2020 (12) TMI 1410 - HC - Indian Laws

Applicability of exception clause in the Medical Entrance Information Brochure for the National Eligibility and Entrance Test UG-2020 (NEET 2020) - whether the Industrial Development Bank of India Limited (IDBI Limited) can be regarded as an undertaking of the Government of India? - HELD THAT - Section 5 of the 2003 Act is crucial and clinches the issue against the petitioner and for the respondents. Perusal of the 2003 Act clearly reveals cessation of the Development Bank as a body corporate which by operation of the said Act would stand transferred to and vested in the Company to be formed and registered under the 1956 Act. The Development Bank from a body corporate by reason of the 2003 Act (which also repealed the IDBI Act) attained an identity of a Company governed by the 1956 Act. Though undertaking is a word of large import it has to be read and understood in the context where it occurs. In the present context a Government of India undertaking would mean an undertaking run by the Government of India that is to say it belongs to the Government of India. The vigilance control over IDBI Limited by the Central Vigilance Commission cannot be the guiding factor for exploring the answer to the issue which are primarily tasked to decide. On this writ petition it is not required to decide whether exercise of vigilance control over IDBI Limited by the Central Vigilance Commission is legal and valid. Such a question can be dealt with in an appropriate proceeding if the occasion therefor arises. Conclusion - The IDBI Limited is not a Government of India undertaking and the petitioner is not entitled to the exception clause in the NEET 2020 Information Brochure. Petition dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered in this judgment is whether the Industrial Development Bank of India Limited (IDBI Limited) can be regarded as an undertaking of the Government of India. This determination is crucial for the petitioner, as it would allow her to avail of an exception clause in the Medical Entrance Information Brochure for the National Eligibility and Entrance Test UG-2020 (NEET 2020).

2. ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The legal framework revolves around the Industrial Development Bank of India Act, 1964 (IDBI Act), the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003 (2003 Act), and the Companies Act, 1956. The IDBI Act initially established IDBI as a body corporate, while the 2003 Act facilitated its transformation into a company under the Companies Act, 1956, thereby ceasing its status as a government-owned entity.

Court's interpretation and reasoning:

The court interpreted that the transformation of IDBI from a statutory corporation to a company under the Companies Act meant it no longer qualified as a Government of India undertaking. The court emphasized the lack of deep and pervasive control by the government over IDBI Limited, which is a key factor in determining its status as a government undertaking.

Key evidence and findings:

The court examined letters from the Ministry of Finance and the Reserve Bank of India (RBI), which indicated that IDBI Limited is categorized as a private sector bank following the acquisition of a 51% stake by the Life Insurance Corporation of India (LICI). The RBI's press release and subsequent instructions to IDBI to remove references to being a government-owned bank were pivotal in the court's findings.

Application of law to facts:

The court applied the provisions of the 2003 Act, which transferred the undertaking of IDBI to a company structure, thereby altering its status. The court found that the absence of government control over IDBI Limited post-transfer and the classification by the RBI as a private sector bank were decisive in determining that IDBI is not a government undertaking.

Treatment of competing arguments:

The petitioner argued that the shareholding pattern, with significant government and LICI ownership, and the applicability of the Central Vigilance Commission Act indicated government control. However, the court dismissed these arguments, stating that shareholding alone does not establish government control or status as a government undertaking.

Conclusions:

The court concluded that IDBI Limited is not a Government of India undertaking and, therefore, the petitioner cannot avail of the exception clause in the NEET 2020 Information Brochure.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

"The transition of the Development Bank from a body corporate to a Company (IDBI Limited) without deep and pervasive administrative, financial and functional control of the Government of India over such Company having been shown gives us little reason to hold that after the enactment of the 2003 Act, IDBI Limited could still be regarded as an undertaking of the Government of India."

Core principles established:

The judgment establishes that the classification of an entity as a government undertaking requires substantial government control and ownership, not merely significant shareholding. The transformation of a statutory corporation into a company under the Companies Act alters its status unless pervasive government control is demonstrated.

Final determinations on each issue:

The court determined that IDBI Limited is not a Government of India undertaking, and the petitioner is not entitled to the exception clause in the NEET 2020 Information Brochure. The writ petition was dismissed, and no costs were awarded.