2022 (10) TMI 1272 - HC - Companies Law

Dismissal of petition on the ground that it was not maintainable as Gems Jewellery Export Promotion Council (GJEPC) i.e. Respondent No.2 did not fall within the ambit of State under Article 12 of the Constitution of India 1950 - invocation of writ jurisdiction under Article 226 - HELD THAT - State as defined under Article 12 is meant to include inter alia the Government of India the Government of each of the States and all local or other authorities within the territory of India or under the control of the Government of India. The Supreme Court over the years has examined what constitutes a State or other authorities as contemplated in Article 12. The rationale for this analysis lies in the fact that any authority falling within the ambit of Article 12 is subject to the same constitutional limitations as the Government and is bound by the basic obligation to obey the constitutional mandate of the fundamental rights enshrined in the Constitutional. By virtue of being accountable to the judiciary and the citizens Article 12 prevents such authorities from obfuscating its responsibility to adhere to our fundamental rights and hinders them from taking an individual for a ride without any consequences. The importance of this exercise has been elaborated in AJAY HASIA ETC. VERSUS KHALID MUJIB SEHRAVARDI OTHERS ETC. 1980 (11) TMI 150 - SUPREME COURT wherein the Supreme Court was considering whether the Society registered under the Jammu and Kashmir Registration of Societies Act 1898 and managing the activities of the Regional Engineering College Srinagar would fall within the ambit of State under Article 12. It is further well settled that Article 12 should not be stretched so as to bring in every autonomous body which has some nexus with the government within the sweep of the expression State . A wide enlargement of the meaning must be tempered by a wise limitation. It must not be lost sight of that in the modern concept of Welfare State independent institution corporation and agency are generally subject to State control. The State control does not render such bodies as State under Article 12. The State control however vast and pervasive is not determinative. The financial contribution by the State is also not conclusive. The combination of State aid coupled with an unusual degree of control over the management and policies of the body and rendering of an important public service being the obligatory functions of the State may largely point out that the body is State . The primary purpose of GJEPC is to act as a Nodal Agency/interface between the exporters and the Government. The Council being a collective body of the exporters places the interests/problems faced by the exporters before the Government so that the Government can take such decisions which would promote the export of gems and jewellery. The Council therefore does not carry out the policy decisions of the Government or is in any way relevant to the decision-making process of the Government regarding exports of these articles. The CoA primarily consists of exporters with only three out of the 27 members being Government nominees. It cannot therefore be said that the Council does anything which is even remotely connected with the activities which are conducted by the instrumentalities of the State. A deep dive into the AoA and MoA of the GJEPC only brings forth the understanding that the GJEPC is a nodal agency meant to mediate between exporters of gems and jewellery and the Central Government. The function performed by the GJEPC cannot be termed as public duty and any administrative or financial hold that the Central Government is deemed to have over GJEPC is far from pervasive. The GJEPC retains its autonomous character and it is the CoA which not only looks after the affairs of the GJEPC but is also empowered to make rules and regulations with regard to conditions of service appointment elections etc. GJEPC does not satisfy any of the requirements or tests laid down by various Judgements of the Supreme Court for establishing whether or not an authority can be deemed to be a State under Article 12. Conclusion - The writ petition is not maintainable as the GJEPC does not fall within the ambit of State under Article 12. The GJEPC retains its autonomous character and the control exercised by the Central Government is limited and specific rather than pervasive. Appeal dismissed.

Summary

The core legal issue considered in this judgment is whether the Gems & Jewellery Export Promotion Council (GJEPC), as Respondent No. 2, falls within the ambit of "State" or "other authorities" under Article 12 of the Constitution of India, thereby making it amenable to writ jurisdiction under Article 226.

The relevant legal framework includes Article 12 of the Constitution, which defines "State" to include the Government of India, the Government of each of the States, and all local or other authorities within the territory of India or under the control of the Government of India. The Supreme Court's precedents, such as Ajay Hasia v. Khalid Mujib Sehravardi and Ramana Dayaram Shetty v. International Airport Authority of India, provide tests to determine when a corporation or authority can be deemed an instrumentality or agency of the State. These tests consider factors such as financial assistance from the State, the extent of State control, and whether the functions of the corporation are of public importance and closely related to governmental functions.

The Court's interpretation and reasoning rely on these tests to assess the nature and functions of the GJEPC. The Court examines the Memorandum of Association (MoA) and Articles of Association (AoA) of the GJEPC, which reveal that it was incorporated under Section 25 of the Companies Act, 1956, by private individuals and is not a statutory body. The Council's primary function is to promote the export of gems and jewellery, acting as a nodal agency between exporters and the Government, rather than performing any sovereign or public functions.

Key evidence and findings include the structure and governance of the GJEPC, which is managed by a Committee of Administration (CoA) with 27 members, only three of whom are nominated by the Central Government and do not have voting rights. The financial data presented shows that government grants to the GJEPC do not constitute a majority of its revenue, indicating financial autonomy. The Court also notes that the Central Government's control over the GJEPC is limited to specific situations, such as national security or public interest, and is not pervasive.

The Court addresses competing arguments by considering the Appellant's reliance on various legal precedents and documents, such as the RTI Act and the General Clauses Act, 1897, but finds these arguments insufficient to establish the GJEPC as an instrumentality of the State. The Court distinguishes the present case from other cases where bodies were deemed "State" due to their statutory nature or performance of public duties.

In conclusion, the Court determines that the GJEPC does not satisfy the criteria to be considered a "State" under Article 12. The functions of the GJEPC do not pass the "public function" test, and any administrative or financial control by the Central Government is not pervasive enough to render it a State instrumentality.

Significant holdings include the Court's affirmation of the learned Single Judge's decision that the writ petition is not maintainable, as the GJEPC does not fall within the ambit of "State" under Article 12. The Court emphasizes that the GJEPC retains its autonomous character, and the control exercised by the Central Government is limited and specific rather than pervasive.

The Court's final determination is to dismiss the appeal, upholding the decision that the GJEPC is not amenable to writ jurisdiction under Article 226, as it is not a "State" or "other authority" under Article 12 of the Constitution.