The "State" under the Constitution - A Journey Down the Trodden Path
(By A.K. Jayasankaran Nambiar, (M/s Menon & Pai, Advocates)
1. As one of the three pillars on which the edifice of Governance rests, the Judiciary has a rather important role to play in the development of our jurisprudence. In the discharge of its functions, the judiciary faces numerous problems, a substantial part of which is on account of the need to apply the written law to changed social circumstances. The Supreme Law of our Country being contained in a written document - The Constitution - Our Courts have had to grapple with the unenviable task of interpreting the written words of the Constitution to adapt to the needs of a changing society. They do not have the luxury enjoyed by countries such as Britain where constitutional concepts can be evolved to suit the times and later dropped when they have served their time. For us, the laws are written or codified and therefore the dropping of a legal concept can happen only through a repeal or amendment of an existing legal provision or the overruling of a judgment that interprets the provision in a particular way. In this essay I endeavour to focus on the development of our constitutional law in relation to one particular concept - the concept of “the State” as contained in Art.12 of the Constitution.
2. It is by now well settled that the remedy available to a litigant of our Country through Writ Petitions - either under Art.32 or under Art.226 of the Constitution - is only in respect of a right that arises or accrues to him in the realm of public law. In other words, where a person complains of a breach of his civil right and the right claimed by him is one which does not stem from a public duty that is cast on the alleged infringer of that right, then his remedy lies in approaching a Civil Court of competent jurisdiction and not the Writ Court. The remedy by way of a Writ Petition is confined to cases where the breach alleged is of a right that is guaranteed to a person under the Constitution or a right that a person is entitled to claim as a member of the general public to whom such a duty is owed by the alleged violator of the right. This, in essence, is the public law/private law divide that so haunts many a hapless litigant trying to determine where he should go for a redressal of his grievance.
3. Rights of a person under public law, correspond to duties in another person who has vested in him an authority to act in a manner that is capable of affecting the rights of the former. This authority conferred on the latter can be either under a statute or otherwise, but must necessarily be such that the duty cast on him by virtue of that authority is one that is owed not to particular individuals but the public in general or a class of such public. Thus, as a general proposition it can be stated that when a person, who has been conferred with a power to affect the rights of the public in general, acts in a manner prejudicial to the rights of any particular member of the public, that member can approach the Higher Courts for a remedy under public law. The difference in the nature of remedies under Art.32 and Art.226 is that while the former is available only when the right of the individual affected is a fundamental right, the latter is available in all cases where the right affected is a right under public law. The concept of “State” as defined in Art. 12 of the Constitution of India, assumes importance in the context of legal remedies because there are various provisions in the Constitution that cast duties or obligations on the “State” in its dealings with citizens and non-citizens. The legal identity of the alleged violator of the right - whether it is a State or a private person -assumes importance as a first step in determining the forum where the dispute can be settled.
4. The definition of the word “State” in the Constitution is to be found in Art.12, which itself is in Part III of the Constitution under the Heading “Fundamental Rights”. The definition reads as follows:
“12. Definition - In this part, unless the context otherwise requires, “the State” includes the Government and Parliament of India and the Government and Legislature 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.”
It is clear from the opening words itself that the definition of the term “the State” is for the purposes of Part III alone and hence all those persons who come within the ambit of the term “the State” under Art.12 are subject to the duties and obligation cast upon them under Part III of the Constitution. Part III of the Constitution indicates not only what rights are treated as fundamental under the Constitution but also the persons against whom these rights can be enforced as fundamental rights. The Constitution does not through its own force set any limit upon private action. This was clearly noticed by the Hon’ble Supreme Court in Sukhdev Singh v. Bhagatram ((1975) 1 SCC 421.) when it observed that “it is against State action that fundamental rights are guaranteed. Wrongful individual acts unsupported by State authority in the shape of laws, customs or judicial or executive proceedings are not prohibited...By and large, unless an act is sanctioned in some way by the State, the action would not be State action. In other words, until some law is passed or some action is taken through officers or agents of the State, there is no action by the State”. The development of the law relating to the ambit and scope of each of the fundamental rights, therefore, had a direct bearing on the expanding scope of the term “the State” and the Supreme Court once observed that “keeping pace with this broad approach to the concept of equality under Arts.14 and 16, courts have whenever possible, sought to curb an arbitrary exercise of power against individuals by “centres of power”, and there was correspondingly an expansion in the judicial definition of “State” in Article 12" (Ruma Pal J. in Pradeep Kumar Biswas v. Indian Institute of Chemical Biology – 2002 (2) KLT SN 82 (C.No.96) SC = 2002 (5) SCC 111 @ p. 124.)
5. The expansion in the judicial definition of “State” in Art. 12 came about through a steady process of judicial interpretation spanning more than four decades. Initially, courts applied the well known interpretational tool of “ejusdem generis” to hold that the term “other authorities” would take within its fold only such authorities as would fall within the same class as those authorities that were specifically mentioned in the definition. This view later gave way to a purposive interpretation of the definition so that all authorities who exercised statutory powers also came within the scope of the term. In Rajasthan State Electricity Board v. Mohan Lal (AIR 1967 SC 1857) while considering the issue of whether an Electricity Board, which was a statutory corporation carrying on commercial activities, would come within the definition of “State” a Constitutional Bench of the Supreme Court held that “the expression “other authorities” in Art.12 will include all constitutional or statutory authorities on whom powers are conferred by law. It is not at all material that some of the powers conferred may be for the purposes of carrying on commercial activities”. This view was taken a step further in Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi ((1975) 1 SCC 421) where the court affirmed the decision in Rajasthan Electricity Board and further held that “the State” would include a public authority which is a body which has public or statutory duties to perform and which performs those duties and carries out its transactions for the benefit of the public and not for private profit. The Court recognised the possibility of power being bestowed upon corporations and other authorities which was not necessarily statutory in its origin. They acquired power because they produced goods or services upon which the community came to rely. It was observed that “the methods by which these corporations produce and the distribution made in the course of their production by way of wages, dividends and interest, as also the profits withheld and used for further capital progress and the manner in which and the conditions under which they employ their workmen and staff are vital both to the lives of many people and to the continued supply line of the country. Certain imperatives follow from this. Both big business and bi labour unions exercise much quasi-public authority”. It was opined, however, that for qualifying to be a “State” for the purposes of Art.12 of the Constitution, the authority should be “the voice and the hand” of the Government. Mathew J, while delivering a concurring judgment also postulated the following tests for determining whether a corporation was an agency or instrumentality of the State
• A finding of State financial support and an unusual degree of control over the management and policies of the corporation;
• Whether the operation carried on is an important public function;
• If a given function is of such public importance and so closely related to Governmental functions as to be classified as a Governmental agency, then even the presence or absence of State financial aid might be irrelevant in making a finding of State action. If the function does not fall within such a description then mere addition of state money would not influence the conclusion;
• The ultimate question is whether such a corporation is an agency or instrumentality of the State for carrying on a business for the benefit of the public.
6. The law on the subject was further developed in R.D.Shetty v. International Airport Authority ((1979) 3 SCC 489) which concerned the grant of a tender for running a restaurant and two snack bars at the International Airport at Bombay. Bhagwati, J held that where the Government deals with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and, like a private individual, deal with any person it pleases, but its actions must be in conformity with standard or norms which is not arbitrary, irrational or irrelevant. He went on to supply the rationale for an expansive definition of State as follows:
“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 that the public corporation came into being as the third arm of the Government.”
It was observed that corporations acting as instrumentalities or agencies of the Government would obviously be subject to the same limitations in the field of constitutional and administrative law as the Government itself, though in the eye of the law, they would be distinct and independent legal entities. It was acknowledged, however, that the Question as to whether a corporation was acting as an instrumentality or agency of the government was one that was “not entirely free from difficult”. Drawing analogy from the concept of State action as developed in the United States of America, Bhagwati J. proceeded to suggest the following tests for determining whether a corporation was an instrumentality or agency of the Government:
• Where the financial assistance of the State is so much as to meet almost the entire expenditure of the corporation, it would offer some indication of the corporation being impregnated with Governmental character;
• The existence of deep and pervasive State control;
• The existence of a monopoly status which is either State conferred or State protected;
• If the functions of the corporation are of public importance and closely related to governmental functions;
• If a department of the Government is transferred to the corporation;
It was opined that the public nature of the function carried on by the corporation, if impregnated with governmental character or tied or entwined with the Government or fortified by some other additional factor, might render the corporation an instrumentality or agency of the Government. To ascertain this, it was necessary to apply the suggested tests cumulatively and not singularly and then come to a finding on a consideration of all the facts. The International Airport Authority was found to satisfy all the tests laid down and accordingly it was held to be an instrumentality or agency of the Central Government and therefore a “State” as defined in Art.12 of the Constitution.
7. In Ajay Hasia v. Khalid Mujib Sehravardi ((1981) 1 SCC 722) a Constitutional Bench of the Supreme Court, speaking through Bhagwati J. again, reiterated the need for expanding the concept of “State” so as to protect the fundamental rights of the people. It was held that merely because the Government chose a Corporation or other body as a vehicle for carrying on their functions, it could not absolve itself of its Constitutional duties or obligations. A corporation which was in effect an agency or instrumentality of the State was subject to the same limitations in the field of constitutional law as the Government itself, though in the eye of the law it was a distinct and independent legal entity. While clarifying that it was not necessary that an authority for the purposes of Art.12 had to be created either by or under a Statute, the court held that the inquiry to be made was not as to how the juristic person is born but why it has been brought into existence. The Court then endorsed the tests laid down in the International Airport Authority case and observed, with a caveat, that while the said tests were merely indicative indicia, they had to be used with care and caution because while stressing the necessity of a wide meaning to be placed on the expression “other authorities”, it had to be realised that it should not be stretched so far as to bring in every autonomous body which has some nexus with the Government within the sweep of the expression. On the facts of the case before it, the Society which administered the Regional Engineering College, Srinagar was held to be an Instrumentality or Agency of the State and Central Governments and hence an “authority” within the meaning of Art.12 of the Constitution.
8. The approach of the judiciary in the cases referred to in the earlier paragraphs has been to strike a balance between the need to prevent the State from escaping its constitutional obligations while at the same time protecting the freedom enjoyed by autonomous bodies by ensuring that they are not subjected to such constitutional duties and obligations as were not required of them.
9. In April 2002, a Seven member bench of the Supreme Court was constituted, in Pradeep Kumar Biswas v. Indian Institute of Chemical Biology ((2002) 5 SCC 111) to decide upon the correctness of an earlier five member bench decision of the court on the issue of whether the Council of Scientific and Industrial Research (CSIR) was an “authority” within the meaning of Art.12 of the Constitution. After an elaborate consideration of the case law on the subject, the majority held, overruling the earlier decision in Sabhajit Tewary v. Union of India ((1975) 1 SCC 485) that the CSIR is a State within the meaning of Art.12. As regards the tests to be applied for determining whether a body is a “State” it was held that the question in each case would be whether in the light of the cumulative facts as established, the body is financially, functionally and administratively dominated by or under the control of the Government. Such control has to be particular to the body in question and must be pervasive. If the control is merely regulatory, whether under statute or otherwise, it would not serve to make the body a “State”. An interesting observation was made by Lahoti, J. while delivering the dissenting judgment. He sought to highlight the distinction between the terms “instrumentality or agency of the State” and “other authority” for the purposes of Art.12. He points out that earlier decisions seem to have obliterated the distinction between the two terms and proceed on the basis that a finding that a body is an instrumentality or agency of the State would automatically bring it within the ambit of “other authorities” for the purposes of Art.12. This view, according to him, is flawed because the two terms are distinct and separate and simply by holding a legal entity to be an instrumentality or agency of the State it does not necessarily become an authority within the meaning of “other authorities” under Art.12. To be an authority, the entity had to be created by a statute or under a statute and functioning with liability and obligations to the public. Further, the statute creating the entity should have vested that entity with power to make law or issue binding directions amounting to law within the meaning of Art.13(2) governing its relationship with other people or the affairs of other people - their rights, duties, liabilities or other legal relations. If created under a statute, then there must exist some other statute conferring on the authority such powers. In either case, it should have been entrusted with such functions as are Governmental or closely associated therewith by being of public importance or being fundamental to the life of the people and hence governmental. Such authority would be the State for, one who enjoys the powers or privileges of the State must also be subjected to limitations and obligations of the State.((2002) 5 SCC 111 @p. 157)
10. The observations by Lahoti J, although forming the minority view in the Pradeep Kumar Biswas case, does try to explain the development of the law by adhering to a course that would not do violence to the literal meaning of the words used in Art.12. Thus, while the word “Government” - whether State or Central - could, by virtue of the earlier decisions, be interpreted as taking within its fold even an instrumentality or agency of the Government, the term “other authority” could be confined in its operation to only such bodies as actually enjoyed powers by virtue of express conferment of those powers on them by a Statute.
11. In Zee Telefilms Limited v. Union of India ((2005) 4 SCC 649) a Constitutional Bench of the Supreme Court was called upon to review the case law on the subject so as to determine whether the Board of Control for Cricket in India (BCCI) was a State for the purposes of Art.12. The Board was not created by any statute and was only a Society registered under the Societies Registration Act, 1860. It was an autonomous body, the administration of which was not controlled by any authority including the Union of India. It did not take any financial assistance from the Government nor was it subjected to any financial control by the Government or was its accounts subjected to scrutiny by the Government. While this was deemed sufficient by the majority to hold that BCCI was not a State - since it did not satisfy the tests of functional, financial and administrative control by the Government as laid down in the case of Pradeep Kumar Biswas, it is relevant to note that it was virtually admitted that in the field of cricket in India, the Board enjoyed a monopoly status, which although not State conferred was not entirely free of State protection. The majority view of the Supreme Court was that this passive, State-protected, monopoly was not sufficient to treat the Board as a State because the controls exercised by the Union of India over the activities of the Board in regard to organising cricket matches and granting of permission to allow foreign teams to come into India were only regulatory in nature. The majority view did, however, acknowledge that the activities of the Board were akin to public duties or State functions and accordingly, if there was a violation of any constitutional or statutory obligations or rights, the aggrieved person could have a remedy through a petition under Art.226. An interesting observation is to be found in the concluding part of the majority judgment wherein it is stated that:
“..the socio-economic policy of the Government of India has changed and the State is today distancing itself from commercial activities and concentrating on governance rather than on business. Therefore, the situation prevailing at the time of Sukhdev Singh is not in existence at least for the time being, hence, there seems to be no need to further expand the scope of “other authorities” in Art.12 by judicial interpretation at least for the time being. It should also be borne in mind that as noticed above, in a democracy there is a dividing line between a State enterprise and a non-state enterprise which is distinct and the judiciary should not be an instrument to erase the said dividing line unless, of course, the circumstances of the day require it to do so”.((2005) 4 SCC 649 @p.684)
12. The minority view in Zee Telefilms Limited, voiced by Sinha, J. preferred to adopt a new approach to interpretation of the Constitution. The Constitution, according to him, had to be interpreted in the light of our whole experience and not merely on the basis of the law as prevailed at the commencement of the Constitution. He points out that the feature that the Board has been allowed to exercise the powers enabling it to trespass across the fundamental rights of a citizen is of great significance. Referring to the observations in Sukhdev Singh’s case he states that if the development of the law is to be given full effect, it is not only the functions of the Government alone which would enable a body to become a State but also when a body performs Governmental functions or quasi-governmental functions as also when its business is of public importance and is fundamental for the life of the people. This is not to say that every private body carrying on a business of public importance must be a State....what matters is the quality and character of functions discharged by the body and the State control flowing there from.((2005) 4 SCC 649 @ p.696) In adopting this view, the learned Judge found great merit in the reasoning of the Queen’s Bench in R v. Panel on Take-overs and Mergers, ex p Datafin pic (1987(1) All. ER 564) that a body, although self regulating, if performs a public duty by way of exercise of regulatory machinery, a judicial review would lie against it.
13. While the approach of the minority is no doubt one that will expand the concept of “State” to embrace entities that were hitherto held to be private bodies, it is relevant to note that even in the United Kingdom, the courts have been reluctant to carry forward the step taken in ex p Datafin on account of the difficulties that would be faced in drawing the “dividing line” between authorities who would come within the purview of judicial review and those who would stand outside it. The observations of the Supreme Court in Sukhdev Singh’s case, as regards the persons against whom protection of fundamental rights are guaranteed under the Constitution, should serve to remind the judiciary that the rights of one person against another- who does not wield any statutory power or carry on any function affecting the public in general - have not been exalted to the status of fundamental rights under the Constitution. Barring an exceptional case where, for example, the body in question enjoys monopoly status that is either expressly or tacitly protected or recognised by the State and exercises powers that are akin to that exercised by a State, a private body, functioning without any administrative, functional or financial control by the Government, cannot be conferred the status of a “State” for the purposes of Art.12.
14. Four years have elapsed since the decision of the Supreme Court in Zee Telefilms Limited and subsequently decided cases (14 . Lt. Governor of Delhi v. V.K.Sodhi- (2007 (4) KLT SN 37 (C.No.39) SC = JT (2007) 10 SC 137); State of U.P v. Radhey Shyam Rai - (JT (2009) 3 SC 393); M.P.State Co-o perative Dairy Federation v. R.K.Jamindar (JT (2009) (suppl.) 6 SC 263.) reveal that the law with regard to the interpretation of the term “State” under Art.12 continues to be that as laid down in Pradeep Kumar Biswas and Zee Telefilms Limited. The development of the concept of “State” has been through the inclusion of instrumentalities and agencies of the Government in the definition of “State” and a continuing search for those bodies who function as “centres of power” in their relationship with the public at large, irrespective of whether the source of their power is statutory in origin or sui generis. With concepts such as Globalisation, Liberalisation and Privatisation being ritualistically and fervently chanted as the new economic mantra, we could well see private “centres of power” emerging in a new world. Will the judiciary then adopt an activist approach and endorse the minority view in Zee Telefilms?