Andhra HC (Pre-Telangana)
Sri Konaseema Co-Operative Central ... vs Seetharama Raju on 5 March, 1990
Author: B.P. Jeevan Reddy
Bench: B.P. Jeevan Reddy, M. Jagannadha Rao, S.S. Mohammed Quadri
JUDGMENT B.P. Jeevan Reddy, J.
1. The issue before the Full Bench is whether a writ petition lies against a co-operative society, and if it does, in what circumstances ? The context is the enforcement of bye-laws governing service condition of employees.
2. In P.S.Naidu v. Chittoor District Co-operative Central Bank [1977] 2 APLJ 282, a Division Bench of this court held that an order of punishment made by a society against its employees cannot be questioned by the latter by way of a writ petition. The Bench pointed out "as far as this court is concerned, it has uniformly taken the view that a writ petition does not led against a co-operative society especially when it relates to matters concerning the society and its employees. In C.V.Narasimha Naidu v. Chittoor District Co-operative Bank Ltd. [1971] 2 APLJ (SN) 16, "W.P.No. 3788 of 1970 dated 7th June, 1971)" one of us (Kuppuswami J.) (sic) following the dicision of a Division Bench of this (Madras) court in C. Lakshmiah v. Sri Perumbadur Taluk Co-operative Marketing Society Ltd., , held that an order under article 226 of the Constitution cannot be issued to quash the proceedings of a co-operative society....." The Bench noted that there appears to be a difference f opinion between the various High Court in the country on that question, and observed" we would, however, prefer to rest our decision on the ground that what the petitioner is seeking to ensure is a purely contractual right, and in substance his case is that there has been a wrongful interence with the conditions of his service by the stoppage of three increments. As the Supreme Court pointed out in Kulchhinder Singh Brar, , where a petitioner is seeking to enforce a contract, he cannot invoke the jurisdiction under article 226 bypassing the normal channels of civil litigation. Even in W.P. No. 3711 of 1970 dated june 7, 1971, another ground for dismissing the writ petition was that in terminating the services of its own employees, the co-operative society cannot be said to be acting in the discharge of a public duty. in considering whether a particular body is an institution amenable to jurisdiction under article 226, it was observed that it is to be ascertained whether the particular act complained of is one which was done in discharge of a public duty. A statutory body entrusted generally with the performance of a public duty may still performed several acts which cannot be considered to be public functions like entering into a contract for the purchase of goods to other property. While doing so, it is not discharging a public function. Similarly, is was held that termination of services is one connected only with the contract of employment. A fortiori in this case, the stoppage of increments cannot be regarded as a public function, but is only one connected with the contract...." A similar view was taken by a learned single judge in Ranga Reddy v. Co-operative Electricity Supply Society Lt. [1977] ALT 172.
3. In V. Narasinga Rao v. Prudential Co-operative Urban Bank Ltd. [1989] 1 ALT 300; [1990] 77 FJR 361, a Division Bench comprising two of us (Jeevan Reddy and Syed Shah Mohammed Quardi JJ.) examined this question. That was a case where an employee of the Prudential Co-operative Urban Bank was dismissed by the bank in pursuance of a disciplinary enquiry, which order was challenged by way of a writ petition. The writ petition was referred to a Division Bench by a learned single judge in view of the Bench decision in P. S. Naidu v. Chittor District Co-operative Central bank [1977] 2 APLJ 282, and the decision in Ranga Reddy v. Co- operative Electricity Supply Society Ltd. [19977] ALT 172. It would be appropriate to notice the propositions flowing from the decision in Narasinga Rao [1989] 1 ALT 300; [1990] 77 FJR 361. They are :
(i) The question whether a writ petition lies against a co- operative society or not, has to be examined in the light of the language employed in article 226, which empowers this court "to issue to any person or authority including in appropriate cases any Government...directions, orders or writs including writs in the nature of habeas corpus, mandamus, prohibition,quo warranto, and certiorari or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose". The expressions 'person" or "authority" have been defined in the Constitution. The definition of "person" in the General Clauses Act is of little help in determining its meaning and scope. The expressions "authorities" occurs in the definition of "State" contained in article 12 of the Constitution but even that does not throw any light on the meaning of the expression "authority". These ought to be several authorities falling outsides the definition of "State" but amenable to writ jurisdiction under article 226.
(ii) Applying the tests evolved by the Supreme Court in Ramana Dayaram Shetty, , and other decisions,if it can be held that a particular society can be characterized as "State", a writ would lie against it. It was observed (at page 363 of 77 FJR): "So far as the authorities which fall within the definition of 'state' in article 12 are concerned, it is admitted on all hands that they are amenable to the writ jurisdiction of this court...". And again (at page 363 of 77 FJR): "if a co- operative society in a given case can be held to be 'State', a writ would lie against it". On an examination of the relevant material, however, it held that the society concerned therein cannot be characterizes as "State".
(ii) The society concerned therein cannot also be characterized as an "authority" within the meaning of article 226, applying the definition of the expression "authority" approved by the Supreme Court in Rajasthan State Electricity Board v,.Mohan Lal, .
(iv) A writ can undoubtedly issue against a co-operative society on the basis that it is a "person" within the meaning of article 226, as held by P.A.Choudary, J., in T.Gattaiah's case [1981] 1 APLJ 280, whose decision was affirmed by a Division Bench in Writ Appeal No. 16 of 1981, dated December 4, 1981. But this can be done only where the petitioner is seeking enforcement of a statutory public duty. No such duty was sought to be enforced in the case before it.
(v) Though the technical rules evolved in the U.K.in the matter of these high prerogative writs do not shackle the High Courts in India while acting under article 226, the broad principles governing the same in English law must yet be kept in mind, as observed by the Supreme Court. Writ is a public law remedy.
(vi) The Supreme Court has held in Co-operative Central Bank Ltd. v. Addl. Industrial Tribunal, Hyderabad [1970] 37 FJR 118; [1970] 40 Comp Cas 206, that the bye-laws of a society do not have the force of law.
(vii) The principle of the decision of the Court of Appeal in Regina v. Criminal Injuries compensation Board: Ex parte Lain [1967] 2 QB 864 too cannot help the petitioner in maintaining the said writ petition. Since the society was not performing a public function akin to Governmental function.
4. In Rattanlal Kaul v. Jammu and Kashmir bank. [1989] 3 ALT 177, one of us (M. Jagannadha Rao J.) held that an order of dismissal of an employee by the jammu and Kashmir Bank-a company incorporated under the Companies Act-is amenable to writ jurisdiction, inasmuch as the bank is "State" within the meaning of article 12 of the constitution. The learned judge referred to various decisions of the Supreme Court and this court, including v. Narasinga Rao [1990] 77 FJR 360; [1989] 1 ALT 300.
5. In A.P. Dairy Development Co-operative Federation ltd. v. Milk Producers' Co-operative Union Ltd. [989] 2 APLJ 455, however, a learned single Judge, M. N. Rao J. criticised the judgment in V. Narasinga Rao [1990] 7 FJR 360; [1989] 1 ALT 300, as laying down "apparently inexplicable and incongruous propositions. "After an elaborate examination of the case law, the learned judge enunciated three propositions in the following words :
"(i) a statutory duty enjoined on a co-operative society can be enforced by a writ of mandamus even if the society is not an authority under article 12 ;
(ii) if a co-operative society is funded by the State in full or substantial measure and the Governmental control is deep and pervasive, it falls within the ambit of article 12 of the Constitution and, therefore, its actions can be questioned by a write of certiorari ;
(iii) since every bye-law of a co-operative society falling under article 12 is comprehended by the inclusive definition of 'law' under article 13(3)(a), it being void to the extent of its inconsistency with the provisions f part III of the Constitution, this court cannot decline to grant judicial review by a writ of certiorari against such a society on the sole ground that the relief claimed by the petitioner is founded on breach of bye- laws."
6. The learned judge held further that the decision of the Supreme Court in Co-operative Central bank [1970] 37 FJR 118; [1970] 40 Comp Cas 206, and its subsequent decision in B.K. Garad v. Nasik Merchants' Co-operative bank Ltd., (where too it was held that bye-laws of a society are not statutory ), "cannot be considered as binding precedents for the proposition that breach of bye-laws of a co-operative society falling within the ambit of article 12 are outsides the purview of judicial review under article 226". The learned judge observed: "as already noticed, those two decisions did not consider the law laid down by larger Benches. For the same reason, the decision of the Division of Bench of Narasinga Rao's case [1990] 77 FJR 361; [1989] 1 ALT 300, cannot be understood as laying down the proposition that breach of bye-laws does not give a valid cause of action for interference under article 226, even if the respondent is an 'authority' under article 12...". The decisions of the larger Benches of the Supreme Court, referred to in the above extract according to the learned judge, are the decisions in Rashid Ahmed v. Municipal Board, Kairana, and Mohd. Yasin v. Town Area Committee, . We shall refer to these decisions at a later point of time. It is this decision of the learned single judge in A.P. Dairy Development Co-operative Federation [1989] 2 APLJ 455, that has led to this reference to a Full Bench.
7. The respondent in W.A.No. 69 of 1986 (writ petitioner) is challenging the termination of his service by the appellant ( a co-operative bank, registered under the A.P.Co-operative Societies Act) on the ground that it is contrary to the bye-laws of the appellant society. The learned single judge has upheld the ground and quashed the order . At the commencement of hearing, we indicated the following two propositions as beyond dispure. We asked counsel to address themselves on other questions. The two propositions beyond dispute are:
(i) If a particular co-operative society can be characterized as "State" within the meaning of article 12 of the Constitution (applying the tests evolved by the Supreme Court in that behalf), it would also be an "authority" within the meaning, and for the purpose of article 226 of the Constitution. In such a situation, an order passed by the society against its employee in violation of the bye-laws can be corrected by way of a writ petition. This is not because the bye-laws have the force of law, but on the ground that, having framed the bye-laws prescribing their service conditions, the society must follows them in the interest of fairness. It cannot be left to the sweet will and pleasure of such society to follows, or not to follows the bye- laws in a given case. If is is so left to its will and pleasure it may choose to follow the bye-laws in one case and to ignore them altogether in another case; in yet another case it may choose to follow that bye laws only partly. This would undoubtedly lead to arbitrary and discriminatory results, violative of article 14 of the Constitution, Once a society is characterized a s "State" within the meaning of article 12, it has to act inconformity with article 14 and the other article in Part III of the Constitution . This principle has been recognised inserveral decisions of this court. In W. P. Nos. 106 and 107 of 1983, dated november 8, 1983, [1983] 2 ALT (SN) 98 (2); [1984] Lab IC NOC 49, one of us (Jeevan Reddy J.), dealing with the enforceability of non-statutory conditions of service obtaining under a company, which was held to be "State" within the meaning of article 12, stated the rule thus :
"Where a corporation, company or society us held to be 'State' within the meaning of article 12, it is government by part III and IV o the Constitution. Such an entity has to act and operate consistent with, and subject to the limitations contained n these Parts. Among other obligations, it has to abide by article 14, which is held to be the antithesis of arbitrariness, and which obliges the State of act reasonably in all its dealings. Now, if a corporation frames certain rules/regulations/bye-laws, governing a disciplinary enquiry and prescribing the procedure which has to be followed while holding such an enquiry, it has to follow them in all cases. It cannot claim any discretion or choice in the matter of following such rules. Such a course, if permitted, would be inherently discriminatory. The corporation would follow the rules in one case, but not in the other. It will follow such of the rules as it thinks convenient, but not the others. This will be purely arbitrary and capricious, besides being unreasonable. This will result in unequal treatment being meted out to similarly situated persons. The court cannot say that because such rules are not statutory, it will not enforce them. It is not really a question of enforceability of those rules. The question is whether, by not following the rules, or by violating the rules framed by itself, the corporation is not violating the fundamental rights of its employees, or other affected persons ? The court must hold these corporations bound by their own rules and regulations, and must insist upon their following the rules and regulation. In the absence of rules and regulations, the corporation has to act fairly, and where it has to act consistent with the principle of natural justice, consistent with such principles. In such a situation it cannot be argued that the court is in effect enforcing rules and regulations which do not have the force of law. As I have said, the question is not one of enforcing the rules and regulations, but one of enduring the observance and protection of the fundamental rights of the affected persons......".
8. The same principle was applied in M.v Subbanna v. S. P. Nellore [1986] 1 APLJ, though in a different context. Applying this principle, it was held that this court enforce obedience to the orders of the A. P. Administrative Tribunal created under clause (3) of article 371-D. The Supreme Court too has affirmed this principle in B. S. Minhas v. Indian Statistical Institute, . It said (at page 370) :
"In view of the pronouncement of this court on the point it must be held to be obligatory on the part of respondent No.1 to follow the bye-laws, if the bye-laws have been framed for the conduct of its affairs, to avoid arbitrariness. Respondent No.1 cannot, therefore, escape the liability for not following the prescribed by bye law 2.
Compliance with this bye-laws also seems to be necessary in the name of fair-play."
(ii) Even if a particular society cannot be characterised as "State" within the meaning of article 12 of the Constitution, even so a writ would lie against it to enforce a statutory public duty which a person is entitled to enforce. In such a situation it is unnecessary to go into the question whether the society is a "person" or an "authority", within the meaning of article 226. What is material is the nature of the statutory duty placed upon it. This is the principle laid down in Gattaiah's case [1981] 1 APLJ 280 and affirmed by the Bench in Writ Appeal No. 16 of 1981.
9. We shall now proceed to deal with the questions upon which there has been a difference of opinion. The first of such questions is:
Whether the bye-laws framed by a co-operative society have the force of law?
The power to make law belongs to the Legislature and other persons and authorities empowered by the Constitution. (We are not concerned herein with the other sources of law, namely, custom or usage having the force of law personal law laid down in texts, or judge-made law). Besides Parliment and the Legislature,the Constitution has empowered the President and the Governor to make laws in certain situations. Some of the examples are: the power to issue Ordinances conferred upon the President and the Governor (articles 123 and 213); power to make rules governing service conditions (proviso to article 309); the Governor's power to make laws with respect to scheduled areas (Schedules V and VI), and the power to issue statutory order conferred upon the President or other authorities under various provisions of the Constitution, like clauses (1)and (3) of article 371-D. The main organ empowered to make laws is, of course the Legislature whether at the Center or in the States. It is the prerogative of the Legislative and the Legislative alone either to enact the law itself or to delegate that function to a person or authority so long as it does not delegate its essential legislative function. The law made by such a delegate is called delegated legislation. The delegate may be a Government, university, corporation, local authority, or even an individual. Several enactments in India, particularly those creating statutory corporations, empower both the Government and the corporation to make rules/regulations to carry out the purposes of the enactment. Very often local authorities, like municipal corporation, are empowered to issue, what are called "bye-laws", governing various matters decided and to carry out generally the purposes of the Act. What is material, however, is not the name given to it, but its essential nature. The test is whatever it is made by a delegate of the Legislature. Applying this test, it is difficult to say that bye-laws constitute delegated legislation. Section 130 of the A. P. Co-operative Societies Act confers the rule-making power upon the Government to carry out all or any of the purposes of the Act. The rules so made are a spices of delegated legislation. But bye-laws are not. They cannot be equated to rules. The bye-laws have to be framed and submitted by a society at the time of its registration; it is a condition of registration. All that the Act says is that, before registering a society, the Register should be satisfied that the "Proposed bye- laws are not contrary to the provisions of the Act and the rules"; (vide section 7(1)(d)). Section 16 provides for the manner in which the bye-laws of a society can be amended. It says that an amendment of the bye-laws of a society shall not be valid unless it is approved by the Registrar. Power is also conferred upon the Registrar to direct the amendment of a bye-law, and in case of default or refusal by the society, he can himself amend such bye-law in the manner indicated by him. These bye-laws can, by no stretch of imagination, be characterized as delegated legislation.
10. Apart from the above theoretical discussion, the Supreme Court has specifically ruled in the case of the A.P. Co-operative Societies Act itself that the bye-laws made by a society do not have the force of law. In Co-operative Central Bank Ltd. v. Addl. industrial Tribunal Hyderabad [1970] 40 Comp Cas 06, 217; [1970] 37 FJR 118, 129, the Supreme Court had this to say :
"We are unable to accept the submission that the bye-laws of a co-operative society framed in pursuance of the provisions of the Act can be held to be law or to have the force of law. it has no doubt been held that, if a statute gives power to a Government or other authority to make rules, the rules to framed have the force of statute and are to be deemed to be incorporated as a part of the statute. The principle, however, does not apply to bye-laws of the nature that a co-operative society is empowered by the Act to make. The bye-laws of the nature that a co-operative society is empowered by the Act to make. The bye-laws tha tare contemplated by the Act can be merely those which govern the internal management, business or administration of a society. They may be binding between the persons affected by them, but they do not have the force of a statue. In respect of bye-laws laying down conditions of service of the employees of a society, the bye-laws would be binding between the society and the employees just in the same manner as conditions of service laid down by contract between parties. In fact, after such bye-laws laying down the conditions of services are made and any person enters the employment of a society those conditions of service will have to be treated as conditions accepted by the employee when entering the service and will thus bind him like conditions of service specifically forming part of the contract of services. The bye laws that can be framed by a society under the Actare similar in nature to the articles of association of a company incorporated under the companies Act and such articles of association have never been held to have the force of law....".
11. The decision in Co-operative Central Bank [1970] 40 Comp Cas 206; [1970] 37 FJR 118 was followed the Supreme Court in B.K. Garad v. NASIK Merchants co-operative Bank Ltd, . It was held (at page 198).
"Section 73B of the Maharashtra Co-operative Societies Act provides a legislative mandate. Rule 61 has a status of subsidiary legislation or delegated legislation. Bye- laws of a co-operative society can at best have the status of an article of association of a company governed by the Companies Act, 1956, and as held by this court in Co-operative Central Bank Ltd v. Addl. Industrial Tribunal , Hyderabad [1970] 40 Com Cas 206 ; [1970] 37 FJR 118 the bye laws of a co-operative society framed in pursuamce of the provision of the relevant Act cannot be held to be law or to have the force of law. They are neither statutory in character nor they have statutory flavour so as to be raised to the status of law."
12. In our opinion there cannot be a clearer exposition of law. No doubt both these decisions are rendered by Division Benches comprising three judge each.
13. Now, let us examine whether these decisions can be said to be not binding on the ground that while laying down the aforesaid principle, the two Division Benches have failed to note the earlier decisions of larger Benches, as pointed out by the learned single judge in A.P.Dairy Development Co-operative Federation [1989] 2 APLJ 455. The earlier decisions which according to the learned single judge laid down a contrary proposition are Rashid Ahmed v. Municipal Board, Kairana, and MOhd.Yasin v. Town Area Committee . We have carefully gone through the decision in Rashid Ahmed v. Municipal Board . There is no discussion in this decision withe respect to the nature of the bye laws made by the municipal board. Nor is there any discussion, whether they have the force of law. (The bye-laws considered therein were made under section 298 of the U.P. Municipalities Act, 1916, and as we shall presently demonstrate, constituted delegated legislation. Neither party contended that they do not have the force of law. Indeed such a contention could not have been raised since being delegated legislation they did have the force of law. So far as the decision goes all it did was to declare that the restrictions placed by certain bye-laws were more than reasonable restrictions contemplated by article 19(6), and, therefore, void under article 13(1) of the Constitution. The learned single judge has quoted the following two sentences from judgment (at page 165 of AIR 1950 (SC)) :
"These certainly are than reasonable restrictions on the petitioners as are contemplated by clause (6) of article 19. This being the position the bye-laws would be void under article 13(1) of the Constitution."
14. In our opinion, the said two sentences cannot be read as amounting to a decision that the bye-laws even where they do not constitute delegated legislation have the force of law, nor can the subsequent decisions of the Supreme Court be faulted on the ground that they had ailed to take note of the said two sentences.
15. Now coming to Mohd. Yasin v. Town Area Committee, , this again was a case where the court was considering the question whether certain bye-laws made by the Town Area Committee, Jalabad (under the U. P. Municipalities Act, 1916), offended the fundamental right guaranteed by article 19(1)(g) of the Constitution and not saved by clause (6) thereof. The argument of the petitioner therein was that the bye-laws had the effect of prohibiting him completely from carrying on any business. Upholding the said contention, the following observation were made relied upon by the learned single Judge in A. P. Dairy Development C-operative Federation [1989] 2 APLJ 455, as running counter to the principle of the decisions in Co- operative Central Bank [1970] 40 FJR 206; [1970] 37 FJR 118 and B. K. Garad, :
16. In our opinion, the bye-laws which impose a charge on the wholesale order in the shape of the prescribed fee, irrespective of any use or occupation by him of immovable property vested in or entrusted to the management of the Town Area Committee including any public stree, are obviously ultra vires the powers of the respondent committee, and, therefore, the bye-laws cannot be said to constitute a valid law which alone may, under article 19(6) of the Constitution, impose a restriction on the right conferred by article 19(1)(g). In the absence of any valid law authorising it, such illegal imposition must undoubtedly operate as an illegal restraint and must infringe the unfettered right of the wholesale dealer to carry on his occupation, trade or business which is guaranteed to him by article 19(1)(g) of our Constitution."
17. With grate respect to the learned single judge, we are unable to read the above observations as laying down the proposition that bye-laws to have the force of law, irrespective of the manner in which, and the authority under which, they are made. The Supreme Court said in the first instance that the impugned bye-laws were ultra vires the rule-making power of the Town Area Committee and, accordingly, observed that the bye-laws cannot, therefore, be said to constitute valid law, within the meeting of article 19(6) of the Constitution. From this, it does not follow that the Supreme Court laid down that bye-laws, by whomsoever made and under whatsoever enactment, have the force of law. In this decision too, the question whether the bye-laws have the force of law was neither raised, nor considered.
18. In this connection, it is important to remember that the bye-laws considered in these two cases were not the bye-laws made by a co- operative society much less under a Co-operative Societies Act. Though called "bye-laws", they constituted delegated legislation, having been made in exercise of the power conferred by section 298 of the U.P. Municipalities Act, 1916. Section 296 of the Act empowered the Provincial Government to make rules; section 297 empowered the municipal board to frame regulations, and section 298 empowered the municipal board to frame bye-laws. All of them are species of delegated legislation, also called subordinate legislation. In so far as material the three sections read as follows :
"296. (1) The State Government shall make rules consistent with this Act in respect of the matters described in sections 95, 127, 153 and 235.
(2) The State Government may make rules consistent with this Act...."
"297. (1) A board may, by special resolution, make regulations consistent with this Act, or with any rule under section 296, or regulation under sub-section (2) made by the State Government, as to all or any of the following matters :...
(2) Provided that the State Government may, if it thinks fit, make regulations consistent with this Act in respect of any of the matters specified in clauses (d) and (h) of sub-section (1), and any regulation so made shall have the effect of rescinding any regulation made by the board under the said sub-section in respect of the same matter or inconsistent there with......"
"298. (1) A board by special resolution may, and where required by the State Government shall, make bye-laws applicable to the whole or any part of the municipality, consistent with this Act and with any rule for the purpose of promoting or maintaining the health, safety and convenience of the inhabitant of the municipality and for the furtherance of municipal administration under this Act.
(2) In particular, and prejudice to the generality of the power conferred by sub-section (1), the board of a municipality, wherever suited, may, in the exercise of the said power, make any bye-laws described in List I below, and the board of a municipality, wholly or in part, situated in hilly tracts may further make, in the exercise of the said power, any bye-law described in List II below."
19. Indeed, in Deputy Commissioner, Kheri v. President, Notified Area Committee. AIR 1949 All 683, it was held that the bye-laws so made have the force of law.
20. We are, therefore, of the firm opinion that the decisions of the Supreme Court Co-operative Central Bank [1970] 40 Comp Cas 206; [1970] 37 FJR 118 and B. K. Garad, , cannot be said to have been wrongly decided on the ground--nor can they be ignored on the ground --that they did not take note of the earlier decisions in rashid Ahmed, and Mohd. Yasin, , Co-operative Central Bank [1970] 40 Comp Cas 206; [1970] 37 FJR 118, was decided under the A. P. Co- operative Societies Act. It expressly lays down, after a good amount of discussion, that bye- law framed by a co-operative society as contemplated by the Act do not have the force of law. This decision was specially refereed to, and followed in the later decision in B. K. Garad v. Nasik Merchants Co-operative Bank Ltd., . The earlier cases neither arose under the Co-operative Societies Act, nor did they deal with the said question. The bye-laws considered in those cases are qualitatively different as explained hereinbefore and bear no similarity to the bye-laws of a co-operative society under the A. P. Act. It would, therefore, not be right to infer a contradiction between the said earlier decisions and the two later decisions, or to hold that the subsequent decisions do not represent good law and need not be followed by this court.
21. The learned single judge further relied upon the definition of "law" in sub-clause (a) of clause (3) of article 13 in support of his proposition that the bye-laws made by a co-operative society do have the force of law. Clause (1) to (3) of article 13 read as follows :
"13. Laws inconsistent with or in derogation of the fundamental rights :- (1) All laws in force in the territory of India immediately before the commencement of this Constitution, in so far as they are inconsistent with the provisions of this Part, shall, to the extent of such inconsistency, be void.
(2) The State shall not not make any law which takes away or abridges the rights conferred by this Part and any law made in contravention of this clause shall, to the extent of the contravention, be void.
(3) In this article, unless the context otherwise require, --
(a) 'law' included any Ordinance, order, bye-law, rule, regulation. notification, custom or usage having in the territory of India the force of law ;
(b) 'laws in force' includes laws passed or made by a Legislature or other competent authority in the territory of India before the commencement of this Constitution and not previously repealed, notwithstanding that any such law or any part thereof may not be then in operation either at all or in particular areas..."
22. The object behind article 13(2) is plain. The "State" as defined in article 12 shall not make any law, whether called Ordinance, rule, bye-law, order or regulation, which takes away, or abridges the fundamental rights conferred by Part III. This does not mean that it can make a rule, bye law, or regulation, not having the force of law, but which takes away or abridges the fundamental rights. The latter cannot stand on a better footing than the former. It is for the above purpose that the definition of "law" was put in clause (3)(a) in expansive terms. Now,the definition of "State" in article 12 expressly includes local authorities. By the date of commencement of the Constitution, bye-laws made by local authorities, like municipal authorities, was a well- recognized and well established prectice. Although called "bye- laws", they constituted, and do constitute,delegated legislation. We must emphasise again that it is not the label that matters , but the true nature of it- the source. Indeed, it had been repeatedly held that a rule or instruction, which does not have the force of law is not,"law" as defined in article 13(3)(a). Suffice it to refer to two decision of the Supreme Court. In D Bhuvan Mohan Patnaik v, State of A.P., , the court held (at page 2092):
"....The installation of the high-voltage wires lacks a statutory basis and seems to have been devised on the strength of departmental instructions. Such instructions are neither 'law' within the meaning of article 13(3)(a) nor are they 'producer established by law' within the meaning of article 21 of the Constitution. Therefore, if the petitioners are right in their contention that the mechanism constitutes an infringement of any of the fundamental rights available to them, they would be entitled to the relief sought by them, viz, that the mechanism be dismantled. The State has not justified the installation of the mechanism on the basis of a 'law' or a ;procedure established by law'..."
23. In Dwarka Nath Tewari v. State of Bihar, AIR 1959 SC 249, the court was considering whether article 182 of the Bihar Education Code is "law" within the meaning of article 3`(1) of the Constitution. If it were law then the deprivation of property thereby , could not have been complained of as being violative of article 31(1), since the deprivation in such a case would be by authority of law, within the meaning of article 31(1). Dealing with the said aspect, the Supreme Court had this to say ( on page 253) :
"As already indicated, proceeding on the assumption that the land and the building of the school are vested in the petitioners as the managing committee of the school, have the petitioners have been divested of their rights by authority of law, under article 31(1) of the Constitution ? If the amended article 182 of the Code, extracted above, is law within the meaning of the article aforesaid of the Constitution, the petitioners cannot have any just complaint if they have been or are being deprived of those properties, because it is clear that the petitioners are holding the properties not their individual absolute right but only as trustees for the purposes of the school. They have the properties vested in them because they are the managing committee. If they have been divested of those rights by the authority of law, this petition under article 32 of the Constitution must stand dismissed. If, on the other hand, the amended article 182 of the Education Code, is not law within the meaning of article 13 of the Constitution, then the petitioners cannot be deprived of their right to hold the properties as trustees, by a mere fiat of the officials of the Government of Bihar. Though, in the affidavits sworn on behalf of the Correspondents, it was claimed that the provisions of the Bihar Education Code had the force of law, it has been conceded by the learned Solicitor-General appearing on behalf of the respondents that he could not justify that contention. The preface to the latest edition (7th edition) printed in 195, of the Bihar Education Code, 1944, contains the following statement by the then Director of Public Construction, Bihar :
'The Bihar Education Code is compiled in the office of the Director of Public Instruction, Bihar, and is issued under his authority. Those articles, below which no reference to higher authority is cited, have the same authority as circulars and other orders of the Director.'
24. It is clear, therefore, from the portion of the preface extracted above, that article 182 of the Code has no greater sanction than an administrative order or rule, and is not based on any statutory authority or other authority which could give it the force of law. Naturally, therefore, the learned Solicitor General, with with his usual fairness, conceded that the article relied upon by the respondents as having the force of law, has no such force, and could not , therefore, deprive the petitions of their rights in the properties aforesaid.....".
25. Under clause (2) to (6) of article 9, it has been repeatedly held that the e"law" contemplated therein is statutory law or an instrument/order/notification having force of law, but not hose not having the force of law. We do not think it necessary to cite decisions in support of this proposition.
26. Several in his treatise Constitutional Law of India, elaborates the said definition in the following words :
"Article 13(3)(a) defines 'law' very widely by an inclusive definition. It does not expressly include a law enacted by the Legislature, for such an enactment is obviously law. The definition of law includes:(i) an Ordinance, because it is made in the exercise of the legislative powers of the executive; (ii) an order, bye law, rule, regulation, and notification having the force of law, because ordinarily they form the category of subordinate delegated legislation and are not enacted by the Legislature; (iii) custom or usage having the force of law, because they are not enacted law at all. This extended definition appears to have been given to law in order to forestall a possible contention that 'law' can only ,mean law enacted by the Legislature...". (see page 237, volume 1).
27. It, therefore, cannot be said that merely because article 13(3)(a) includes bye laws within the definition of "law", a bye law made by a co-operative society governed by the A.P.Co- operative Societies Act is law, or has the force of law.
28. Municipalities and gram panchayats, it may be noted, are illustrations of local self-government. Co-operative societies, on the other hand, represent a collective co-operative effort of a group of persons to improve their economic well being. A co- operative society stands no comparison to municipalities and gram panchayats. The bye laws made by a local authority bind all the persons within its area,whereas the bye-laws of a society bind only its members and its employees. The former is law. The latter is only a contract. We have already referred to the nature of bye laws made under the U.P. Municipalities Act. A few more illustrations nearer home would suffice. The position obtaining under the Madras District Municipalities Act was the same. Section 303 and 306 of the Madras Act correspond to sections 296 and 298 of the U.P.Act. In our own State, the position is no different. Section 330 of the A.P. Municipalities Act confers power upon the municipal council to make bye laws to carry out the purposes of the Act. The language of section 220 is akin to the language of section 326, which confers power upon the Government to make rules, section 326(1) reads:
"(1) The Government may, by notification in the A.P Gazette, make rules for carrying on all or any of the purposes of this Act.?
Section 330 in so far as it is relevant, reads :
"The council may make bye-laws not inconsistent with this Act or with any other law, to provide-
(i)for all matters expressly required or allowed by this Act to be provided for...
(12) (a) for the regulation of building .....
(iii) in general for securing cleanliness, safety and order and good Government and well-being of the municipality and for carrying out all the purposes of this Act...."
29. Section 331 confers upon the council the power to give retrospective effect to bye-laws made with regard to certain specified matters. Sections 332 and 333, of course, provide for the manner of making bye-laws and their approval by the Government, when alone they become effective. Sections 585 and 586 o the Hyderabad municipal Corporation Act, 1955, corresponded to section 330 and 331 of the A. P. Municipalities Act. (In this connection, it may be noted that regulations which the statutory corporations are empowered to make under various enactments like the Road Transport Corporation Act and the Air Corporation Act also require that the regulations should not be inconsistent with the rules made under the Act, and further that they must be made with the previous approval of the Central Government. That does not affect their nature or legal effect. For example, see section 45(3) of the Air-Corporation Act, section 49(1) of the LIC Act, section 42(1) of the Ware-housing Corporation Act, and so on).
30. The learned single judge in A. P. Dairy Development Co-operative Federation [1989] 2 APL also relived upon two other later decisions of the Supreme Court Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly [196] 60 Comp Cas 797; [1986] 69 FJR 171, wherein the Central Inland Water Transport Corporation Ltd., a Government of India Undertaking, was held to be "State" within the meaning of article 12, and therefore, subject to the discipline of article 14, and B. S. Minhas v. Indian Statistical Institute, . In both cases, the authority was held to be "State" The observations quoted from the latter decision only go to show that having made the bye-laws, the Indian Statistical Institute was bound to follow them so as to avoid arbitrariness. In this case too, it was held that the Indian Statistical Institute was an "authority" and, therefore, it was observed that it should follow the bye-laws made by it prescribing the procedure for appointment, inasmuch as not following the same would violate article 14. None of these cases can be said lay down a proposition contrary to the express enunciation in Co-operative Central Bank [1970] 40 Comp Cas 206; [1970] 37 FJR 118 and B. K. Garad, .
31. In any event, once there was a decision of the Supreme Court under the every Act with which we are concerned therein, judicial discipline demands that we should follow it, unless there is another decision of the Supreme Court directly in conflict with it. No such conflict can even be suggested between the two earlier relating to municipal bye-laws, and the case in Co- operative Central Bank [1970] 40 Comp Cas 206;[1970] 37 FJR 118.
32. For the above reasons, we hold that the bye-laws of a co- operative society governed by the A.P.Co-operative Societies Act do not have the force of law, as held by the Supreme Court in Co- operative Central Bank [1970] 40 Comp Cas 206; [1970] 37 FJR 118. This is so even where the society which made them is characterized as "State" within the meaning of article 12. This does not however, mean that, where a particular co-operative society can be characterised as "State", it is not bound to follow those bye-laws. We have already indicated hereinbefore that such society must follow its bye-laws, and it would be compelled to follow such bye-laws by way of a writ petition, so as to ensure fair and equal treatment- the mandate of article 14.
33. Is the appellant in W.A.No.69 of 1986 (Sree Konaseema Co- operative Central Bank, which merged with the Kakinada District Co-operative Central Bank on March 31,1987) "State" within the meaning of article 12?
34. That a co-operative society can also be an "authority" within the meaning of article 12 and, therefore,"State" is beyond dispute. The tests for determining whether a particular society or company is any agency or instrumentality of the State, so that it can be characterized as an "authority" within the meaning of article 12 have been enuciated in Ramana Dayaram Shetty , and affirmed in Ajay Hasia v. Khalid Mujib Sehravardi, . They are the following (at page 496 of AIR 1981 SC).
"(1) One thing that is clear is that 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.
(2) Where the financial assistance of the Stare is so much as to meet almost the entire expenditure of the corporation, it would afford some indication of the corporation being inpregnated with governmental character.
(3) It may also be a relevant factor... whether the corporation enjoys monopoly status which is State conferred or State protected.
(4) Existence of "deep and pervasive State Control" may afford an indication that the corporation is a State agency or instrumentality.
(5) If the functions of the corporation are of public importance and closely related to government functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of the Government.
(6) Specifically, if a department of the 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 the Government..."
35. It is, however, emphasized that a corporation to be characterised as an instrumentality or agency of State need not satisfy all the six tests. While it is nowwhere stated that satisfaction of even one of the six tests would suffice, the Supreme Court has refused to specify how many of them should be satisfied in a given case. It is left to be determined in each case, having regard to the totality of the circumstances.
36. Of the six tests indicted above, tests 2,3 and 6 are inapplicable in the present case, and may be dealt with in the first instance to clear the ground.
(2) There is no financial assistance of the State, much less is it of such an extent as to meet almost all the expenditure of the corporation. The Government's contribution is only in the shape of share capital to a small extent, as we shall presently indicate. Some loans may also have been given to the appellant- bank either by the Government, or by other public financial institutions, but particulars of such loans are not furnished. Be that as it may, giving loans is not financial assistance contemplated by the second test. It means a grant as in the case of educational institutions is not a loan, but a grant, and that is why decided cases treat the educational institutions as category part. We do not, of course, rule out the possibility of a society in respect of a grant from the Government ; but the appellant-society is not one such.
(3) The appellant-bank also does not enjoy a monopoly status which is conferred or is protected by the State. It is not suggested that the societies to which loans are given by the appellant-bank are precluded from receiving loans from any other source.
(6) The sixth test too is inapplicable, inasmuch as this is not a case where the business carried on by appellant-bank was previously carried on by a department of the Government, nor is it a case where the work of a department of the Government is transferred to the appellant-society.
37. We now proceed to examine whether the other three tests, namely, 1, 4 and 5 are satisfied in this case.
(1) Government's contribution to the share capital :
According to the information furnished by Sri K. Srinivas Murthy, learned counsel for the appellant-bank, the Government's shareholding in the kakinada District Co-operative Central bank is in the following proportion :
Total paid-up share capital as on June 30, 1987 : Rs. 693.33 lakhs out of which the State Government held shares worth Rs. 79.10 lakhs.
Total paid up share capital as on June 30, 1988: Rs.689,35 lakhs out of which the Government's shareholding was Rs. 78.40 lakhs.
(The position in December,1988, is practically the same).
It is thus clear that the Government's shareholding is in the region of 10 per cent. Which can be said to be negligible. There is another aspect to this test which is emphasized by a Division Bench of the Patna High Court in Harender Narain Banker v. State of Bihar [1985] Lab IC 1807; [1986] 2 Serv LR 256. It is pointed out in the said decision that even though the Government owns a substantial number of shares of a co-operative society still it would be having only one vote, just like an individual shareholder holding one share. Accordingly, it is pointed our that the importance given to shareholding in the first set enuncicate by the Supreme Court loses much of its significance in the case of a co-operative society. The said test has been evolved, says the Bench, keeping in mind the normal run of companies/ corporations registered under the Companies Act, where shareholding carries with it the power of control and management of the company, and it is for that reason, they said that satisfaction of this test goes a long way in establishing that the body is an agency or instrumentality of the State. So far as our Act is concerned, the position is practically the same. Section 25(1) says that subject to such release as may be made in this behalf, every member shall have one vote in the affairs of the society and shall exercise his vote in person and not by proxy. The proviso to section 25(2) says specifically that no nominee of the Government or representative of the financing bank shall be entitled to participate in or vote at any election. Moreover, section 33(1) provides that where the Government has subscribed to the share capital of a society or guaranteed the repayment of principal and payment of interest on debentures issued by a society, or has guaranteed the repayment of principal and payment of interest on loans and advances to the society the the Government shall have the right to nominate to the committee of such society not more than three persons as members or one- third of the total number of members of the committee, whichever is less. Thus,even in a case where the Government's shareholding is 95 per cent, its representation on the committee of the society cannot exceed one-third of the total number of members of the committee. So far as the general body is concerned it has only one vote. This does not, however, mean that the first test evolved by the Supreme Court has no relevance or has no weight in the case of a co-operative society ; the Government's representatives, though in minority in the committee, may yet carry great weight , consistent with the largeness of the interest they represent. All that we say is that such large shareholding does not have the same importance as, say, in the case of a company incorporated under the Companies Act. A substantial holding of share capital in a society by the Government would not by itself go a long way towards indicating that such society is an instrumentality or agency of the State.
38. (4) Deep and pervasive State control :
Now, what does deep and pervasive State control mean ? Does every legislative regulation constitute State control, or does State control mean only the control vesting in the executive, either under a statute or under the constitution (including memorandum) and bye-laws (including articles) of the body ? This question becomes relevant whenever the court proceeds to examine whether a company (incorporated under the Companies Act) or a society (whether registered under the Societies Registration Act or the Co-operative Societies Act) can be characterized as "State" with in the meaning of article 12. (In the case of statutory corporations, created by legislative Acts, normally to perform statutory public functions, such a question mat not arise, since by their very nature and constitution, they are liable to be characterised as "State" see test No. 3 at page 136 of B. Satyanarayana v. State of A. P., [FB]. Our considered view is that in case of non-statutory corporations/ companies and societies, etc., State control means the control vesting in the Government or its officers either by the statute or by the constitution/memorandum of association/ bye - laws/articles of association of the society or company. Concerned. Take for example, the Companies Act. It regulates the incorporation, working and winding up of the company in elaborate detail. The governmental authorities are vested with various powers to ensure observance of, and compliance with, the regulatory provisions. But all this is designed not to vest control (over the company) in the Government but to ensure the proper working of the company-the main object being protecting the interest and rights of shareholders, investing public, employees and others having dealing with the company. on a consideration of the provisions of the companies Act, it is not possible to say that the control vested by the Act in the Government/Company Law Board and Register is deep and pervasive control, within the meaning of the four the test aforementioned. But, when we come to examine the provisions of the A. P. Co- operative Societies Act, it emerges that the control tested in the Government and Register over the societies is deeper and qualitatively different. We shall refer to some of those provisions ;
(i) Section 4(2) confers upon the Register the power to issue binding directions from time to time "in the interest of the co- operative movement, or public interest, or in order to prevent the affairs of the society from being conducted in a manner detrimental to the interest of the members or depositors, or creditors thereof".
(ii) Section 15 confers upon the Registar the power to divide a society into more than one society, or to amalgamate two or more societies into one society, if in his opinion such a course is necessary " in the interest of societies or of the co-operative movement."
(iii) Section 15A confers upon the Registrar the power to amalgamate or merge any society with another such society, or to divide a society and/ or to restrict, or transfer the area of operation of the society or to liqidate a society, if in his opinion such a course is necessary for ensuring economic viability of the concerned society or to avoid overlapping or conflict of jurisdiction of society4s, or even "for securing proper management of a society". Such a step can be taken also in the interest of the co-operative movement in general or for any other reason in public interest.
(iv) Section 16(5) confers upon the Registar the power to amend the bye laws of a society if he thinks it necessary or desirable in the interest of such society or of the co-operative movement.
(v) Under section 31 read with rule 22, the election to the committee of a co-operative society (except in the case of certain categories of small societies) is conducted by a Government official. In many cases, elections have been postponed by the Government are special officers appointed under section 32(7) to manage the affairs of the society-though such a course has been frowned upon by this court.
(vi) Section 34 empowers the Registrar to supersede the committee of a society if, in his opinion,"the committee is not functioning property, or wilfully disobeys or fails to comply wilfully with any lawful order or direction issued by the Registrar under this Act or the Rules."
(vii)Section 45 prescribes the mode in which the net profits of a society are to be distributed. It is not open to the society to distribute the entire net profit by way of dividents. Section 46 controls and prescribes the manner of investment of funds also. Section 47(2) prohibits a society from granting a loan to any person other than a member.
(viii) Section 59 empowers the Registrar to direct the committee of a society to suspend, pending investigation, any paid officer or servant of the society if in his opinion there is prima facie evidence against such person.
(ix) Section 60 empowers the Registrar to direct any member of the committee to make good to the society the amount misappropriated by him, or reimburse the society for the loss caused by his willful negligence.
(x) Sections 70, 71 and 74 empower the Registrar to recover any amount due to a society from its member/s as also other amounts specified in those sections, as if they were arrears of land revenue. Similarly, section 101 empower the Register to recover any loan due to an Agricultural Development bank from its members as if it were arrears of land revenue. Section 102 empowers the Collector also to make similar recoveries certain situations.
(xi) Section 116A confers upon the Registrar that power to constitute a common cadre in respect of certain posts in co- operative banks, the A. P. Co-operative Dairy Development Federation, spinning mills, and sugar factories. The Registrar is also empowered to prescribe the conditions of binding of such cards. Section 116B empowers the Government to give binding directions to societies to reserve posts in favour of weaker sections of society. Under section 116C, the staffing pattern, qualifications, pay scales, etc., of the employees of a society must receive prior approval of the Registrar before they become effective.
(xii) Section 131 empowers the Government to issue such orders directions, either generally or in any particular matter, as it may consider necessary, to the Registrar of Co-operative Societies. The Registrar is bound to give effect to such orders and report back to the Government.
39. The aforesaid control vested in the Government and the Registrar, particularly the power to divide, amalgamate or merge the societies, power to conduct elections to the committee (disabling the society to conduct such an election itself), power to supersede the committee, power to recover amounts due to the societies as arrears of land revenue, power to provide common cadres for the employees of several independent societies, as also the extensive power to give binding directions vested in both the Government and the Register not only in the interest of shareholders, depositors and creditors, but also in the interest of the public and of the co-operative movement, is liable to the characterized as deep and pervasive control, within the meaning of the fourth test aforesaid. It must be noted that tin this particular writ appeal, the society concerned is a co-operative central bank, which is included within the categories of societies, included in section 116A.
(5) Whether the functions of the society are of public importance and closely related to governmental functions ?
40. This test, it is generally recognised, is too general to be precise. As has been pointed out by the Supreme Court in Ramana Dayaram Shetty, , today the expression "governmental function" is a vague and indefinite description. In a welfare society like ours, it is difficult to draw a demarcating line between governmental and non-governmental functions. Similarly, it is equally difficult to say with precision, which function is of public importance and which is not. If imparting education is a function of public importance, growing foodgrains,distribution of foodgrains, production and distribution of goods essential to society (industrial activity and commerce), providing housing, consumer goods and services essential to life and well- being of society are all equally public functions. This inherent weakness in this test is bound to tell upon its importance.
41. Be that as it may, we find from the bye-laws of the appellant bank that its dealings are confined to its members and its membership consist of member societies, the Government, or a few nominal members. In response to our specific and repeated querier, it has been stated by counsel for both the parties that the operations of the e appellant bank are actually confined to its members only. The appellant would not advance loans to a non- member whoever he may be. The appellant bank's main object is to raise funds to finance its members. It has its own funds. It is entitled to raise loans from scheduled banks and other agencies. Its members also make deposits with it. It is this amount coupled with the rural credit provided by the Central agencies, that is provided to its members. The main function of this bank we are told as to provide credit out of its funds to agricultural credit societies which, in turn, provide the same to their members. The State provides credit to agriculturists mainly with a view to save them from exploitation and harassment by money-lender, and also to promote agricultural production and in that sense, it is a function of public importance. But so does every other financial institution and bank which provide credit to industry, commerce, communications and other bodies providing various services to the society to the society. More important, according to the fifth test evolved by the Supreme Court, not only should the functions of a corporation should be of public importance, but they must also be closely related to government functions. Inasmuch as the operation of the appellant bank is not confined to State funds and also because it cannot be termed as an agency created by the State for distributing the rural credit provided by it, it cannot be said that it satisfies this test. As stated above the appellant bank has its own funds, and the credit provided by central agencies is only a part of it. We may in this connection refer to what Bhagwati J., said in Ramana Dayaram Shetty v, International Airport Authority of India, . After pointing out that the distinction between govern mental and non governmental functions is no longer valid in the present day social welfare State, the learned judge observed (at page 1641):
"The contrast is rather between governmental activities which are private and private activities which are governmental.(Mathew J., in Sukhdev Singh v. Bhagatram Sardar Raghuvanshi [1975] 47 FJR 214, 248, 249 ( at page 1355 of AIR 1975 SC) ). But the public nature of the function, if impregnated with the governmental character or 'tied or entwined with the Government' or fortified by some other additional factor, may render the corporation an instrumentality or agency of the Government. Specifically, if a Department of the Government is transferred to a corporation, it would be a strong factor supportive of this inference...."
42. In the circumstances, it is not possible to say that the appellant-bank/ society satisfies the fifth test enunicated by the Supreme Court.
43. For the above reasons, the appellant-society cannot be characterized as "State" within the meaning of article 12.
44. There is yet another aspect which is academic in nature but must be mentioned in the interest of clarity. It is this: Even if for some reason it can be held that the appellant-society is an "authority" within the meaning of article 12, it does not follow therefrom that every activity of the society is amendment to writ jurisdiction. Even in the case of a Government, a writ petition does not lie enforce a non-statutory contractual obligation. Similarly, even in the case of a society, which is a "State" within the meaning of article 12, a writ does not lie to enforce a contractual obligation. In Co-operative Central bank [1970] 40 Comp Cas 206; 37 FJR 118, the Supreme Court has specifically said that the bye-laws providing services conditions of the employees of a society are nothing more than a contract of service. This distinction was indeed pointed out by Kuppuswami J., in P. S. Naidu [1977] 2 APJL 282. It has also been emphasized by the Supreme Court in M.C. mehta v. Union of India, . In paragraph 29 of the said judgment, it is observed (at page 1097) :
"Learned counsel for Shriram stressed the inappositeness of the doctrine of State action in the Indian context because, occurring to him, once an authority is brought within the purview of article 12, it is State for all intents and purposes and the functional dichotomy in America where certain activities of the same authority may be characterized as State action and others as private action cannot be applied here in India. But so far as this argument in concerned, we must demur to it and point out that it is not correct to say that in India once a corporation is deemed to be 'authority', it would be subject to the constitutional limitation of fundamental rights in the performance of all its functions and that the appellation of 'authority' would stick to such corporation, irrespective of the functional context......."
45. Thus, bye-laws-which merely constitute terms of contract between a society and its employees-do not have, or do not again the force of law even where such society can be characterized as "State", within the meaning of article 12. But this aspect is of mere academic importance, since we have held (see the undisputed proposition 1, above) that where a particular society can be characterized as "State" within the meaning of article 12, the court will compel such society to follow its bye-laws in the interest of fairness, ie. article 14.
46. Whether a writ petition lies to enforce the terms of a non- statutory contract?
47. This discussion has become necessary in view of the contention urged by the respondent (writ petitioner) to the effect that, even if the bye-laws of the appellant-society are held not to have the force of law and it is held that they constitute merely terms of contract of employment between the society and the writ petitioner, even so a writ petition lies to enforce the terms of such contract. It is urged that the appellant-society is a public body and, therefore, it is amenable to a writ of mandamus, as well as a writ of certiorati. It is not possible to agree with the contention.
48. The basic feature of mandamus and certiorari is that they are public law remedies and are not available to enforce private law rights. Though the strict techinical rules governing these writs in English law are not applicable in India, yet the broad principles underlying the said writs have to kept in mind by this court while exercising the power under article 226. Not keeping the said court while exercising the power under article 226. Not keeping the said distinction in mind obliterate the distinction between a writ petition and a suit; there will be chaos. As pointed out by a Constitution Bench of the Supreme Court in T. C. Basappa v. T. Nagappa, , though the power of the High Court under article 226 need not be constricted by the technical rules applicable to these prerogative writs in English law, it is yet necessary to keep to the board and fundamental principles that regulate the exercise of jurisdiction in the matter of granting such writs in English law". Similarly, it was pointed out in Dwarka Nath v. ITO , that "article 226 is couched in comprehensive phraseology and it ex facie confers a wide power on the High Court to reach injustice wherever it is found. Wide language in describing the nature of the power, the purpose for which and the person or authority against whom it can be used, was designedly used by the Constitution....But this does not mean that the High Court can function arbitrarily under this article. There are some limitation implicit in the article, and others may be evolved to direct the article through defined channels...."The object behind article 226 was to strengthen the then existing judicial system, to make it more effective and not to dispense with, duplicate, or replicate the existing system. It was not to supplant the existing judicial system, but to confer an additional power in the service of people and Constitution that this extraordinary power was created. It is for this reason that, notwithstanding the wide language of article 226, courts have been observing certain self-imposed restrictions upon this power. One of the well-accepted limitations upon the exercise of this power is that is not available to enforce the terms of a contract, i.e., a contract which is not statutory in nature. This is so even if one of the contracting parties is the State, a Government, or other local authority. THis is the principle affirmed by the Supreme Court in a large number of cases, some of which are Radhakridhna Aggarwal v. State of Bihar, AIR 1977 SC 1496, State of Punjab v. Balbir Singh, AIR 1977 SC 1717, Bihar Eastern Gangetic Fishermen Co-operative v. Society Ltd. v. Sipahi Singh, , Lekhraj Sathramdas Lalvani v. N. M. Shah, Deputy Custodian-cum-Managing Officer, . Har Shankar v. Deputy Excise and Taxation Commissioner, , and finally, LIC of India v. Escorts Ltd. [1986] 59 Comp Cas 548. In Escorts' case, an argument was urged that inasmuch as the Life Insurance Corporation was an instrumentality of the State, it is debarred by article 14 from acting arbitrarily. It is obligatory upon the corporation, it was contended, to disclose the reasons for its action complained of, viz., its requistion to call an extraordinary general meeting of the company for the purpose of moving a resolution to remove some directions and appoint others in their place. This argument was opposed by the learned by the learned Attorney-General for the State, contenting that actions of the State or an instrumentality of the State which do not properly belong to the filed of public law but belong to the filed of private law, are not subject to judicial review. Dealing with the said contentions, the court observed (at page 637 of 59 Comp Cas):
"While we do find considerable force in the contention of the learned Attorney-General is may not be necessary for us to enter into any lengthy discussion against the topic , as we shall presently see. We also desire to warm ourselves against readily referring to English cases on questions of Constitutional law. Administrative law and public law as the law in India in these branches has forged ahead of the law in England, guide as we are by our Constitution and uninhibited as we are by the technical rules which have hampered the development of the English law. While we do not for a moment doubt that every action of the State or an instrumentality of the State must be informed by reason and that, in appropriate cases, actions uniformed by be reason may be questioned as arbitrary in proceedings under article 226 or article 32 of the Constitution, we do not construe article 14 as a charter for judicial review of State actions and to call upon the State to account for its actions in its manifold activities by stating reasons for such actions.
For example, if the action of the State is political or sovereign in character, the court will keep away from it. The court will not debate academy matters or concern itself with the intricacies of trade and commerce. If the action of the State is related to a contractual obligation or obligations arising out of tort, the court may not ordinarily examine it unless the action has some public law character attached to it. Broadly speaking, the court will examine actions of State if they pertain to the public law domain and refrain from examining them if they pertain to the private law filed. The difficulty will lie in demarcating the frontier between the public law domain and the private law filed. It is impossible to draw the line with precision and we do not want to attempt it. The question must be decided must be decided in each case with reference to the particular action, the activity in which the State or the instrumentality of the State is engaged when performing the action, the public law or private law character of the action and a host of their relevant circumstances. When the State or an instrumentality of the State ventures into the corporate world and purchases the shares of a company, it assumes to itself the ordinary role of a shareholder, and done the robes of a shareholder, with all the rights available to such a shareholder. There is no reason why the State as a shareholder should be expected to state its reasons when it seeks to change the management, by a resolution of the company, like any other shareholder......".
49. Distinction between "public law" and "private law" :
Difficult as this distinction is and incapable of precise demarcation; it is yet necessary to keep the board distinction in mind. Lord Denning in his book "The Closing Chapter" has this to say on the subject :
"The first thing to notice is that public law is confined to 'public authorities. What are 'public authorities'? There is only one avenue of approach. It is by asking, in the words of section 31(2)(b) of the Supreme Court Act, 1981: What is the 'nature of the persons and bodies against whom relief may be granted by such orders', that is, by mandamus, prohibition or certiorari ?
50. These are divided into two main categories :
First, the persons or bodies or bodies who have legal authority to determine questions affecting the common law or statutory rights or obligations of other persons as individuals. That is the formula stated by Lord or obligations of other persons as individuals. That is the formula stated by Lord Justice Atkin in R. v. Electricity Commissioners : Ex parte Landon Electricty Joint Committee Co. (1920) Ltd. [1924] 1 KB 171, 205 as broadened by Lord Diplock in O'Reilly v. Mackman [1982] 3 WLR 1096, 1104.
51. Second, the persons or bodies who are entrusted by Parliment with functions, powers and duties which involve the making of decisions of a public nature.....To which I would add the words of Lord Goddard C. J., in R. v. National Joint Council for Dental Technicans : Ex parte Neate [1953] 1 QB 704, 707 :
"The bodies to which in modern times the remedies of these prerogative writs have been applied have all been statutory bodies on whom Parliment has conferred statutory powers and adties which, when exercised, may lead to be determent of subjects who may have to submit to their jurisdictions.
But those categories are not exhaustive. The courts can extend them to any other person or body of a public nature exercising public duties which it is desirable to control by the remedy of judicial review.
There are many cases which give guidance, but I will just give some illustrations.
Every body which is created by stated is created by statute -- and whose powers and duties are defined by statute -- is a "public authority. So Government departments, local authorities, police authorities, and statutory undertakings and corporations are all 'public authorities. So are members of a statutory tribunal or inquiry, and the board of vi visitors of a prison. The Criminal Injuries Compensation Board is a public authority. So also, I suggest, is a university incorporated by Royal Charter; and the managers of a State school. So is the Boundary Commission : and the Committee of Lloyd's.
But a limited liability incorporated under the Companies Acts is not a 'public authority' )see Tozer v. National Greyhound Racing Club Ltd. [1983] Times, 16 May). Nor is an unincorporated association like the Jockey Club.....". (see page 122 to 124)
52. Sri Harry Wolf, a Lord Justice of Appeal, pointed out the distinction in the following words :
"I regard public law as being the system which enforces the proper performance by public bodies of the duties which they owe to the public. I regard private law as being the system which protects the private rights of private individuals or the private rights if public bodies. The critical distinction arises out of the fact that it is the public as a whole, or in the case of local government the public in the locality, who are the beneficiaries of what is protected by public law and it is the individuals or bodies entitled to the rights who are the protection provided by private law....." (see page 221 of his article 'Public Law -- Private law : Why the Divide ? A personal view (published in 'public law' : Summer : (1986)").
53. The learned Law Lord stated further in the same article, at page 223 :
While public law deals only with bodies, this does not mean that the activities of public are never governed by private law. Like public figures, at least in theory, public bodies are entitled to have a private life. There have been suggestions that in the commercial filed public bodies should adopt different and higher ethical standards than private individuals, but this is not yet required as a matter of law and in relation to purely commercial transactions the same law is applicable, whether or not a public duty is involved. Prima facie, the same is true in relation to employment. The servant employed by a public body ordinarily has the same private rights as any other servant.....".
54. The position may, however may, however, be different -- pointed out the learned law Lord -- if such relation ship is circumcribed by a statutory provision.
55. In this context, it would be appropriate to refer to two important English decisions, where a public duty was implied even in the absence in the absence of a statutory provision. They are R. v. Criminal Injuries Compensation Board, Ex parte Lain [1967] 2 All ER 770 (QB) and R. v. Panel on Take-overs [1987] 1 All EP. 564 (CA). The Criminal Injuries Compensation Board, the relevant facts are the following : In the year 1964, the Government of Great Britain announced a Scheme in both Houses of Parliment providing for compensation to victims of violence and persons injured while assisting the police . It was a non-statutory scheme under which compensation was to be paid ex gratia. The scheme was to be administered by a Board, which was to be provided with money through a grant-in-aid, out of which payment would be made when the Board was satisfied that the compensation was justified. The widow of a police constable who was shot in the fact by a suspect whom he was about to question, and who subsequently shot himself, applied to the Board for compensation. The Board awarded compensation, but made certain deductions, which were questioned by way of certiorari. The first question before the court was "whether the Board is a body of persons amenable to the supervisory jurisdiction of this court ?". For the Board, reliance was placed upon the well-known words of Atkin, L.J. in R. v. Electricity Commissioners [1924] 1 KB 171, at page 205 (CA) to the effect that the body of persons to be amendable to writ jurisdiction must have the legal authority to determine questions affecting the rights of subjects and who are under a duty to act judicially. The court held that the said words of Atkin., L.J., were not supposed to be exhaustive of the situation where a certiorari may issue,and pointed out that the Board, though not set up under a statute, is set up by the executive Government, i.e. under the prerogative, and that its act its acts are no less lawful on that account. The court observed (at p. 777 of [1967] 2 All ER) :
"Indeed, the writ of certiorari has been issued not only to courts set up by statutes but also to courts whose authority was derived, inter alia, from the prerogative. Once the Jurisdiction is extended, as it clearly has been, to tribunals as opposed to courts, there is no reason why the remedy by way of certiorari cannot be invoked to a body of persons set up under the prerogative. Moreover, the Board, though set up under the prerogative and not by statute, and has in fact the recognition of Parliament in debate and Parliament provided the money to satisfy the Board's awards......".
56. It was further observed (at page 778 of [1967] 2 All ER) :
"We have, as it seems to me, reached the position when ambit of certiorari can be said to cover every case in which in which a body of persons, of a public as opposed to a purely private or domatice character, has to determine matters affecting subjects provided always that it has a duty to act judicially. Looked at in this way, the Board in my judgment comes fairly and squarely within the jurisdiction of this court. The Board are, as counsel for the Board said, ' servant of the Crown, charged by the Crown, by executed instructions, with the duty of distributing the bounty of the Crown". The Board are clearly, therefore, performing public duties. Moreover, the Board are quite clearly under a duty to act judicially".
57. The same idea was put forward by Diplock. L.J. in the his separate opinion, where he said (at page 779 of [1967] 2 All ER): "If new tribunals are established by acts of Government, the supervisory jurisdiction of the High Court extends to them if they possess the essential characteristics on which the subjection of inferior tribunals to the supervisory control of the High Court is based ......" Ashworth, J., justified the issue of certiorari in that case on the following basis (at page 784 of [1967] 2 All ER):
"They t(the Board) were set up by the executive after the proposal to set them up had been debated in both Houses of Parliament, and the money needed to satisfy their awards is drawn from sums provided by Parliament. It can therefore, be said that their existence and their functions have atleast been recognized by the Parliament, which to my mind has a two fold consequence : in the first place it negatives any notion that the Board are a private tribunal, and secondly it confers on the Board what I may call a public or official character. The number of applications for compensation and the amounts awarded by the Board alike show how greatly the general public are affected by the functioning of the Board........."
58. This decision has since been followed and applied in several English decisions. It would suffice to refer to R. v. Panel on Take-overs and Mergers : Ex parte Datafin [1987] 1 All ER 564. The panel on Take overs and Mergers was a self regulating unicorporated association which devised and operated the City code on Take-overs and Mergers prescribing a code of conduct to be observed in the the TAke-overs of listed public companies. The panel had no direct statutory, prerogative or common law powers based solely on consensus; its acts were supported and sustained by certain statutory powers and penalties introduced after the the interception of the panel. A decision of the panel was sought to be questioned by ways of certiorari. One of the objections of the respondents was that the supervisory jurisdiction of the court was confined to bodies whose power was derived solely from legislation or the exercise of the prerogative, and that the power of judicial review did not extend to a body such as the Panel on Take-overs. Overruling this objection, it was held that in determining whether the decisions of a particular body were subject to judicial review, the court was not confined to considering the source of that body's powers and duties, but could also look to their nature. Accordingly, if the duty imposed on a body, whether expressly or by implication, was a public duty and the body was exercising public duty imposed on a body was exercising public law functions, the court had jurisdiction to entertain an application for judicial review of that body's decisions. It was held that, having regard to the wide-ranging nature and importance of the matters covered by the City Code on Take-overs and Mergers and to the PUblic consequences of non- compliance with the Code, and the Panel on Take-overs and Mergers was performing a public duty when prescribing and administering the Code and its rules and was subject to public law remedies. Accordingly, it was held that an application for judicial review would lie in an appropriate case. The approach to be adopted in such cases, it was stated by Sir John Donaldson, M.R., is "to recognise the realities of executive power". This is what the learned Master of the Rools Stated ( at page 577) :
"In fact, given its novelty, the panel fits surprisingly well into the format which this court had in mind in R. v. Criminal Injuries Compensation Board [1967] 2 All ER 770 (QB). It is without doubt performing a public duty and an important one. This is clear from the expressed willingness of the Secretary of State for Trade and Industry to limit legislation in the field of take- overs and mergers and to use the panel as the centre - piece of his regulation of that market. The rights of citizens are indirectly affected by its decisions, some, but by no means all of whom, may in a technical sense be said to have assented to this situation, e.g., the members of the stock exchange. At least in its determination of whether there has been a breach of the code, it has duty to act judicially and it asserts that its raison d'etre is to do equality between one shareholder and another. Its source of power is only partly based on moral persuasion and the assent of institutions and their members, the bottomline being the statutory powers exercised by the Department of Trade and Industries and the Bank of England. In this context I should be very disappointed if the courts could not recognize the realities of executive power and allowed their vision to be clouded by the sublety and sometimes complexity of the way in which it can be exerted.........."
59. This rule was re iterated in yet another decision of the Court of Appeal in R. v. Panel on Take-overs and Mergers : Ex parte Guinness [1988] 1 All ER 509. This was indeed the approach indicated by matter j., in Sukhdev Singh v. Bhagatram Sardar SIngh Raghuvanshi [1975] 45 Comp Cas 285, 315, 316 ; [1975] 47 FJR 214, 244, when the learned Judge spoke of " the governing power, wherever located" being subjected to "fundamental constitutional limitations". The learned judge felt that "the need to subject the power-centers to the control of the Constitution requries an expansion of the concept of State action.".
60. Applying the above test, the appellant-society herein cannot be called a public body. It has no duty towards its members only. It has no power to take any action action or pass any order affecting the rights of the members of public. The binding nature of its orders and actions is confined to its members, an to its members, and to its employees. It is neither statutory body nor are its relations with its employees governed by a statute. Its functions are also not akin to governmental functions. Nor is it a case where it can be said that the reality behind the society is the executive power of the State. Moreover, even if for some distant reason it can be characterised as a public body, even so the contract of service between it and the writ petitioner cannot be treated as belonging to the "public law" field. It is a pure and simple contract of service, and there is no statutory provision regulating, circumscribing, and governing the said relationship - excepting section 47 of the A.P. Shops and Establishments Act, 1988, which imposed certain restrictions in the matter of termination of service to the employees of a co- operative society. This aspect we shall consider presently.
61. Substantial reliance is place upon two recent decisions of the Supreme Court as charting out a new path. It is submitted that the decisions in Shri Anadi Mukta Sadguru Shree Muktajee Vandasjiswami Suvarna Jayanti Mohotsav Smarak Trust v. V. R. rudani, (hereinafter referred to as Rudani) and Dwarkadas Marfatia and sons v. Board of Trustees, Bombay Port, , (hereinafter referred to as Bombay Port Trust), clearly lay down that a mandamus is available even to enforce a non-statutory contract, like a contract of service. We do not think that either of the decisions lays down any such proposition. We shall first take up Rudani.
62. IN Rudani, AIR 1989 SC 1670, the claim of the teachers against the educational institution was for terminal benefits and arrears of salary payable. they were not seeking reinstatement in service. The division Bench distinguished the earlier decisions in Vaish Degree College v. lakshmi Narian, AIR 1979 SC 888, and Deepak Kumar Biswas v. Director of Public Instruction, , as cases where the relief of reinstatement was sought.
63. Having pointed out the said distinction, Jagannatha Shetty J., speaking for the Bench, observed (at page 16111) :
"If the rights are purely of a private character no mandamus can issue. If the management of the college is purely a private body with no public duty mandamus will not lie. These are two exceptions to mandamus. But once these are absent and when the party has no other equally convenient remedy, mandamus cannot be denied......."
64. The learned judge then referred to the fact that the appellant educational institution was in receipt of government aid. Such aid , it was pointed out, plays a major role in the control, maintenance and working of educational institutions ; the function performed by the institution was public in nature ; its activities were closely supervised by the university authorities, who had the power to determine the service conditions of the academic staff as well - short, all the indicia of "State" were present there. In the light of those fact, it was concluded :
"The service conditions of the academic staff are, therefore, not purely mandamus in England, and referred to the fact that article 226 is much wider in its amplitude, as explained by Subba Rao J., in Dwarka Nath v. ITO . The learned judge observed that the term "authority" employed in article 226 must receive a liberal meaning unlike the term in article 12. Reference was the en made to Praga Tools Corporation v. C. V. Imanual [1969] 39 Comp Cas 889 ; [1969] 36 FJR 191, where it was held, inter alia, that "a mandamus would also lie against a company constituted by a statute for the purpose of fulfilling public responsibilities ". Thereafter, in paragraph 21, the learned judge stated thus - which is the sheet - anchor of the petitioner's contention in this behalf :
"Here again we may point out that mandamus cannot be denied on the ground that the duty to be enforced is not imposed by the statute. Commenting on the development of this law, Professor de Smith stated : "To be enforceable by mandamus a public duty does not necessarily have to be one imposed by statute. It may be sufficient for the duty to have been imposed by charter, common law, custor or even contract'; (Judicial Review of Administrative action, fourth edition , page 540 ). We share this view.