2004 (11) TMI 521 - SC - Indian Laws

Whether U.P. Rajya Karmachari Kalyan Nigam for short the Corporation is covered by the definition of State under Article 12 of the Constitution of India and is amenable to writ jurisdiction of the High Court under Article 226 of the Constitution of India? Held that - On detailed examination of the administrative, financial and functional control of the Corporation, we have no manner of doubt that it is nothing but an instrumentality and agency of the State and the control of the State is not only regulatory but it is deep and pervasive in the sense that it is formed with the object of catering to the needs of the government employees as a supplement to their salaries and other perks. The top executives of the government department ex officio are members and office bearers of the Corporation. The Corporation is fully supported financially and administratively by the State and its authorities. Even day-to-day functioning of the Corporation is watched, supervised and controlled by the various departmental authorities of the State particularly the Department of Food and Civil Supplies. Thus it can be fairly concluded that the Corporation is covered as an agency and instrumentality of the State in the definition of State under Article 12 of the Constitution. It is, therefore, amenable to the writ petition of the High Court under Article 226 of the Constitution. Thus even though a body, entity or Corporation is held to be a State within the definition of Article 12 of the Constitution what relief to the aggrieved person or employee of such a body or entity is to be granted is a subject matter in each case for the court to determine on the basis of the structure of that society and also its financial capability and viability. The subject of denial or grant of relief partially or fully has to be decided in each particular case by the court dealing with the grievances brought by an aggrieved person against the bodies covered by the definition of State under Article 12 of the Constitution. Appeal is allowed.

Summary

Issues Involved:
1. Whether U.P. Rajya Karmachari Kalyan Nigam (the Corporation) is covered by the definition of "State" under Article 12 of the Constitution of India.
2. Whether the Corporation is amenable to writ jurisdiction of the High Court under Article 226 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Definition of "State" under Article 12:
The primary issue was whether the Corporation qualifies as a "State" under Article 12 of the Constitution of India. The High Court had dismissed the writ petition based on the precedent set by the Lucknow Bench in Vijay Kumar Verma vs. U.P. Government Employees Welfare Corporation. However, the Supreme Court revisited the scope of Article 12 in light of the Constitution Bench judgment in Pradeep Kumar Biswas vs. Indian Institute of Chemical Biology, which overruled the earlier decision in Sabhajit Tewary vs. Union of India. The Pradeep Kumar Biswas case laid down a multiple test to determine whether a body is financially, functionally, and administratively dominated by or under the control of the Government. If such control is pervasive, the body is considered a "State" under Article 12.

2. Application of the Multiple Test:
The Corporation was not created by a statute but was registered under the Societies Registration Act, 1860. The Supreme Court examined the objects, administrative control, financial control, and functional control to determine if the Corporation is an "instrumentality or agency of the State."

Administrative Control:
The Corporation was formed by a government decision to provide essential commodities to government employees at reasonable rates. The governing body consisted of high-ranking government officials, and any changes to the rules required prior government approval. The administrative control was evident from the fact that the Corporation's activities were supervised by state officials.

Financial Control:
The Corporation was heavily funded by the State Government, receiving 100% grants for employee salaries and substantial working capital. The financial support and control were significant, indicating the Corporation's dependence on the State.

Functional Control:
The Corporation's functional control was also under the State, as its activities were directed and supervised by government officials. The Corporation acted as an agent for the government in various capacities, and its day-to-day operations were under state supervision.

Conclusion:
The Supreme Court concluded that the Corporation is an "instrumentality and agency of the State" with deep and pervasive state control. Therefore, it falls within the definition of "State" under Article 12 and is amenable to writ jurisdiction under Article 226.

Outcome:
The appeal was allowed, and the High Court's order dismissing the writ petition was set aside. The case was remitted to the High Court for a decision on the merits. The parties were directed to bear their own costs.