Gujarat High Court
Bhavsar Urmiben Kanaiyalal vs State Of Gujarat - Through Thedirector ... on 23 April, 2015
Bench: Jayant Patel, J.B.Pardiwala, Paresh Upadhyay
C/LPA/70/2012 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
LETTERS PATENT APPEAL NO. 70 of 2012
In
SPECIAL CIVIL APPLICATION NO. 4146 of 2011
With
LETTERS PATENT APPEAL NO. 331 of 2013
In
SPECIAL CIVIL APPLICATION NO. 207 of 2011
TO
LETTERS PATENT APPEAL NO. 335 of 2013
In
SPECIAL CIVIL APPLICATION NO. 4151 of 2011
With
LETTERS PATENT APPEAL NO. 321 of 2014
In
SPECIAL CIVIL APPLICATION NO. 5812 of 2011
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE JAYANT PATEL
With
HONOURABLE MR.JUSTICE J.B.PARDIWALA
and
HONOURABLE MR.JUSTICE PARESH UPADHYAY
==========================================================
1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
Page 1 of 38
C/LPA/70/2012 CAV JUDGMENT
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BHAVSAR URMIBEN KANAIYALAL....Appellant(s)
Versus
STATE OF GUJARAT - THROUGH THEDIRECTOR SOCIAL SECURITY &
3....Respondent(s)
==========================================================
Appearance in LPA No.70/12 with LPA No.331/13 to LPA No.335/13:
MR SUNIL K SHAH, ADVOCATE WITH MRS. SUSHMA S SHAH for the
Appellant(s) No. 1
MR UTKARSH SHARMA, AGP for the Respondent(s) No. 1 , 3
MR MANOJ N POPAT, ADVOCATE for the Respondent(s) No. 2 , 4
Appearance in LPA No.321/14:
MR NISHANT LALAKIYA, ADVOCATE for the Appellant(s) No. 1-32
NOTICE SERVED BY DS for Respondent(s) No.1-2
MR DG SHUKLA, ADVOCATE for the Respondent(s) No. 3
==========================================================
CORAM: HONOURABLE MR.JUSTICE JAYANT PATEL
and
HONOURABLE MR.JUSTICE J.B.PARDIWALA
and
HONOURABLE MR.JUSTICE PARESH UPADHYAY
Date : 23/04/2015
CAV JUDGMENT
(PER : HONOURABLE MR.JUSTICE PARESH UPADHYAY)
1. The point for consideration before this specially constituted Bench is as to whether the Gujarat State Social Welfare Board is a 'State' within the meaning of Article 12 of the Constitution of India. Reference is made to this Bench by the Division Bench of this Court vide order dated 18.07.2014.
Page 2 of 38 C/LPA/70/2012 CAV JUDGMENT2. Since it is the question noted above, which only needs to be answered by this Bench, the merits of the petition, which is dismissed by the learned Single Judge on the ground of that being not maintainable, need not be gone into and therefore whether to grant any relief to the petitioners would be left to the Division Bench which is seized of the Letters Patent Appeal, however, for the limited purpose, as to under what circumstances the reference is made, the following aspects are noted.
3.1 The petitioners, who are working with the Gujarat State Social Welfare Board, asked for uniform implementation of the Government Resolution dated 13.03.1995, for all the employees, by which higher pay-scale is ordered to be given to the employees of the Gujarat State Social Welfare Board. The same was granted to some of the persons and is denied to some other persons. Under these circumstances, a petition being Special Civil Application No.207 of 2011 was filed. It is this petition, which was contested by the respondent Board, principally contending that, the writ petition is not maintainable against this Board, since it is not 'State' within the meaning of Article 12 of the Constitution of India. Reliance was placed on the decision (of learned Single Judge) of this Court in the case of P.K. Khalsa versus Gujarat State Social Welfare Advisory Board reported in 1995(2) GLH 339. Reliance was also placed on the decision of the Division Bench of this Court recorded on Letters Patent Appeal No.812 of 1995. Accepting the said preliminary objection, the said petition came to be dismissed as 'not maintainable'. While holding the petition to be not maintainable, the learned Single Judge has Page 3 of 38 C/LPA/70/2012 CAV JUDGMENT otherwise not gone into the merits of the matter.
3.2 Being aggrieved, the petitioners filed Letters Patent Appeal No.70 of 2012 and cognate appeals i.e. the present group of appeals. During the course of hearing of this group of Letters Patent Appeals, on 18.07.2014, the Division Bench of this Court (Coram : Hon'ble Mr. Justice Vijay Manohar Sahai and Hon'ble Mr. Justice R.P. Dholaria) found and observed as under.
"1. We have heard Mrs. Sushma S. Shah, learned counsel for the appellant and Mr. Manoj N. Popat, learned counsel assistant by Mr. Digant Popat, learned counsel for the respondents.
2. In this Letters Patent Appeal, common judgment of learned Single Judge dated 19th July 2011 passed in Special Civil Application No.207 of 2011 and Special Civil Application No.4146 of 2011 to 4152 of 2011 has been challenged, wherein, the learned Single Judge has dismissed the writ petitions holding that the Gujarat State Social Welfare Board is not a State within the meaning of Article 12 of the Constitution of India and therefore the writ petitions are not maintainable.
3. The learned counsel for the appellant has urged that the Gujarat State Social Welfare Board is a State within the meaning of Article 12 of the Constitution of India as Page 4 of 38 C/LPA/70/2012 CAV JUDGMENT the State Government has got deep pervasive control of the Board and therefore if any employee has any grievance, he may file a writ petition before this Court.
4. This argument is opposed by Mr. Digant Popat, who has placed reliance on the decision of learned Single Judge in P. K. Khalsa v. Gujarat State Social Welfare Advisory Board & Another, 1995(2) GLH 339. The said decision was challenged by way of a Letters Patent Appeal. The said appeal was disposed of on 20.11.1998 as not pressed as the retiral benefits were paid by the Board to the appellant.
5. In the said Letters Patent Appeal, the question whether the Gujarat State Social Welfare Advisory Board was a State within the meaning of Article 12 of the Constitution of India was not decided.
6. In the affidavit in reply filed in this appeal, respondent No.2 in para 3 has clearly stated that earlier the name was State Social Welfare Advisory Board which has been changed by the resolution dated 12.05.2004 and is now known as Gujarat State Social Welfare Board.
7. From the arguments raised before us by the learned counsel for the parties it is Page 5 of 38 C/LPA/70/2012 CAV JUDGMENT clear that at some stage the Central Government passed the orders and granted assistance and at some stages the Gujarat State Government passed the orders and granted assistance and as a matter of fact if we look into the budgetary provisions as provided in Rules of the State Social Welfare Advisory Boards, which have been filed on page 77 of the paper-book, it is clear that the expenditure to be incurred on the establishment of the office of the State Board will be equally shared by the Central Board and the State Govt. concerned. From the Rules, it prima facie appears that the Board is controlled by the Central and State Government and the State is having deep and pervasive control over it. Funds are also provided by the Central and State Government and at page 84 of the paper-book, a document has been annexed, which shows that there are six projects going on at present and out of these projects, first five projects are 100% financed by the Central Social Welfare Board to the Gujarat State Social Welfare Board. Though, there was an order of learned Single Judge holding that the Gujarat State Social Welfare Advisory Board is not a State within the meaning of Article 12 of the Constitution of India and this question was not touched in an appeal by the Division Bench, we may have proceeded to decide the Page 6 of 38 C/LPA/70/2012 CAV JUDGMENT Letters Patent Appeals but the interest of justice demands that since the Letters Patent Appeal against the order of learned Single Judge in P. K. Khalsa's case had been disposed of by the Division Bench, we deem it fit and proper to refer the following question to be decided by the Full Bench of this Court.
QUESTION "Whether the Gujarat State Social Welfare Board is a State within the meaning of Article 12 of the Constitution of India?"
8. Let the papers of these Letters Patent Appeals be placed before the Hon'ble the Chief Justice for constituting an appropriate Full Bench. Office shall obtain necessary nomination at the earliest."
(emphasis supplied by us) 3.3 It is in the above background, that this Bench is examining the issue as to whether the Gujarat State Social Welfare Board is amenable to the writ jurisdiction of this Court.
4. Learned advocate for the appellants has submitted that, the petitioners are working with the Gujarat State Social Welfare Board and are praying for uniform implementation of the Government Resolution dated 13.03.1995, for all the employees, by which higher pay-scale is ordered to be given to the employees of the Gujarat State Social Welfare Board. It is submitted that, the same was granted to some of the persons Page 7 of 38 C/LPA/70/2012 CAV JUDGMENT and is denied to some other persons. It is submitted that, it is this hostile discrimination which was challenged by filing a group of petitions being Special Civil Application No.207 of 2011 and cognate matters before this Court. It is submitted that, it is this petition, which was contested by the respondent Board, principally contending that, the writ petition is not maintainable against this Board, since it is not 'State' within the meaning of Article 12 of the Constitution of India, which is accepted by the learned Single Judge, which has ultimately resulted in not interfering in the arbitrary and discriminatory exercise of power of the respondent Board. It is submitted that, the reference be answered by this Court by holding that the Gujarat State Social Welfare Board is amenable to writ jurisdiction of this Court.
5. Learned advocate for the Gujarat State Social Welfare Board has submitted that, writ petition is not maintainable against this Authority and this issue is already concluded long back. Learned advocate has also taken this Court through the contents of the affidavit in reply dated 05.05.2014, which is filed in this Letters Patent Appeal. Reliance is also placed on the decision of this Court in the case of P.K.Khalsa versus The Gujarat State Social Welfare Advisory Board reported in 1995(2) GLH 339. Reliance is also placed on the decision of Hon'ble the Supreme Court of India in the case of Zee Telefilms Limited versus Union of India reported in (2005) 4 SCC 649. It is submitted that, the reference be answered by holding that, the writ is not maintainable against the Gujarat State Social Welfare Board.
6. Learned Assistant Government Pleader has adopted the Page 8 of 38 C/LPA/70/2012 CAV JUDGMENT argument made on behalf of the Board and has submitted that, the reference be answered by holding that, the writ is not maintainable against the Gujarat State Social Welfare Board.
7. Having heard learned advocates for the respective parties and having gone through the material on record, while recording our findings, the observations of Hon'ble the Supreme Court of India in the case of Balmer Lawrie & Company Limited and others versus Partha Sarathi Sen Roy and others reported in (2013) 8 SCC 345, are kept in view. Paragraph-22 of the said decision reads as under.
"22. In light of the aforementioned discussion, it is evident that, it is rather difficult to provide an exhaustive definition of the term "authorities", which would fall within the ambit of Article 12 of the Constitution. This is precisely why only an inclusive definition is possible. It is in order to keep pace with the broad approach adopted with respect to the doctrine of equality enshrined in Articles 14 and 16 of the Constitution, that whenever possible courts have tried to curb the arbitrary exercise of power against individuals by centers of power, and therefore, there has been a corresponding expansion of the judicial definition of the term "State", as mentioned in Article 12 of the Constitution."Page 9 of 38 C/LPA/70/2012 CAV JUDGMENT
8. The Full Bench (Bench of Five Hon'ble Judges) of the Patna High Court has also deliberated on this point in detail. Reference can be made to the decision in the case of The Organizer, Dehri C.D. & C.M. Union Ltd., Fazalganj versus State of Bihar & Others reported in AIR 2014 Patna 67. Paragraph 47 of the said judgment reads as under.
"47. Thus, from the plethora of case laws on the subject as to when an authority or person would become a "State" within the meaning of Article 12 of the Constitution, briefly, though not exhaustively, the following principles and rationale are deducible:
(i) The authority created by a Statute
under control of Government, hence a
statutory corporate entity; and/or
(ii) Even a body corporate as distinct
from statutory Corporation could be "State", if there was a deep and pervasive control of the Government; and/or
(iii) Independent body corporate formed by the Government to perform Governmental duties or duties of public nature for Government; and/or
(iv) Authority functioning as an instrumentality or agency of Government, the functionality test; and/or
(v) Unusual degree of control of Government Page 10 of 38 C/LPA/70/2012 CAV JUDGMENT and rendering public service; and/or
(vi) Authority works as an adjunct of and for the purpose of Government and Governmental purposes and/or public function; and/or
(vii) Authority performing monopolistic functions reserved by State; and/or
(viii) Cumulative effect of various relevant facets have to be seen and not one stray facet; and/or
(ix) The authority may itself not be State, but a person therein is controlled by and supervised by the State/Government, then he becomes a "State" because of the control."
8.1 In the present case, there is material on record which suggests that, there is deep and pervasive control of the Governments - both Central and State, over the Gujarat State Social Welfare Board. The said material inter alia is as under.
8.2 The Chairperson and Members of the Board are appointed by the Government. The Government Resolution dated 08.12.1999 in this regard is on record.
8.3 On adoption of revision of pay for the employees of the State Government, the same was decided to be given to the employees of the Gujarat State Social Welfare Board by the Government. The Government Resolutions dated 19.05.1998 and 29.10.1998 speak about this. The same was done by the Social Welfare Department of the Government of Gujarat in Page 11 of 38 C/LPA/70/2012 CAV JUDGMENT consultation with the Finance Department.
8.4 The Rules governing composition and functions of the State Social Welfare Boards, as framed by the Central Social Welfare Board inter alia provides as under.
8.4.1 "Rule-3 (viii) : The State Board can be dissolved / superceded or the Chairperson or any member can be removed from his/her Office for specified reasons with the mutual consent of the Central Board and the State Government concerned. The term of the Chairperson, State Social Welfare Board, should not be terminated except for the following reasons :-
xxx"
8.4.2 "Rule-10 (viii) : The employees of the State Board will be governed by the State Government rules in terms of their service conditions. The State Board will also follow the State Government rules in case of other financial and administrative matters."
8.5 In view of above, it needs to be held that, the Gujarat State Social Welfare Board is controlled by the Government(s) and there is deep and pervasive control of the Government inasmuch as by the Rules of the Board itself, the employees of the State Board are directed to be governed by the State Government Rules in terms of their service conditions and further, the State Board is also to follow the State Government Rules in case of other financial and administrative matters. 9.1 This Court further finds that, there is one glaring aspect, which needs a mention. The Government of Gujarat adopted a policy of giving higher grade scale to its employees on Page 12 of 38 C/LPA/70/2012 CAV JUDGMENT completion of their nine years of service in a particular scale. The same was also sought to be implemented by the Gujarat State Social Welfare Board. Permission of the Government was sought for by the Board. The same is permitted by the State of Gujarat vide Government Resolution dated 13.03.1995. The said Resolution further stipulates that, the financial burden shall be borne by the Central Government and the State Government equally. It also needs to be recorded that, the benefit of this Resolution was given to some of the employees of the Board, however the same was denied to some other employees. It is this hostile discrimination, which is complained before this Court in the petition filed by those persons, and in the said petition, the stand is taken by the respondents that, this writ petition be dismissed, since it is not maintainable because the Gujarat State Social Welfare Board is not amenable to writ jurisdiction of this Court - it not being 'State' within the meaning of Article 12 of the Constitution of India. It is this objection, which is upheld by the learned Single Judge vide order dated 19.07.2011, which is questioned in this batch of Letters Patent Appeal, and it is on this batch of appeals, the Division Bench of this Court, while making this reference, has made the observations, in the order dated 18.07.2014 to the effect that, it prima facie appears that the Board is controlled by the Central and State Government and the State is having deep and pervasive control over it. In this factual background, we approve the said view of the Division Bench.
9.2 Further, in this fact situation, the observations of Hon'ble the Supreme Court of India quoted above gather further significance. A center of power can not be permitted to put on a shield of it not being a 'State' when the powers exercised by Page 13 of 38 C/LPA/70/2012 CAV JUDGMENT it is questioned before a Court of Law, more particularly a Writ Court, on the ground of arbitrariness, discrimination, etc. Further, there is also ample material on record to hold that, the Government does have deep and pervasive control over the Gujarat State Social Welfare Board on all material aspects including financial as well as administrative aspects. The reference therefore needs to be answered by holding that the Gujarat State Social Welfare Board is 'State' within the meaning of Article 12 of the Constitution of India and is amenable to writ jurisdiction of this Court.
10. So far the argument of both the learned advocates for the respondents i.e. the respondent Board and the learned Assistant Government Pleader that there is no control of the Government over the Gujarat State Social Welfare Board, is concerned, the same is not tenable in view of the findings recorded above. This argument is therefore rejected.
11.1 We hold that, in view of the decision of Hon'ble the Supreme Court of India in the case of Balmer Lawrie & Company Limited (supra), more particularly the observations quoted above, the decision of learned Single Judge of this Court in the case of P.K.Khalsa versus The Gujarat State Social Welfare Advisory Board reported in 1995(2) GLH 339 holding that the Gujarat State Social Welfare Advisory Board is not amenable to writ jurisdiction of this Court, is no more a good law. We also note that the challenge to the said decision in Letters Patent Appeal No.812 of 1995 was not examined on merits by the Division Bench. It is relevant to quote the order of the Division Bench of this Court dated 20.11.1998 recorded on the Letters Patent Appeal filed by said petitioner i.e. Mr. Page 14 of 38 C/LPA/70/2012 CAV JUDGMENT P.K.Khalsa being Letters Patent Appeal No.812 of 1995.
"CORAM : MR.JUSTICE B.C.PATEL and MR.JUSTICE C.K.BUCH Date of decision: 20/11/98 ORAL JUDGEMENT (Per Patel, J. ) Against the dismissal of Special Civil Application No. 608/81 by learned Single Judge on 15/16th February 1995, the present appeal is preferred.
The petition was dismissed mainly on the ground that the respondent No.1 Board is neither an instrumentality nor an agency of the State within the meaning of Art. 12 of the Constitution. So far as the merits were concerned, it was kept open for the petitioner to approach the appropriate forum. The appellant was also directed to make a representation and the authority was directed to consider the same and give due weightage to the fact that the petitioner worked for all this period of 17 years and that he has voluntarily retired during the pendency of this petition.
The question now involved in this matter is retirement benefit. Mr. Popat, learned advocate for the respondent No.1 Board states that in accordance with law, whatever benefit the petitioner is entitled to, will be given.Page 15 of 38 C/LPA/70/2012 CAV JUDGMENT
In view of this statement, Mr. Master, learned advocate for the petitioner does not press this appeal. It is directed that in view of the fact that the appellant has retired long back, the respondent shall give whatever benefit the petitioner is entitled to according to law, within a period of two months from today. The appeal stands disposed of as not pressed with the aforesaid direction.
In view of the aforesaid order passed in the appeal, Civil Application No. 2037/95 does not survive and it stands disposed of accordingly. Notice is discharged."
11.2 Reliance placed by learned advocate for the respondent Board on the decisions noted above, will not take the case of the respondent Board any further in view of the above discussion, finding and the subsequent decision of Hon'ble the Supreme Court of India in the case of Balmer Lawrie & Company Limited (supra), which has also considered all previous decisions on the issue.
12.1 For the reasons recorded above, we hold that, the Gujarat State Social Welfare Board is 'State' within the meaning of Article 12 of the Constitution of India and is amenable to the writ jurisdiction of this Court. The reference is answered accordingly.
12.2 In view of above, these Letters Patent Appeals be listed before the Division Bench for consideration. Since Page 16 of 38 C/LPA/70/2012 CAV JUDGMENT learned Single Judge has otherwise not examined the grievance of the petitioners on merits, it is left to the discretion of the Division Bench either to examine the grievance of the petitioners on merits, or to remand the matter to learned Single Judge for adjudication of the petitions on merits.
(PER : HONOURABLE MR.JUSTICE JAYANT PATEL)
1. We had the benefit of going through the reasons recorded in the judgment prepared by my brother Paresh Upadhyay, J., in LPA No.70/12 with LPA Nos.331/13 to 335/13. We find it appropriate to supplement the reasons while concurring with the ultimate decision that Gujarat Social Welfare Board can be said as a "State" within the meaning of Article 12 of the Constitution of India and amenable to the writ jurisdiction of the High Court. We may also record that since the LPA No.70/12 with LPA Nos.331/13 to 335/13 are simultaneously heard and to be decided with LPA No.321/14, wherein the question involved is as to whether Gujarat Ayurvedic Vikas Mandal could be said as a "State" within the meaning of Article 12 of the Constitution of India or not and since the parameters to be examined relate to holding of a particular body or corporation or society formed under the Indian Companies Act or Societies Registration Act respectively, there would be common facets to be considered for satisfying the parameters. Hence, I find that supplementing the reasons in the judgment recorded by my brother Paresh Upadhyay, J., and consideration of the same question in LPA No.321/14 can be simultaneous.
Page 17 of 38 C/LPA/70/2012 CAV JUDGMENT2. The question needs to be addressed is as to how to determine whether a particular Board or a Society is acting as an instrumentality or agency of the Government. At this stage, we may usefully refer to the observations made by the Apex Court in its decision in the case of Ramana Dayaram Shetty v. The International Airport Authority of India reported at AIR 1979 SC 1628, wherein the Apex Court before holding Airport Authority could be said as a State, observed at paragraphs 15 to 19, which reads as under:
"15. The analogy of the concept of State action as developed in the United States may not, however, be altogether out of place while considering this question. The decisions of the court in the United States seem to suggest that a private agency, if supported by extraordinary assistance given by the State, may be subject to the same constitutional limitations as the State. Of course, it may be pointed out that "the State's general common law and statutory structure under which its people carry on their private affairs, own property and contract, each enjoying equality in terms of legal capacity, is not such State assistance as would transform private conduct into State action". But if extensive and unusual financial assistance is given and the purpose of the Government in giving such assistance coincides with the purpose for which the corporation is expected to use the assistance and such purpose is if public character, it may be a relevant circumstance supporting an extensive that the corporation is an instrumentality or agency of Government. The leading case on the subject in the United States is Kerr v. Eneck Pratt Free Library, 149 F 2d 212. The Library system in question in this case was established by private donation in 1882, but by 1944, 99 per cent of the system's budget was supplied by the city, title to the library property was held by the city, employees there paid by the city payroll officer and a high degree of budget Page 18 of 38 C/LPA/70/2012 CAV JUDGMENT control was exercised or available to the city government. On these facts the Court of Appeal required the trustees managing the system to abandon a discriminatory admission policy for its library training courses. It will be seen that in this case there was considerable amount of State control of the library system in addition to extensive financial assistance and it is difficult to say whether, in the absence of such control it would have been possible to say that the action of the trustees constituted State action. Thomas P. Lewis has expressed the opinion in his article on "The meaning of State Action" (60 Colombia Law Review 1083) that in this case "it is extremely unlikely that absence of public control would have changed the result as long as 99% of the budget of a nominally private institution was provided by government.
Such extensive governmental support should be sufficient identification with the Government to subject the institution to the provisions of the Fourteenth Amendment". It may, therefore, be possible to say that 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 impregegnated with governmental character. But where financial assistance is not so extensive, it may not by itself, without anything more render the corporation an instrumentality or agency of government, for there are many private institutions which are in receipt of financial assistance from the State and merely on that account, they cannot be classified as State agencies. Equally a mere finding of some control by the State would not be determinative of the question "since a State has considerable measure of control under its police power over all types of business operations". But a finding of State financial support plus an unusual degree of control over the management and policies might lead one to characteristic an operation as State action" vide Sukhdev v. Bhagatram(1975) 3 SCR 619 at p.658 :
(AIR 1975 SC 1331 at pp. 1359, 1360). So also the existence of deep and pervasive State control may afford an indication that the Corporation is a State agency or instrumentality. It may also be a relevant factor to consider whether the corporation enjoys Page 19 of 38 C/LPA/70/2012 CAV JUDGMENT monopoly status which is State conferred or State protected. There can be little doubt that State conferred or State protected monopoly status would be highly relevant in assessing the aggregate weight of the corporation's ties to the State. Vide the observations of Douglas, J., in Jackson v. Metropolitan Edison Co., (1974) 419 US 345:42 L Ed 2d 477.
16. There is also another factor which may be regarded as having a bearing on this issue and it is whether the operation of the corporation is an important public function. It has been held in the United States in a number of cases that the concept of private action must yield to a conception of State action where public functions are being per formed.
Vide Arthur S. Miller: "The Constitutional Law of the Security State" (10 Stanford Law Review 620 at
664). It was pointed out by Douglas, J., in Evans v. Newton(1966) 382 US 296: 15 L Ed 2d 373 that "when private individuals or groups are endowed by the State with powers or functions governmental in nature, they become agencies or instrumentalities of the State". Of course, with the growth of the welfare State, it is very difficult to define what functions are governmental and what are not, because, as pointed out by Villmer, L.J., in Pfizer v. Ministry of Health,(1964) 1 Ch 614, there has been, since mid-Victorian times, "a revolution in political thought and a totally different conception prevails today as to what is and what is not within the functions of Government". Douglas, J., also observed to the same effect in New York v. United States (1937) 304 US 405, 426, 427. A State's project is as much a legitimate governmental activity whether it is traditional or akin to private enterprise, or conducted for profit." Cf. Helverillg v. Gerhardt(2). A State may deem it as essential to its economy that it own and operate a railroad, a mill, or an irrigation system as it does to own and operate bridges, street lights, or a sewage disposal plant. What might have been viewed in an earlier day as an improvident or even dangerous extension of state activities may today be deemed indispensable. It may be noted that besides the so Page 20 of 38 C/LPA/70/2012 CAV JUDGMENT called traditional functions, the modern State operates a multitude of public enterprises and discharges a host of other public functions. If the functions of the corporation are of public importance and closely related to governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government. This is precisely what was pointed out by Mathew, J., in Sukhdev v. Bhagatram (AIR 1975 SC 1331)(supra) where the learned Judge said that "institutions engaged in matters of high public interest or performing public functions are by virtue of the nature of the functions performed government agencies. Activities which are too fundamental to the society are by definition too important not to be considered government functions."
17. This was one of the principal tests applied by the United States Supreme Court in Marsh v. Alabama(1945) 326 US 501:90 L Ed 265 for holding that a corporation which owned a Company town was subject to the same constitutional limitations as the State. This case involved the prosecution of Marsh, a member of the Johevah's witnesses sect, under a state trespass statute for refusing to leave the side walk of the company town where she was distributing her religious pamphlets. She was fined $ 5/- and aggrieved by her conviction she carried the matter right upto the Supreme Court contending successfully that by reason of the action of the corporation her religious liberty had been denied. The Supreme Court held that administration of private property such as a town, though privately carried on, was, nevertheless, in the nature of a public function and that the private rights of the corporation must, therefore, be exercised within constitutional limitations and the conviction for trespass was reversed. The dominant theme of the majority opinion written by Mr. Justice Black was that the property of the corporation used as a town not recognisably different from other towns, lost its identification as purely private property. It was said that a town may be privately owned and managed but that does not necessarily allow the corporation Page 21 of 38 C/LPA/70/2012 CAV JUDGMENT to treat it as if it was wholly in the private sector and the exercise of constitutionally protected rights on the public ,street of a company town could not be denied by the owner. "The more an owner, for his advantage, opens up his property for use by the public in general, the more do his rights become circumscribed by the statutory and constitutional rights of those who use it... Thus, the owners of privately held bridges, ferries, turnpikes and railroads may not operate them as freely as a farmer does his farm. Since these facilities are built and operated primarily to benefit the public and since their operation is essentially a public function, it is subject to state regulation". Mr. Justice Frankfurter, concurring, reduced the case to simpler terms. He found in the realm of civil liberties the need to treat a town, private or not, as a town. The function exercised by the corporation was in the nature of municipal function and it was, therefore, subject to the constitutional limitations placed upon State action.
18. We find that the same test of public or governmental character of the function was applied by the Supreme Court of the United States in Evans v. Newton (1966) 382 US 296 (supra) and Smith v. Allwight (1943) 321 US 649. But the decisions show that even this test of public or governmental character of the function is not easy of application and does not invariably lead to the correct inference because the range of governmental activity is broad and varied and merely because an activity may be such as may legitimately be carried on by Government, it does not mean that a corporation, which is otherwise a private entity, would be an instrumentality or agency of Government by reason of carrying on such activity. In fact, it is difficult to distinguish between governmental functions and non-governmental functions. Perhaps the distinction between governmental and non-governmental functions is not valid any more in a social welfare State where the laissez faire is an outmoded concept and Herbert Spencer's social statics has no place. The contrast is rather between governmental activities Page 22 of 38 C/LPA/70/2012 CAV JUDGMENT which are private and private activities which are governmental. (Mathew, J. Sukhdev v. Bhagatram (supra) at p. 652) (of 1975-3 SCR) : (at p.1355 of AIR 1975 SC). But the public nature of the function, if impregnated with governmental character or "tied or entwined with Government" or fortified by some other additional factor, may render the corporation an instrumentality or agency of Government. Specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive of this inference.
19. It will thus be seen that there are several factors which may have to be considered in determining whether a corporation is an agency or instrumentality of Government. We have referred to some of these factors and they may be summarised as under: whether there is any financial assistance given by the State, and if so, what is the magnitude of such assistance whether there is any other form of assistance, given by the State, and if so, whether it is of the usual kind or it is extraordinary, whether there is any control of the management and policies of the corporation by the State and what is the nature and extent of such control, whether the corporation enjoys State conferred or State protected monopoly status and whether the functions carried out by the corporation are public functions closely related to governmental functions. This particularisation of relevant factors is however not exhaustive and by its very nature it cannot be, because with increasing assumption of new tasks, growing complexities of management and administration and the necessity of continuing adjustment in relations between the corporation and Government calling for flexibility, adapt ability and innovative skills, it is not possible to make an exhaustive enumeration of the tests which would invariably and in all cases provide an unfailing answer to the question whether a corporation is governmental instrumentality or agency. Moreover even amongst these factors which we have described, no one single factor will yield a satisfactory answer to the question and the court will have to consider the cumulative effect of these Page 23 of 38 C/LPA/70/2012 CAV JUDGMENT various factors and arrive at its decision on the basis of a particularised inquiry into the facts and circumstances of each case. "the dispositive question in any stale action case," as pointed out by Douglas, J., in Jackson v. Metropolitan Edison Company (1974-419 US 345) (supra) "is not whether any single fact or relationship presents a sufficient degree of state involvement, but rather whether the aggregate of all relevant factors compels a finding of state responsibility." It is not enough to examine seriatim each of the factors upon which a corporation is claimed to be an instrumentality or agency of Government and to dismiss each individually as being insufficient to support a finding of that effect. It is the aggregate or cumulative affect of all the relevant factors that is controlling."
(Emphasis supplied)
3. The aforesaid shows that the Apex Court in the above referred decision, elaborately considered broadly three aspects, one was for unusual and extensive financial support. The second was unusual and extensive control over the management. The third was a public or a governmental function and the fourth incidentally considered was the monopolistic status of such a body in contradistinction to other society or corporation which could be formed as per the relevant statute by any citizen or any other person. It further appears that while examining the aforesaid four broad heads, the language used is "unusual" and such word "unusual" is to be understood in contradistinction to the normal financial support or normal control over the management upon any similar body functioning under the relevant statute, may be a company under the Indian Companies Act or a Society under the Societies Registration Act. It is hardly required to be stated that when any Corporation is Page 24 of 38 C/LPA/70/2012 CAV JUDGMENT formed under the relevant statute enabling the citizen or any person to get it registered under the relevant statute, there would be control, checks and balances by the State machinery as per the relevant statute. Therefore, such checks and balances or the statutory control would fall outside the arena of unusual financial assistance or control. For example, if the Government has taken a policy decision to provide financial assistance by way of grant or otherwise to a particular body, such would not characterize per se as unusual financial assistance. Similarly, if a society or a company registered under the relevant statute has to meet with the requirement of the statute and in a given circumstance as per the statute, the power vests to the competent authority to take steps including that for removal of certain persons from the management and induction of certain person in the management or such other powers given for controlling or regulating the management of that particular body would also fall outside the arena of unusual control. To put it otherwise, such could be termed as usual normal financial assistance or usual control.
4. The test therefore is unusual financial assistance or unusual control over the management which is popularly known as deep and pervasive control over a particular body or institution or the corporation. When one uses the word "deep and pervasive control", it is not restricted to only control of management but it equally applies with the same degree for control over the finance. If one speaks of the functioning of any society or the corporation, one may say that the management is like Page 25 of 38 C/LPA/70/2012 CAV JUDGMENT brain in a human body whereas the finance is like blood and life in a human body. Therefore, when we speak for deep and pervasive control, it needs to be further considered as to whether the deep and pervasive financial control exists or whether deep and pervasive managerial control exists in a particular body, for which the scrutiny is to be undertaken as to whether it is a State within the meaning of Article 12 of the Constitution or not.
5. It is true that in the above referred decision, the additional tests led by the Apex Court are the nature of function whether it is a very important public function and while examining the same, incidental aspect may be required to be examined as to whether the function of that particular body is having a monopolistic character or not. If it is monopolistic character in the public field, it may have great weightage but if yes, the question may also be required to be examined as to whether it is at par with the State function or a public function. When we talk for public function, we need to further examine as to whether it is a sovereign function of the State or a function undertaken by the welfare State which could be termed as indispensable function to maintain the welfare in the society. Such functions of the State can also be considered in contradistinction to the commercial ventures of the State.
6. At this stage, we may refer to the decision of the Apex Court in the case of State of Assam v. Barak Upatyaka D.U.Karmachari Sanstha reported at (2009) 5 SCC 694, Page 26 of 38 C/LPA/70/2012 CAV JUDGMENT wherein the question arose before the Apex Court as to whether State can be directed to release the fund to pay the salary of the employees of Cachar and Karimganj District Milk Producers' Cooperative Union Limited ("CAMUL" for short). The said society CAMUL was formed to run its cattle development project and the Board of Directors including Managing Director comprised of Government servant on deputation. The State Government had sanctioned staffing pattern and was also extending financial assistance by way of grant to CAMUL. An amount of Rs.7 lakhs as grant-in-aid was sanctioned but as it was not disbursed and consequently CAMUL did not pay its monthly salary to its employees, a petition was filed contending inter alia that there was deep and pervasive control over the affairs and management of CAMUL and it be treated as department of State of Assam and it was also contended that the State was responsible and liable to pay the salaries and emoluments of the employees of CAMUL and the direction be issued to the State Government to release the arrears of pay and allowances of the employees of CAMUL. The learned Single Judge of the High Court held that the project was of the State Government and CAMUL was receiving grant- in-aid and the State could not deny the amount of grant- in-aid and therefore, the learned Single Judge directed the release of the fund for paying salary and allowances with arrears. The Division Bench of the High Court affirmed the order of the learned Single Judge. In appeal before the Apex Court, while examining the question as to whether High Court was justified in directing the State Government to release the grant to CAMUL so as to Page 27 of 38 C/LPA/70/2012 CAV JUDGMENT enable it to pay salary and emoluments to its employees or not, the Apex Court, at paragraphs no. 9 to 14, observed thus-
"9. The various averments of the respondent in the writ petition, about the all pervasive financial, administrative and functional control of CAMUL by the state government, even if assumed to be true, may at best result in CAMUL being treated as `state' within the meaning of that expression under Article 12 of the Constitution of India. If it is a `state', in case of violation of any of the fundamental rights of its employees, by CAMUL as employer, the employees were entitled to claim relief against CAMUL, by taking recourse to a writ petition under Article 226 of the Constitution of India. But the fact that a corporate body or co- operative society answers the definition of `state' does not make it the `state government', nor will the employees of such a body, become holders of civil posts or employees of the state government. Therefore the fact that the CAMUL may answer the definition of "state" does not mean that the state government is liable to bear and pay the salaries of its employees.
10. CAMUL indisputably is a co- operative society registered under the provisions of the Assam Cooperative Societies Act, 1949. Section 85 of the said Act provides that every registered society shall be deemed to be a body corporate by the name under which it is registered, with perpetual succession and a common seal, and with power to hold property, to enter into contracts, institute and defend suits and other legal proceedings and to do all things necessary for the purposes for which it was constituted.
11. Therefore, CAMUL, even if it was `state' for purposes of Article 12, was an independent juristic entity and could not have been identified with or treated as the state government. In the view we have taken, it is not necessary in this case to examine whether CAMUL was `state' for purposes of Page 28 of 38 C/LPA/70/2012 CAV JUDGMENT Article 12.
12. Section 43 of the Act provides that notwithstanding anything contained in any law for the time being in force, the State Government may grant loans or give financial assistance in any form to any registered society. Therefore, the fact that the state government had given financial assistance in the form of grant-in-aid to CAMUL continuously for some years, either to meet its development activities or for even meeting the salaries, does not mean that state government is responsible to bear and pay the salaries and emoluments of the employees of CAMUL or other liabilities of CAMUL. Nor can the state government be made liable for extension of financial assistance for all times to come, to cover the payment of salaries of employees of CAMUL.
13. If the salaries are not paid, the remedy of the employees of CAMUL is to proceed against CAMUL, in accordance with law, by approaching the forum under the appropriate labour legislation or the Co- operative Societies Act. But a trade union representing the employees of a co-operative society cannot, by filing a writ petition, require the Government to bear and pay the salaries of the employees of the co- operative society, howsoever pervasive, the control of the state government, over such society. Nor is any right created to demand the continuance of financial assistance to a co- operative society, on the ground that such assistance has been extended by the government, for several years.
14. The respondent has not been able to show any right in the employees of CAMUL against the state government, or any obligation on the part of the state government with reference to the salaries/emoluments of employees of CAMUL either under any statute or contract or otherwise."
(Emphasis supplied) The Apex Court after making the aforesaid observations and after distinguishing the observations and the Page 29 of 38 C/LPA/70/2012 CAV JUDGMENT directions given in the case of Kapila Hingorani v. State of Bihar reported at (2003) 6 SCC 1, and another decision of the Apex Court between the same party in the case of Kapila Hingorani v. State of Bihar reported at 2005 (2) SCC 262 explaining the earlier decision, observed at paragraphs 22 to 24 as under:
"22. The observations and directions in Kapil Hingorani (I) and (II) being interim directions based on tentative reasons, restricted to the peculiar facts of that case involving an extraordinary situation of human rights violation resulting in starvation deaths and suicides by reason of non- payment of salaries to the employees of a large number of public sector undertakings for several years, have no value as precedents. The interim directions were also clearly in exercise of extra-ordinary power under Article 142 of the Constitution. It is not possible to read such tentative reasons, as final conclusions, as contended by the respondent. If those observations are taken to be a final decision, it may lead to every disadvantaged group or every citizen or every unemployed person, facing extreme hardship, approaching this Court or the High Court alleging human right violations and seeking a mandamus requiring the state, to provide him or them an allowance for meeting food, shelter, clothing, salary, medical treatment, and education, if not more. Surely that was not the intention of Kapila Hingorani (I) and (II).
23. What clearly holds the field at present is the principle laid down and reiterated by the Constitution bench of this Court in Steel Authority of India v. National Union Waterfront Workers 2001 (7) SCC 1 wherein this Court categorically held :
"We wish to clear the air that the principle, while discharging public functions and duties the government companies/corporations/societies which are instrumentalities or agencies of the Page 30 of 38 C/LPA/70/2012 CAV JUDGMENT government must be subjected to the same limitations in the field of public law - constitutional or administrative law - as the government itself, does not lead to the inference that they become agents of the Centre/state government for all purposes so as to bind such government for all their acts, liabilities and obligations under various Central and/or State Acts or under private law."
[emphasis supplied]
24. We, therefore, reject the interpretation put forth by the respondent, on the tentative observations in Kapila Hingorani(I) and (II), to contend that the government would be liable for payment of salaries and other dues of employees of the public sector undertakings. We are of the considered view that the decision of the High Court cannot therefore be sustained."
(Emphasis supplied) The Apex Court thereafter set aside the orders passed by the learned Single Judge as well as Division Bench of the High Court and the writ petition came to be dismissed without prejudice to the rights of the employees of CAMUL to take such action as available in law for redressal of grievances.
7. The aforesaid shows that while considering the aspects of public function, it needs to be kept in mind that limitation in the field of public law would apply to such public functions. Merely because it is found that the function is public function, such would not lead to the inference that it would become an agent of the Centre/State Government for all purposes so as to bind such Government for all their acts, liabilities and obligations under various Central and/or State Acts or under private Page 31 of 38 C/LPA/70/2012 CAV JUDGMENT law.
8. Keeping in view the aforesaid legal position, we need to further examine as to whether Gujarat State Social Welfare Board could be said as a State and as to whether the Gujarat Ayurvedic Vikas Mandal could be said as State within the meaning of Article 12 of the Constitution keeping in view the controversy involved and the prayers made by the respective petitioners.
Gujarat State Social Welfare Board
9. The formation of Gujarat State Social Welfare Board (hereinafter referred to as "Board") is not by registration under a particular statue but is formed under the rule framed for governing the functions and composition of the State Welfare Advisory Board. The composition of the Board is as may be decided by Central Social Welfare Board. Notification for constitution of the Board is to be issued by the State Government. The Chairperson is to be selected by the Central Social Welfare Board in consultation with the State Government. The other members of the Board includes social worker to represent each major district in the State, one representative of the University, department or school of social work, official representing the department of health, social welfare, education, community development and one woman representative from the State Legislature. The nomination is to be made by the State Government. Half of the official members excluding the Chairperson is to be nominated by the Central Board and other half is to be Page 32 of 38 C/LPA/70/2012 CAV JUDGMENT nominated by the State Government. The Board can be dissolved or superseded with the mutual consent of the Central Board and the State Government concerned. The functions of the Board as per Rule 7, are as under:
i) To act as medium for exchange of information between the field and the Centre and vice-versa.
ii) To invite, receive, examine and recommend to the Central Social Welfare Board applications for Grant-
in-Aid from Voluntary organisations and other Institutions under different programmes;
iii) To supervise and report on the working of the Voluntary organisations/Institutions/Projects to the Central Social Welfare Board or other Govt. Departments;
iv) To advice and assist the Central board in sponsoring new welfare programmes and activities wherever they are needed within their States;
v) To coordinate the welfare and developmental activities undertaken by the various Departments of the State Governments with a view to avoid duplication;
vi) To undertake such other activities as may be conducive to the fulfilment of these objectives;
vii) To promote the growth of voluntary social welfare agencies, with special reference to development of the welfare services in the areas uncovered at Page 33 of 38 C/LPA/70/2012 CAV JUDGMENT present;
viii) To assist the Central Social Welfare Board in providing field counselling services for aided agencies;
ix) To administer the programmes of social welfare & development either sponsored by the Central Social Welfare Board or jointly initiated with the cooperation of the State Governments;
x) To undertake with the concurrence of the Central Social Welfare Board such social welfare activities or programmes that are entrusted to the State Board by any Department of Centre/State/Union Territory and,
xi) To assist the Central Social Welfare Board and the State Govt./in further development of welfare services.
xii) To organise through its machinery emergency relief in case of calamity-national/natural or otherwise, wherever deemed fit or necessary.
The employees of the Board are to be governed by the State Government Rules in terms of their service conditions and the State Board is required to follow the State Government Rules in case of other financial and administrative matters. The object of the Board is to be approved by the Central Board and the expenditure incurred on establishment of the office of the Board is to Page 34 of 38 C/LPA/70/2012 CAV JUDGMENT be equally shared by the Central Board and State Government concerned. The members while on duty would be entitled to TA, DA as admissible in respect of journey to the State Government officials of the highest grade of Class-I and non-officials as per the State Government Rules. The funding pattern is 50% by Central Board and 50% by the State Government. The aforesaid shows that the State Board satisfies the parameters for being an agency of the State for three reasons; one is that there is not only deep and pervasive but full control over the management. Second is that full finance is to be provided by the Central Board and the State Government. State Board has no source of generation of its own income. The third is that the functions of the Board are all public functions and in contradistinction to commercial venture of the State. All such functions can be said as public functions to be discharged by a welfare State.
Gujarat Ayurvedic Vikas Mandal
10. It is true that initially at Junagadh, ayurvedic pharmacy was run by the Government, but thereafter, the decision was taken to form Ayurvedic Vikas Mandal and the said ayurvedic pharmacy at Junagadh was assigned to Gujarat Ayurvedic Vikas Mandal (hereinafter referred to as "Mandal") by one-time grant. The first board was nominated by the Government Resolution, but as per the objects of the Mandal, it can generate funds by accepting donations on cash or securities or movable or immovable properties. As per the objects, it can also acquire other Page 35 of 38 C/LPA/70/2012 CAV JUDGMENT properties, but if the property is received from the Government or from the grant of the Government, prior permission will be required to be obtained from the Government. As per by-law no.6, if the Mandal is dissolved, the property acquired from the State Government, i.e., of Junagadh Ayurvedic Pharmacy will have to be re-transferred to the State Government. Upon dissolution, the property will be appropriated as per the decision taken by the State Government in consonance with the provisions of Societies Registration Act. The Regulations further provides the composition of the Mandal and the managing committee provides for nomination of the members as may be decided by the State Government but the managing committee and such Board is to hold the office until new board is appointed and takes over the office. The managing committee of the Mandal is assigned with the power to undertake the work for achieving the objects of the Mandal. It is also independently assigned with the power to administer finance of the Mandal. It has also power to frame the by- laws for maintenance of the accounts, object, and regulation of fund. Regulation No.24 provides for the power with the managing committee of the Mandal to accept donation, deposits and generate its fund, but the condition of such deposit should not be in contravention to the objects of the Mandal. The Mandal is to function as per the provisions of the Societies Registration Act, 1860 and with the prior approval of the Government, it may change the objects or extend the objects of the Mandal.
11. The aforesaid shows that there is unusual control over Page 36 of 38 C/LPA/70/2012 CAV JUDGMENT the management of the Board, but it is difficult to find that there is unusual financial assistance or aid. It needs to be emphasized that managerial control and financial assistance both should be with the degree of unusual. The deep and pervasive control has to be in regular course. Merely because at one point of time, a particular fund or a particular property is assigned to the Mandal, it cannot be said that it would meet with the requirement of deep and pervasive financial control or the finance to be provided by the Government. The fact that the Mandal has been given authority to generate its own fund and to acquire its own property and to utilize its own fund, by the majority decision of the Mandal except one property of Junagadh Pharmacy would not be sufficient to find that there is deep and pervasive control over the finance in regular course by the State Government. Further, even on the aspects of deep and pervasive managerial control, independent powers are given to the Mandal or the managing committee of the Mandal. The staff or the office bearers of the Mandal are not to function or to receive any salary or wages or remuneration as per the Government Rules. The functions of Mandal are to promote ayurvedic pharmacy in the State. Such cannot be said as a public function even if to be considered in a welfare State. It can rather be said as an activity undertaken for a particular branch of medicine. The fact that ayurvedic medicines are to be used for treatment of the patients in our view cannot be said as a valid ground for making function as an important public function and the reason being that there are so many ayurvedic pharmacy or private concern or companies undertaking Page 37 of 38 C/LPA/70/2012 CAV JUDGMENT the manufacturing of ayurvedic medicines and for getting raw materials, they would have the farms at which ayurvedic plants may be grown. Hence, it is difficult to accept that running of ayurvedic pharmacy or the development of ayurvedic pharmacy medicines could be said as indispensable public function. Under these circumstances, it is not possible to conclude that Mandal would meet with the above referred parameters for being "State" within the meaning of Article 12 of the Constitution.
12. Hence, the questions need to be answered as under:
1) Gujarat State Welfare Board can be said as a "State"
within the meaning of Article 12 of the Constitution.
2) Gujarat Ayurvedic Vikas Mandal cannot be a "State"
within the meaning of Article 12 of the Constitution.
10. The reference stands answered accordingly. The matters shall now be placed before the appropriate Bench for further consideration in accordance with law.
(JAYANT PATEL, J.) (J.B. PARDIWALA, J.) (PARESH UPADHYAY, J.) MH Dave/bjoy Page 38 of 38