Article 12 of the Constitution gives an inclusive definition to the expression ‘State’. The significance of A.12 lies in the fact that it occurs in Part III of the Constitution which deals with Fundamental Rights[1].
There have, and continue to be multiple varied interpretations of what constitutes ‘State’. The previous structuralist interpretation was problematic because it restricted the actors against whom Fundamental Rights could be claimed, led to trials becoming time consuming and cumbersome, and posed challenges to the maintainability of Writ Petitions.
Prior to the Rajasthan State Electricity Board Case, Courts took a narrow interpretation of A.12. In University of Madras v Shanta Bai[2], one of the earliest cases regarding A.12, the Court concluded that ‘other authorities’ would only include those exercising governmental functions, when construed ejusdem generis. The SC in Ujjam Bai v Union Of India[3], rejected the restrictive interpretation of ‘other authorities’ and held ejusdem generis to be inapplicable. An ‘inclusive’ definition is generally not exhaustive as far as A.12 is concerned.
In Rajasthan Electricity Board v Mohan Lal[4], it was held that the expression “other authorities” in A.12 would include all constitutional/statutory authorities on which powers are conferred by law. It is immaterial that some of the powers conferred may be for the purpose of carrying on commercial activities. Up until this case, a very ‘structuralist’ approach had been followed.
It was Sukhdev Singh v Bhagat Ram[5] that introduced the concept of functionalism in the SC’s interpretive approach to A.12. Matthew J. laid emphasis on the ‘agency or instrumentality’ character of the body in question, thereby including financial support and degree of control exercised by the government over management and policies.[6] Corporations which have legal personality of its own, can still be agents or instrumentalities of the state, if subject to control of government in all important matters of policy. Therefore, a careful and holistic analysis must be done while looking into whether a body an agency or instrumentality of the State.
Ironically, another judgement on the same day as Sukhdev Singh, in Sabhajit Tiwari vs Union Of India[7], the SC held that the petitioner’s writ petition was not maintainable as CSIR did not fall within ‘State’ under A.12, since it was not performing essential state functions and was not functioning under the pervasive control of the government.
Despite Sabhajit Tiwari, the wider notion of ‘agency or instrumentality’ of the State became the judicially applicable standard to determine the ‘State’ character of a private body. The courts applied it in the case of U.P State Warehousing Corporation Vs. Vijay Narayan[8] amongst others and, RD Shetty v International Airport Authority of India[9]. The Court held that ‘agencies or instrumentalities’ of the State would be amenable to a fundamental rights-based review of their actions. It introduced an ‘expansionary’ interpretation of A.12 where almost any activity bearing some impact on public life would qualify as a State function, and prioritized fairness over efficiency.[10] This is where we witness the transition into a more functionalist approach. The Court however, failed to provide the doctrinal transition from a structuralist to a more expansive functionalist test.
The Court in Ajay Hasia Khalid Mujib Sehravardi & Ors[11] introduced the juristic veil principle, disclosing for the first time a conceptual rationale for the ‘agency or instrumentality’ approach. The Court held that the juristic veil of corporate personality, worn ‘for the purpose of convenience of management and administration’ could not be ‘allowed to obliterate the true nature of the reality’. The reality was undoubtedly the ‘deeply pervasive presence of the Government’ behind the formal ownership cast in corporate mould. It replaced the functional approach to the meaning of ‘State’ with a structuralist approach that took into account a few more factors than the narrow one advocated in RSEB.[12]
Test formulated in Ajay Hasia focussed on the following parameters:
- Holding of share capital by the State
- Financial Assistance from State, and whether it constituted the body’s entire expenditure.
- Monopoly status conferred by the State
- Existence of deep and pervasive State control
- Functions of the corporation being of public importance and closely related to governmental functions.
Specifically, if a governmental department was transferred to a corporation, it would strongly support an inference of its instrumentality or agency status. In Som Prakash Rekhi v UOI[13], it was further elaborated 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 enquiry has to be not as to how the juristic person is born but why it has been brought into existence.
Pradeep Biswas v. Indian Institute of Chemical Biology[14] overruled Sabhajit Tiwari and revisited Ajay Hsia. The SC laid down the following test for the determination of ‘State’:
- The test formulated in Ajay Hasia was not rigid in principle that needed to be complied with in all cases without exception, to determine, whether or not, a body is a State;
- All cases were to be determined in light of their respective cumulative facts- to see, whether or not, a body was financially, functionally and administratively dominated by, or was under the control of, the government;
- The control should be deep and pervasive;
- If the control is mere regulatory under a statute (or otherwise), then the body is not State under A.12.
However, PK Biswas categorically ruled out attribution of ‘State’ character to autonomous authorities that did not satisfy its onerous three-pronged standard. This issue was taken up in Zee Telefilms V UOI.[15]Here, the issue was whether BCCI is a state under A.12.
Part II discusses Article 12 and private bodies.
[1] Goel S, “Article 12: Defining the Term ‘State’ (Part III of the Constitution of India, 1950)” [2015] SSRN <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2660116>
[2]University of Madras v Shanta Bai AIR 1954 Mad 67
[3] Ujjam Bai v Union Of India 1962 AIR 1621
[4] Rajasthan Electricity Board v Mohan Lal 1967 AIR 1857
[5] Sukhdev Singh v Bhagat Ram AIR 1975 SC 1331
[6] Padmanabhan A, “Rights: Breadth, Scope, and Applicability” in Sujit Choudhry, Madhav Khosla and Pratap Bhanu Mehta (eds), The Oxford Handbook of the Indian Constitution (Oxford University Press 2016)
[7] Sabhajit Tiwari vs Union Of India 1975 SCC (1) 485
[8] U.P State Warehousing Corporation Vs. Vijay Narayan 1980 SCR (2) 773
[9] RD Shetty v International Airport Authority of India 1979 AIR 1628
[10] Padmanabhan A, “Rights: Breadth, Scope, and Applicability” in Sujit Choudhry, Madhav Khosla and Pratap Bhanu Mehta (eds), The Oxford Handbook of the Indian Constitution (Oxford University Press 2016)
[11] Ajay Hasia Khalid Mujib Sehravardi & Ors 1981 AIR 487
[12] Padmanabhan A, “Rights: Breadth, Scope, and Applicability” in Sujit Choudhry, Madhav Khosla and Pratap Bhanu Mehta (eds), The Oxford Handbook of the Indian Constitution (Oxford University Press 2016)
[13] Som Prakash Rekhi v UOI 1981 AIR 212
[14] Pradeep Biswas v. Indian Institute of Chemical Biology (2002) 5 SCC 111
[15]Zee Telefilms V UOI 78 (1999) DLT 738
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