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TMI Blog1992 (8) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... within the meaning of Article 12 of the Constitution and whether the writ petition was maintainable against the appellants. The learned single Judge, by his above judgment and order, held that the appellants Bank was State within the meaning of Article 12 of the Constitution and hence a writ was maintainable against the appellants. 3. The appeal came up for hearing before a Division Bench of this Court consisting of Pendse and Kapadia, JJ. The Division Bench, in its judgment and order dated 26th February 1992, referred to a decision of a Division Bench of this Court at Nagpur in the case of Narayan Balaji Bhanage v. Maharashtra State Co-operative Land Development Bank Limited, . The Division Bench of this High Court at Nagpur had held that the Maharashtra State Co-operative Land Development Bank Limited is State within the meaning of Article 12 of the Constitution. It approved the judgment of the learned single Judge herein. The Division Bench at Bombay observed that it is difficult to share the view of the Division Bench at Nagpur in view of certain decisions of the Supreme Court. But it would not be proper for it to take a contrary view because of the decision of the Divi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Because with increasing assumption of new lacks, growing complexities of management and administration and the necessity of continuing adjustment in relations between the corporation and the Government calling for flexibility, adaptability and innovative skills, it is not possible to make an exhaustive enumeration of the tests which would invariably and in all cases prove 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 various factors and arrive at its decision on the basis of a particularised inquiry into the facts and circumstances of each case. 6. In the case of Ajay Hasia v. Khalid Mujib Sehravardi the Supreme Court reiterated the test land down in the case of Ramana Davaram Shetty v. The International Airport Authority of India (supra) with a note of caution. It said (in paragraph 9 at page 496) ...while stressing the necessity of a wide meaning to be placed on the expression other authorities , it must be realised that it s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to examine the constitution and functioning of the appellant Bank, which is a multi-State co-operative society in the light of these tests in order to decide whether it falls within the definition of a State under Article 12. The first aspect that we propose to examine is the aspect of State's control over the appellants Bank. There are three important pieces of legislation which regulate the functioning of the appellant-Bank. These are the Maharashtra Co-operative Societies Act, 1960, the Multi-State Co-operative Societies Act, 1984, and the Banking Regulation Act, 1949. The Report of the Expert Committee on Multi-State Co-operative Societies Legislation, which -was submitted as far back as February 1972, enunciates in Paragraph 3.9 the co-operative principles which have been since enacted in the Multi-State Co-operative Societies Act, 1984 as well as earlier in the Maharashtra Co-operative Societies Act, 1960. The principles which have come to be recognised as fundamental to co-operative organisations were initially enunciated by the Rochdale Equitable Pioneers Society founded in 1844. These principles are :-- 1. Democratic control. 2. Freedom for new members to join, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29 provides that subject to the rules and bye-law the ultimate authority of a multi-State Co-operative Society shall vest in the general body of its members. S. 30 provides for an annual general meeting of the general body, inter alia, to elect members of the Board. S. 32 provides for a Board of Directors of such a society and S. 42 defines the powers and functions of such a Board, This includes, inter alia, the power to appoint a Chief Executive and such other employees of the society in whom, under S. 45 of the Act, the day to day management of the business of the multi-State Co-operative Society is entrusted. These provisions clearly indicate that the ultimate control and management of a multi-State Co-operative Society vests in the general body of its members subject, of course, to the provisions of the Act. 11. Section 47. of the Multi-State Cooperative Societies Act does provide to the Central Government power to give directions in the public interest. It states that if the Central Government is satisfied that in the public interest or for the purposes of securing proper implementation of co-operative production and other developmental programmes approved or undertaken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of banking under S. 5(1)(b) of the Banking Companies Act, 1949. It is deemed to be registered under the Multi-State Cooperative Societies Act, 1984 with effect from 18th August, 1984. The bye-laws of the said bank set out the objects of the bank in Chapter III. The objects of the said Bank are to encourage thrift and promote co-operation among its members and to carry on in Bombay and at such other places as may from time to time be decided, with the approval of the Reserve Bank of India and the Registrar where necessary, the business of banking including borrowing, raising or receiving money from members, non-members, societies, companies, trusts or associations. Under Chapter IV dealing with funds of the said Bank, the Bank is required to raise funds in the following ways : (i) by issue of shares; (ii) by receiving deposits; (iii) by raising loans; (iv) by donations; etc. Under clause 5(b) of Chapter IV of the Bye-laws, as amended after Multi State Co-operative Societies Act, 1984 came into force, it is provided that the authorised share capital of the bank shall be ₹ 5,00,00,000/- divided into 20,00,000 shares of ₹ 25/- each and the same may be inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive bank. Even if we assume broadly that under the Banking Regulation Act the Reserve Bank has regulatory powers over all kinds of banks including co-operative banks, that, in our view, is not sufficient to make such organisations, agencies or instrumentalities of the State. We have a large number of such regulatory kinds of organisations. For example, the Companies Act regulates the working of public and private limited companies in the country. This Act lays down detailed provisions, for example, regarding the manner of holding annual general meetings, the manner of holding meetings of the Board of Directors, how resolutions have to be passed by these bodies, how these companies have to be registered or wound up and so on. This does not make such companies, agencies or instrumentalities of the State simply because the State has enacted a law to regulate the working of such companies. The Indian Partnership Act regulates the functioning of partnership firms. Such regulatory laws cannot be construed ipso facto as providing full or substantial State control over the functioning of the organisations governed by such laws. The Banking Regulation Act, 1949 also does not prescribe any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate under Article 12. In our view, this is too broad a proposition. We have to bear in mind the note of caution sounded by the Supreme Court in the cases of Ajay Hasai (supra) and Tekraj Vasandi (re. the Institution of Constitutional and Parliamentary Studies supra). Every organisation which carries out a function which is of public importance does not necessarily become State under Article 12. Conferment of Statehood depends upon various other factors also, such as the nexus of such organisations with the State, the extent of State control, whether it is entirely financed by the State or by private individuals, whether, the same function was originally carried out by a Department of the State and so on. There may be many functions of public importance which can be performed by private organisation also. We have a large number of organisations doing important social work vital to the community. There are, for example, organisations which look after, educate and train handicapped persons or the blind, provide them with jobs and rehabilitate them. There are private charitable organisations which may provide free or subsidised housing to the poor or free medical aid. They may sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a cooperative bank did not perform functions of public importance which were closely related to governmental functions and hence declined to characterise a co-operative bank as State under Art. 12. 22. In the case of Pritamsingh Gill v. State of Punjab and Haryana, , the Full Bench of the Punjab and Haryana High Court held that the Punjab State Co-operative Land Mortgage Bank registered under the Punjab Co operative Societies Act was not instrumentality of the State and hence was not other authority within the meaning of Art. 12. 23. In the case of V. I. Khalifa v. Satubha Tanubhal Vaghela, reported in 1988 (1) Gujarat Law Reporter 679 a single Judge of the Gujarat High Court also held that a cooperative bank was not State under Art. 12 because there was nothing in the bye-laws of the society to suggest that there was any overriding control over the bank by the State in its management. Our attention was, however, drawn to a decision of the Division Bench of this Court in the case of State Bank of India v. Kalbaka Transport Company, . In that case the Division Bench noted that the State Bank of India and its subsidiaries are statutory corporations. In making several app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors only for the purpose of holding that the Maharashtra Slate Co-operative Land Development Bank was State within the meaning of Art. 12. It said (at page 474) that the Maharashtra State Co-operative Land Development Bank Limited is a creature of the statute and it is discharging public functions which the State could have discharged through its agency. Hence it held that the Bank was a State. In our opinion, the Division Bench, over emphasised the fact that the Bank was a creature of the statute. As the Supreme Court has repeatedly said, the manner in which an organisation is created is not of any direct relevance. What is required to be seen is whether there is pervasive State control over its management and functioning. Moreover, merely because an organisation performs functions of public importance, one cannot hold that the organisation is State under Article 12. The only other factor which the Nagpur Bench looked at was the fact that the Bank was regulated by laws enacted by the State. Such regulatory laws as we have said earlier, arc enacted to cover a large number of organisations. The laws which regulate the functioning of such organisations are presumably enacted in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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