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Showing contexts for: federation of unions in Dr. K.L. Arora And Others vs The Registrar on 19 March, 2009Matching Fragments
(emphasis added)
7. It has, thus, been claimed that the Federation and the Unions are instrumentalities of the State under Article 12 of the Constitution and are amenable to the writ jurisdiction of this Court under Article 226 of the Constitution.
8. At this stage, some facts explaining the historical background of the formation of the Federation and Unions may also be noticed. Initially the work of the dairy development in the State of Punjab was looked after by the Milk Commissioner. Subsequently, the Punjab Dairy Development Corporation Limited (for brevity, 'PDDC') was formed and registered under the Companies Act, 1956. The entire share of PDDC belonged to the State of Punjab. The employees working under the Milk Commissioner were also transferred to PDDC. After formation of the Federation the entire assets and liabilities of PDDC including its employees were placed at the disposal of the Federation w.e.f. 9.4.1983. The share capital of the Federation was also contributed by the State of Punjab. The Chairman of the Board of Directors of the Federation is elected every year from amongst the elected members of the Unions, which are affiliated to the Federation. During the time i.e. 13.2.1980 to 29.7.1981 and 6.10.1984 to 8.10.1986, when the members of the Board of Directors of the Federation were not elected, the functions of the Federation were controlled by the State of Punjab by appointing Administrators. On that count also it has been claimed that the Federation is State or its instrumentality within the meaning of Article 12 of the Constitution and amenable to the writ jurisdiction of this Court. In that regard, reliance has also been placed by the petitioners on the judgments reported as R.S. Goyal v. State of Punjab, 1989 (3) SLR 258 and Ajay Bhatia v. State of Punjab, 1991 (1) RSJ 563.
22. Mr. J.K. Sibal, learned Senior Counsel, Mr. Ravi Kapur, Mr. O.P. Sharda and Mr. Amar Vivek, learned counsel for the petitioners have vehemently argued that there is a deep and pervasive control of the Government over the Federation as well as on the Unions. Placing reliance on Section 26(2) of the 1961 Act, they have submitted that it is on account of subscribing to share capital of a Society or furnishing guarantee for the repayment of the principal and payment of interest of debentures issued for loans raised by the Society that the Government acquire the right to nominate on the committee such number of persons not exceeding three or one-third of the total number of members thereof. They have further highlighted that initially also the share capital of the Federation was Rs. 459.76 lacs out of which Rs. 189 lacs were invested by the Government. The same was to be returned to the Government in seven years with a moratorium period of two years in five yearly equal instalments. Another argument raised by the learned counsel is that initially there used to be Milk Commissioner controlling the activity of production, procurement and manufacturing of milk products. It was only thereafter that the activities of the Milk Commissioner were taken over by the Punjab Dairy Development Corporation, which was hundred percent owned by the State Government. The whole activities concerning the production and procurement of milk of the Corporation were transferred to the Federation, as has been noticed in the preceding paras. Learned counsel have also highlighted by placing reliance on notification dated 22.3.1993 (P-28) issued by the respondent State declaring that the procurement of milk, marketing and distribution has public utility service under the Essential Commodity Act, 1955 (for brevity, 'the 1955 Act'), which would show that the functions as connected with the procurement, production or manufacturing of milk and milk products is a public function and even on the anvil of functional test, the Federation and the Unions must be considered to have rendered public function making them amenable to writ jurisdiction. In support of their submissions, learned counsel for the petitioners have placed reliance on two Single Bench judgments of this Court rendered in the cases of R.S. Goyal (supra) and Ajay Bhatia (supra). They have also made a reference to the order dated 27.12.1992 declaring that the persons specified in the notification were not entitled to contest the elections as Sarpanch or Panch in the Panchayat elections as per the provisions of Section 6(5)(g) of the Punjab Gram Panchayat Act, 1952. After obtaining opinion of the Law Department, which was based on the judgment of Hon'ble the Supreme Court in the case of Ajay Hasia v. Khalid Mujib Sehravardi, AIR 1981 SC 487, the employees of the Federation were not permitted to contest the general elections for the Gram Panchayat. It has further been pointed out that the Managing Director of the Federation cannot be appointed without the prior approval of the Registrar. Learned counsel have also supported their submissions on the issue of amenability of the Federation and the Unions to the writ jurisdiction of this Court under Article 226 by citing a 5-Judge Bench judgment rendered by this Court in the case of Chiman Lal Gupta v. The Punjab State Cooperative Supplies and Marketing Federation Limited (R.S.A. No. 2745 of 1985, decided on 3.11.2004). It has been argued that the 5-Judge Bench has placed reliance on various tests laid down by Hon'ble the Supreme Court in the cases of Ajay Hasia (supra); Ramana Dayaram Shetty v. International Airport Authority of India, AIR 1979 SC 1628; Sabhajit Tewary v. Union of India, AIR 1975 SC 1329; and Pradeep Kumar Biswas v. Indian Institute of Chemical Biology, (2002) 5 SCC 111. Learned counsel for the petitioners have laid emphasis on the fact that financial control, administrative control and nature of functions discharged by the Federation and the Unions would not leave any doubt that they are instrumentalities of the State and have to be subjected to the discipline of Article 14 of the Constitution to act fairly. They have gone to the extent of arguing that Federation and the Unions to a large extent enjoy monopolistic status in the field of milk and milk products because of strict control imposed by the 'Milk and Milk Product Order 1992' issued by the Central Government under Section 3 of the 1955 Act. According to the learned counsel it indicates that the Federation as well as its Unions enjoy a monopoly status which is State conferred or at least State protected. They have, thus, argued that the following tests laid down in Ajay Hasia's case (supra) stand fulfilled:-
24. Mr. Suvir Sehgal, learned State counsel, Mr. D.S. Patwalia and Mr. Alok Jagga, learned counsel for the respondents have vehemently argued that there is neither any financial control much less a deep pervasive control. The total share capital of the State Government by no stretch of imagination be considered as more than 40% of the total share, which according to the learned counsel is not sufficient to hold that Federation is an agency of the State Government. In support of their submission, learned counsel have placed reliance on the judgment of Hon'ble the Supreme Court in the case of VST Industrial Ltd. v. VST Industries Workers' Union, (2001) 1 SCC 298. They have then submitted that out of 17 members of the Board of Directors only three nominee have been representing the State although the Managing Director is appointed by the Government. It has been further argued that merely because the Registrar could annul a resolution passed by the Federation, would not bring the Federation or the Unions within the sweep of Article 226 read with Article 12 of the Constitution. Placing reliance on the judgment of Hon'ble the Supreme Court in the case of G.M. Kisan Sahkari Chini Mills Ltd. v. Satrughan Nishad, (2003) 8 SCC 639, it has been argued that when various tests laid down in Ajay Hasia's case (supra) are applied to the Federation and considered cumulatively then it becomes evident that the Federation and the Unions are not amenable to writ jurisdiction. Elaborating their argument, learned counsel have submitted that in the aforesaid judgment only 50% of the share was held by the State Government and the requirement of financial control was held not to be fulfilled despite the fact that the Chini Mill used to receive some financial assistance from the Government. It has been further submitted that like the Federation and the Unions, the Chini Mill in the cited case also did not enjoy monopoly status. It was on the aforesaid facts Hon'ble the Supreme Court refused to hold the Chini Mill to be a instrumentality of the State. Learned counsel have also elaborated the concept of 'public function' by citing the judgment of Hon'ble the Supreme Court in the case of Binny Ltd. v. V. Sadasivan, (2005) 6 SCC 657. Placing reliance on para 11 of the judgment, learned counsel have argued that a body is performing a "public function" when it seeks to achieve some collective benefit for the public or a section of the public and is accepted by the public or that section of the public as having authority to do so. Learned counsel have then made submission by placing reliance on the averments made in paras 6, 7 and 8 on the merit of the controversy and argued that the decision of the Board of Directors is to prevail. According to the learned counsel unless the pay scales granted by the Government have been adopted by the Federation the same cannot be claimed as a right by its employees. It has been emphasised that in the appointment letter issued to one of the petitioner (in CWP No. 4418 of 1992) it was specifically mentioned that he would be placed in the pay scale of Rs. 225-500 plus allowances and the pay scale given to the employees of the Punjab Government on the corresponding post would not be applicable to the petitioners automatically. Learned counsel also denied that the Government has ever revised the pay scales of the employees of the Federation or its Unions. They have submitted that the Federation prepares its own structure of revision of pay scale and get it approved from the Registrar of the Cooperative Societies as per the requirement of the Punjab Cooperative Societies Rules, 1963 (for brevity, '1963 Rules'). Therefore, it has been argued that the financial difficulties of the Federation and its Unions would be valid ground for granting the pay scales different than the one laid down by the State Government.
28. A perusal of the aforesaid paragraph shows that in each case the question required to be considered is whether in the light of the cumulative facts as established, the body is financially, functionally and administratively dominated by or under the control of the Government. Such control must be particular to the body in question and must be pervasive and that mere regulatory control would not be sufficient to make the body a State.
29. When we apply the aforesaid principle to the facts of the present case it becomes evident that more than 40% of the share capital of the Federation and its Unions is contributed by the State, which satisfies the first test partially. The State Government has always come to the rescue of the Federation and its Unions by releasing huge funds for clearing the outstanding payments. On 9.5.1990 when the Managing Director of the Federation requested, the Government had released Rs. 12 crores. Likewise on 2.5.1990, the National Diary Development Board also released a sum of Rs. 4 crores to Federation and Unions. One factor core to the Federation and Unions is that 'PDDC' was transferred to them, which was a Government Company. It is also not disputed that three Directors of the Board of Directors are nominated by the State and the Managing Director cannot be appointed without the approval accorded by the Registrar, Cooperative Societies, Punjab. The Managing Director has to be either IAS Officer or PCS Officer or Joint Registrar as per Section 26(2) of the Act. All the petitioners except two of them are erstwhile employees of the Government Company 'PDDC', which has merged with the Federation and Unions along with its assets and liability. As on 31.3.1990 when the petition was filed, the subscribed share capital of the Federation was Rs. 2,10,00,000/- out of which Rs. 1,39,00,000/- was subscribed by the Punjab Government, which is more than 68%. Likewise, the Registrar is entitled to annul any resolution passed by the Federation and can also issue direction by virtue of provision of Rule 45 of the 1963 Rules.