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TMI Blog2022 (10) TMI 1272X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Anoop Chaudhari & Ms. June Chaudhari Senior Advocates with Mr. Samarth Chowdhary, Advocate. For the Respondents : Mr. Vivekanand Mishra & Mr. Aayushmaan Vatsyayana, Advocates for Respondent No.1. Mr. Jayant Mehta, Senior Advocate with Mr. Aman Raj Gandhi, Mr. Vardaan Bajaj & Mr. Abhishek Tiwari, Advocates for Respondent No.2. JUDGMENT 1. The present appeal has been filed challenging the Judgment dated 09.07.2021 passed by the Ld. Single Judge of this Court in W.P.(C) No. 4733/2021 whereby the writ petition of the Appellant herein was dismissed 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 (hereinafter referred to as the "Constitution"). 2. The short question which had arisen before the learned Single Judge when the writ petition had been listed for the first time on 16.04.2021 was whether the same was maintainable. It had been argued on behalf of Respondent No.2 that it was not a statutory body, but was a company incorporated under Section 25 of the Companies Act, 1956 and, therefore, fell outside the paramete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectives of the Council and particularly relies on Point 2 which states that, "As per the recommendations of the Committee on Papers Laid on the Table, Rajya Sabha all Government companies/organisations are required to lay their Annual Reports and Audited Accounts on the Table of the House within 9 months from the date of closure of accounts. The Annual Accounts of the Gem & Jewellery Export Promotion Council, Mumbai close on the 31st March, every year. Hence papers are required to be laid on the Table of the House by 31st December". As per Mr. Chaudhuri, the only reason that the annual reports, along with the audited reports, are required to be placed before the Rajya Sabha, is because it is considered to be a "Government company/organisation." 6. Mr. Chaudhuri submits that the fact that GJEPC is a public authority is evident from the Reply dated 09.02.2021 of the Department of Commerce to an RTI application filed by the Appellant herein which demonstrates that MOCI exerts a substantial degree of control over the activities and the finances of Respondent No.1. He submits that the response to the information sought states that GJEPC had participated in the Kimberley Process Certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, it must be subject to writ jurisdiction. Furthermore, Clause 2.1 states that the articles shall be subject to the Export-Import Policy that is notified by the Central Government from time to time. To demonstrate the amount of control exercised by the Central Government over the GJEPC, Mr. Chaudhuri points at Clause 9.2 to state that if GJEPC fails to ensure timely elections as provided in Clause 9.1, then the Central Government, after giving it a reasonable opportunity to be heard, order a fresh election to be held and may make such arrangements as may be necessary for that purpose. With regard to the extent of administrative and financial control of the Central Government, reliance is placed on proviso to Clause 39.3 to showcase that Respondent No.2 is not an autonomous body as its accounts and books are open for inspection by an officer duly authorised by the Central Government for ascertaining or verifying the income and expenditure of Respondent No.2 or for such other purposes as may, by agreement between Respondent No.2 and the Central Government, be specified in this regard. 9. The learned Senior Counsel also refers to Clause 44.1 to submit that the funds of Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of Foreign Trade (Development & Regulation) Act and any Rules/orders emanating therefrom, to state that Chapter 2.91 - 2.99 depicts GJEPC as a registering body notified by the Director General of Foreign Trade ("DGFT"). He argues that all these factors indicate that Respondent No.2 is not an autonomous body, and what constitutes as a "State" under Article 12 has been given a very wide interpretation, and institutions such as AIIMS, ONGC, BHEL, etc. which do not receive any funding from the Government are also considered to be amenable to writ jurisdiction. 12. Mr. Chaudhuri refers to the Counter Affidavit filed by the Union of India in W.P.(C) 2162/2019 to submit that the Government itself has conceded that GJEPC is a part of the list of EPCs that are under the administrative supervision of the Union of India and that the function of Respondent No.2 involves a strong element of national and public interest. Relying upon Commissioner of Income Tax, Bombay City - IV v. Gem and Jewellery Export Promotion Council, (1983) 34 CTR (Bom) 57, the learned Senior Counsel argues that it has already been recorded that Respondent No.2 is a company established for the purposes of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther submits that GJEPC is being run with the aid of contributions from its members and it is not a body whose parts are owned by the Government. He argues that the funds/grants received from Respondent No.1 do not cover the major expenses incurred by GJEPC and it is not substantial when it is compared with the total revenue generated by Respondent No.2. Mr. Mehta refers to Clauses 39, 40, 41 and 42 of the AoA to substantiate how the Central Government does not have control over the finances of GJEPC, and that it is in fact incumbent upon the CoA to keep proper books of accounts, and by Rules, determine whether and to what extent and at what times and places and under what conditions, the accounts and books of GJEPC or any of them shall be open for inspection. He submits that the financial aspects of GJEPC are controlled by GJEPC itself and that Respondent No.1 has no bearing on the same. 15. With regard to the control exercised by Respondent No.1 over the functioning of Respondent No.2, Mr. Mehta submits that GJEPC is managed by a CoA which is controlled by members who are neither appointed nor nominated by Respondent No.1. Further, Respondent No.1 does not have a say in the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aj 202, to submit that the Rajasthan High Court has already rendered a finding on the status of Respondent No.2 and held that the Government has a very limited role to play in the functioning of GJEPC, and that GJEPC cannot be held to be an agency or instrumentality of the State. He further submits that, over time, the AoA has been amended and that the role of the Central Government in the functioning of the GJEPC has decreased. Mr. Mehta submits that the best argument that can be advanced by the Appellant is that the Government has the right to see how the money generated by GJEPC is being spent and the right to ensure that the Export Policy is being followed. In conclusion, Mr. Mehta argues that Article 12 should not be stretched to bring in every autonomous body with in some nexus with government functions within the ambit of "State" and that one function assigned to GJEPC, which is not primary and forms a small fraction of their activities should not matter. He submits the impugned Judgement is not erroneous as the writ petition only reveals a private dispute having no public character, and thus, the instant appeal should be dismissed. 19. Heard Mr. Anoop Chaudhuri, learned Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the Government to its obligation in relation to the fundamental rights by setting up an authority to act as its instrumentality or agency for carrying out its functions. Where constitutional fundamentals vital to the maintenance of human rights are at stake, functional realism and not facial cosmetics must be the diagnostic tool, for constitutional law must seek the substance and not the form. Now it is obvious that the Government may act through the instrumentality or agency of natural persons or it may employ the instrumentality or agency of juridical persons to carry out its functions. In the early days when the Government had limited functions, it could operate effectively through natural persons constituting its civil service and they were found adequate to discharge Governmental functions which were of traditional vintage. But as the tasks of the Government multiplied with the advent of the welfare State, it began to be increasingly felt that the framework of civil service was not sufficient to handle the new tasks which were often specialised and highly technical in character and which called for flexibility of approach and quick decision making. The inadequacy of the ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be subject to the same limitations in the field of constitutional law as the Government itself, though in the eye of the law it would be a distinct and independent legal entity. If the Government acting through its officers is subject to certain constitutional limitations, it must follow a fortiorari that the Government acting through the instrumentality or agency of a corporation should equally be subject to the same limitations. If such a corporation were to be free from the basic obligation to obey the fundamental rights, it would lead to considerable erosion of the efficiency of the fundamental rights, for in that event the Government would be enabled to override the fundamental rights by adopting the stratagem of carrying out its functions through the instrumentality or agency of a corporation, while retaining control over it. The fundamental rights would then be reduced to little more than an idle dream or a promise of unreality. It must be remembered that the Fundamental rights are constitutional guarantees given to the people of India and are not merely paper hopes or fleeting promises and so long as they find a place in the Constitution, they should not be allowed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neka Gandhi v. Union of India, (1978) 1 SCC 248 : (1978) 2 SCR 621] era. It is the fundamental rights which along with the directive principles constitute the life force of the Constitution and they must be quickened into effective action by meaningful and purposive interpretation. If a corporation is found to be a mere agency or surrogate of the Government, "in fact owned by the Government, in truth controlled by the Government and in effect an incarnation of the Government", the court, must not allow the enforcement of fundamental rights to be frustrated by taking the view that it is not the Government and therefore not subject to the constitutional limitations. We are clearly of the view that where a corporation is an instrumentality or agency of the Government, it must be held to be an "authority" within the meaning of Article 12 and hence subject to the same basic obligation to obey the Fundamental rights as the Government." 23. Relying upon Ramana Dayaram Shetty v. International Airport Authority of India and Ors., (1979) 3 SCC 489, the Supreme Court in Ajay Hasia and Ors. (supra) had proceeded to document the relevant tests to determine as to when a corporation or an autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inted out in the International Airport Authority case [(1979) 3 SCC 489] , be an "authority" and, therefore, "State" within the meaning of the expression in Article 12." ***** "11. We may point out that it is immaterial for this purpose whether the corporation is created by a statute or under a statute. The test is whether it is an instrumentality or agency of the Government and not as to how it is created. The inquiry has to be not as to how the juristic person is born but why it has been brought into existence. The corporation may be a statutory corporation created by a statute or it may be a government Company or a Company formed under the Companies Act, 1956 or it may be a society registered under the Societies. Registration Act, 1860 or any other similar statute. Whatever be its genetical origin, it would be an "authority" within the meaning of Article 12 if it is an instrumentality or agency of the Government and that would have to be decided on a proper assessment of the facts in the light of the relevant factors. The concept of instrumentality or agency of the Government is not limited to a corporation created by a statute but is equally applicable to a Company or soc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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". If the government operates behind a corporate veil, carrying out governmental activity and governmental functions of vital public importance, there may be little difficulty in identifying the body as "State" within the meaning of Article 12 of the Constitution [Refer toP.K. Ramachandra Iyer v. Union of India, (1984) 2 SCC 141, Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly, (1986) 3 SCC 156 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia [(1979) 3 SCC 489 : AIR 1979 SC 1628] . Although the International Airport Authority of India is a statutory corporation and therefore within the accepted connotation of State, the Bench of three Judges developed the concept of State. The rationale for the approach was the one adopted by Mathew, J. in Sukhdev Singh [(1975) 1 SCC 421 : 1975 SCC (L&S) 101 : (1975) 3 SCR 619] : (SCC p. 506, para 13) "In the early days, when the Government had limited functions, it could operate effectively through natural persons constituting its civil service and they were found adequate to discharge governmental functions, which were of traditional vintage. But as the tasks of the Government multiplied with the advent of the welfare State, it began to be increasingly felt that the framework of civil service was not sufficient to handle the new tasks which were often of specialised and highly technical character. The inadequacy of the civil service to deal with these new problems came to be realised and it became necessary to forge a new instrumentality or administrative device for handling these new problems. It was in these circumstances and with a view to supplying this administrative need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na [(1979) 3 SCC 489 : AIR 1979 SC 1628] (since in both cases the "authority" in fact involved was a statutory corporation), formed the ratio decidendi of Ajay Hasia [Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722 : 1981 SCC (L&S) 258] . The case itself dealt with a challenge under Article 32 to admissions made to a college established and administered by a society registered under the Jammu and Kashmir Registration of Societies Act, 1898. The contention of the Society was that even if there were an arbitrary procedure followed for selecting candidates for admission, and that this may have resulted in denial of equality to the petitioners in the matter of admission in violation of Article 14, nevertheless Article 14 was not available to the petitioners because the Society was not a State within Article 12. 26. The Court recognised that : (SCC p. 731, para 6) "Obviously the Society cannot be equated with the Government of India or the Government of any State nor can it be said to be a local authority and therefore, it must come within the expression "other authorities" if it is to fall within the definition of "State"." But it said that : (SCC p. 733, para 7) "T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omposition of the governing body alone may not be decisive. The laconic discussion and the limited ratio in Tewary [(1975) 1 SCC 485 : 1975 SCC (L&S) 99 : (1975) 3 SCR 616 : AIR 1975 SC 1329] hardly help either side here."" 30. A perusal of the aforementioned Judgements bring to the fore that the liberal interpretation that has been given to "State" and "other authorities" under Article 12 has been circumscribed over the years to include only those authorities that can explicitly be deemed to be under the control of the State and performs a public duty or State function. The control that must be exercised by the State over the authority should be pervasive in nature to the extent that the authority should have limited autonomy. These are the broad guidelines that must be borne in mind when venturing into the question as to whether or not a certain authorities can be termed to be a "State". In this context, it becomes pertinent to analyse the provisions of the MoA, AoA and other documents to discern whether GJEPC can be brought within the net of "other authorities" for the purpose of Article 12. 31. GJEPC is a company which has been incorporated under Section 25 of the Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may, after giving it a reasonable opportunity of being heard, order a fresh election to be held and may make such arrangements as may be necessary for that purpose. ***** 11.3 Nominated and Co-opted Members A nominated or co-opted member shall have no right to vote." ***** "27.3 Composition of the Committee 1. The Committee of Administration shall have the following members; (a) *Elected members with a minimum of ten and maximum of twenty four(including the Regional Chairman, Chairman, Vice Chairman and the other members of the Committee elected from the Panels constituted under Article 23 of these articles). (b) Nominated members, not exceeding three in number. (c) Members nominated by the Committee due to vacancy arising due to non filing or withdrawal of nomination at the time of election subject to the maximum number of members as stipulated under Article 27.3 (1)(a). 2. ^Subject to the provisions of clause (1), the number of members of the Committee shall be laid down by Election Rules made by the Council." ***** "27.6 Certain further provisions as to nominated members (a) The term of office of members of the Committee who are nominated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Central Government shall also have power to call for such reports, returns and other information with respect to the property and affairs of the Council, the conduct of its business and other matters connected with the performance of its functions, as the Central Government may consider necessary. (3) The Council shall be bound to comply with all directions issued by the Central Government under sub-article" (1) or (2) of this article and all provisions contained in the Export-Import Policy of the Central Government for the time being in force. 47.2 Foreign Collaboration All agreements between the Council and any foreign collaborator shall require prior approval of the Central Government. 48. ALTERATION IN ARTICLES No addition to, modification in, or deletion of, any of these articles shall be made without the prior approval of the Central Government. *49. REPUGNANCY TO COMPANIES ACT. Where, in relation to a Council to which the Companies Act, 2013 applies, there is are pugnancy between the provisions of these articles and the procedures of that Act, the procedures of the Act shall to the extent of the repugnancy overrule the provisions of these articles" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the State in its sovereign capacity. 33. The submission of the Appellant that the Central Government exercises pervasive financial control over the GJEPC to the extent that it provides funds to the GJEPC and it also oversees the investment decisions of the GJEPC is not sustainable. The chart that has been presented by Respondent No.2 indicates that the funds provided by the Central Government are solely for the purpose of execution of specific schemes and projects, and it is definitely the Central Government"s prerogative to ensure that the said funds are not misused; this justifies the power of the Central Government to audit the accounts. However, the earnings of the GJEPC, which stems from subscriptions of its members, do not require prior consent or sanction from MOCI, as demonstrated by the EXIM Policy 1997-2002. The figures that have been shown to this Court reveal that with regard to the revenue generated by the GJEPC, at no point of time did the grant (revenue grants and capital grants) given by MOCI ever exceed 27%. The chart has been reproduced as under for ease of comprehension: Sl.No. Financial Year Grants Utilized (In Rs.) Total Revenue Generated by Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of the AoA, lays down the conduct of elections, the duty of GJEPC in holding the same, and the mode of conducting elections. Furthermore, as per Clause 39 of the AoA, it is the CoA which determines how the books and accounts of the GJEPC must be kept and when they should be inspected. Merely because the Central Government may also inspect the books and accounts of the GJPEC does not establish that it controls the financial aspects of the GJEPC. 35. While it is evident that the Central Government does have wide powers to issue directions to the GJEPC under Clause 47 of the AoA, however, these directions may only be given if they are "a. in the interest of national security, or b. in the interests of national economy, or c. otherwise in the public interest", and they may also have the power to call for such reports, returns and other information with respect to the property, affairs, etc. of the GJEPC. Thus, what can be inferred from these provisions is that the control of the Central Government over the GJEPC is only to be exercised in certain situations and cannot be said to be of such nature that it can be deemed to pervasive. 36. The contention of the Appellant that the Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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