ARTICLE 12

THE CONCEPT OF STATE

What is state?

FRs are guaranteed against state action. But what meant by state? This is defined for the purpose
of FRs (as different from the definition in the General Clauses Act) in Article 12 of the
Constitution. Therefore, it provides an inclusive, and not exhaustive, definition.

Is Judiciary a part of “state”?

It is important to note that the judiciary is conspicuously excluded from the definition. However,
the provision uses a phrase “unless the context otherwise requires”. This definition is not
conclusive because it means that entities other than those mentioned can be included, and those
not mentioned can be excluded, depending on the context.

Therefore, there are two views possible:

1. Exclusion in all cases – the judiciary is not part of the state because it could easily have
been mentioned.
2. Exclusion in some cases – if the context requires, judiciary does become state for the
purposes of FR – what has to be seen is the function performed by the judiciary.

So the question arises what are the kinds of functions the judiciary can perform?

1. Administrative functions

If the CJ is the administrative head of Courts, and exercises administrative functions, and we
then say that judiciary is not part of the state, then the implication is that the CJ is not part of the
state and can act arbitrarily.

In this case, the context requires that it be part of the state, otherwise the employees will not have
any protection

Parmatma Sahoo v. Chief Justice – CJ exercised administrative functions, and CJ was held to
be part of state under Article 12.

2. Legislative functions

If the judiciary exercises legislative power (by framing rules etc), then is judiciary part of the
state?

The context requires that the judiciary is part of the state because otherwise it can make rules
arbitrarily in violation of constitutionally guaranteed FRs.
Prem Chand v. Excise Commissioner – CJ part of state when he exercises legislative functions.

What kind of orders can the judiciary make while entertaining PIL petitions?

There are three questions with respect to PIL:

a) Whose rights can be espoused by PIL?

Bhagwati, J. made the answer clear: the constitutional and statutory rights of weaker sections of
society can be espoused by PIL. The rights of those disadvantaged, deprived, and dispossessed (3
Ds) historically, who cannot espouse their own rights, may be espoused by PIL

b) Who can espouse these rights of weaker sections by filing PIL petitions?

Any public spirited individual – not necessarily persons aggrieved – he should not be a busybody
– should not be PUBLICITY interest litigation – should not be for any private profit or gain.

The SC then relaxed the rule of locus standi in allowing for PIL. Unfortunately, this was not later
followed, and was misused under the rubric of PIL

c) What kind of relief can the court give?

The court, while entertaining PIL, does not conduct adversarial proceedings. Rather, it is a
collaborative, cooperative procedure.

- The court can create law in a vacuum like in Vishakha.

- When the executive fails to implement law, the court can issue directives to the executive.
- The court can also give directives to private individuals.

Therefore, the Court has affected overreaching judicial activism.

3. Judicial functions

The question is, while the judiciary exercises purely judicial functions, can that be considered to
be part of the state?

In other words,

Do the tests applied to legislative law apply to judicial decisions?

The tests of

i) legislative competency
ii) violation of fundamental rights.
The question of competency can obviously not be raised. But what about violation of
Fundamental Rights?

If yes, the very concept of stare decisis is undermined.

The judicial approach has not been consistent in this area.

Case Law

Naresh Sridhar Mirajkar v. State of Maharashtra

Facts:

One of the witnesses, while adducing evidence in the HC, requested HC to keep evidence
confidential, and to not allow anyone to publish it. Agreeing, the HC issued an oral order
prohibiting publication of evidence given by accused, ensuring his safety.

A journalist challenged this, and said it was violative of freedom of speech.

Issue:

Although the oral order might factually affect such right, does it constitutionally affect it?

Judgment:

Gajendragadkar, J. said that the purpose of the oral order was to do justice and not to
constitutionally violate FRs. Thus, the indirect effect of violation of FR has to be ignored.
Judicial function and exercise cannot be questioned.

Sadanandam v. Arunachalam

Facts:

Sadanandam was accused of murder of Arunachalam’s brother. He was convicted by the lower
court, but acquitted by the HC.

The state did not prefer any appeal, and although usually the state files an SLP, the brother of the
victim waited for a while and then moved the SC himself by filing an SLP under Article 136.

The SC allowed the petition and re-examined it. Sadanandam was convicted and sentenced to
death, in the previous case of Arunachalam v. Sadanandam, decided in 1999.

Sadanandam then filed a petition under Article 32 questioning that conviction on the ground that
the decision in Arunachalam v. Sadanandam violates his right to life.

Judgment:
Justice Krishna Iyer entertained the petition and examined it on merits.

He opined that the court had not breached any procedure or rules in hearing the petition under
Article 136 and said that the jurisdiction of the court is unlimited.

The question arises as to why he heard this petition on merits. This is an indication that the
judiciary is also part of the state.

A. R. Antulay v. R. S. Nayak

Facts:

Antulay was the CM of Maharashtra. He floated a company, and raised funds for the same, and
there were allegations that he misappropriated the money

There was a special judge appointed under the Commission of Inquiries Act. Nayak did not
approach the judge, but went directly to the High Court. The High Court accepted the allegations
leveled against him.

Antulay went in appeal to the SC under Article 136.

The SC affirmed the decision of the HC and dismissed the special leave petition (under Art 136)
filed by Antulay. He then filed a review petition in the SC. In the review petition, he raises the
question that the SC decision dismissing his SLP was violated his right to personal liberty, and to
equality.

- Personal liberty because he was not allowed to present his case, and equality because
Nayak did not go to the special judge appointed for this case)

Judgment:

The majority in this case held that it was the inherent right of the SC to entertain petition and
decide cases even on violation of FRs. In this case, however, they said there was no violation.

As opposed to Naresh Mirajkar, the Court held that judicial decisions can be reviewed. The fact
that the judicial order can be questioned on the ground of violation of FR is a clear indication
that the judiciary is part of the state.

What are the implications of judiciary being part of the State?

- If the judiciary is part of the state, then Article 13 would apply, and there would be no
stare decisis, and the court in future cannot change the meaning of fundamental rights.
- The SC cannot reinterpret any provision – it is barred by Article 13 – which means that
all FRs become part of basic structure, and cannot be touched either by the SC (in its
review of the same) or by constitutional amendments.
“OTHER AUTHORITIES”

Today, in the concept of a welfare state, the state has ceased to be a police state (where the state
was primarily preoccupied with the maintenance of law and order). Now, the role of the state has
changed, and it is not a police state anymore, and the state has entered into trading activities.

Case Law

1. Corporations

University of Madras v. Shanta Bai (1954 Madras High Court)

Division Bench

The SC said that the test for deciding whether “other authorities” is state or not is to see whether
is performs sovereign and governmental functions i.e. the emphasis is not on how it was created,
but what it does. So, it said that the phrase “other authorities” should be read ejusdem generis
with Government or Legislature.

If it performs non-governmental functions, then irrespective of how the entity was created, it
would not fall within the ambit of “other authorities”.

The Court therefore held that the Madras University only discharges education, and performs
academic activities. It is thus not state, as it does not perform sovereign and governmental
functions.

Electricity Board, Rajasthan v. Mohanlal (1967 Supreme Court)

5 Judge Bench (5:0)

Bhargava, J. for 4 judges

Shah, J. separate opinion

The issue was whether the Electricity Board was state and whether the employees of the board
had any right.

The SC rejected the ejusdem generic interpretation. The SC said that if the authority has a
statutory character, and is conferred power by law, then no matter what functions it performs, it
is part of the state as under Article 12. The emphasis is on how they are created, not their
functions.

It may even perform commercial functions, but if it has statutory character and is conferred
power by law, it falls within “other authorities”.
Sukhdev Singh v. Bhagatram (1975 Supreme Court)

5 Judge Bench (4:1)

Ray, CJ for 3 judges

Mathew, J. as separate

Alagiriswamy, J. as dissenting.

This case clarified the Supreme Court’s stance in the previous case. The question was whether
statutory corporations like LIC, ONGC, IFC which were created under special laws were state?

The SC said that the abovementioned corporations were state, because of their statutory
character. The SC laid down two tests to determine whether an entity created by the statute is
state or not:

i) The authority should be conferred power to make rules, regulations and by

laws, having the force of law, or to issue directions to third parties
ii) Penal consequences should ensue in case of non-compliance with these rules,
regulations or bye-laws.

2. Public Companies

With respect to public companies, the Supreme Court has invented the doctrine of agency and
instrumentality of the state.

There are certain illustrative guidelines that have been given, and the cumulative effect of such
guidelines will be looked into.

Ajay Hasia v. Khalid Mujib (1981 SC)

5 Judge Bench (5:0)

Bhagwati, J.

Facts:

REC, Srinagar was established, and it was run by a society registered under the societies
registration act. In the process of admission, the question was whether certain procedures could
be followed.

The question arose as to whether the society was state or not.

Judgment:
There were certain parameters laid down, in order to decide whether an entity acts as an agency
of the state:

1. Whether the share capital is owned by the state?

2. Whether the company is given monopoly status in functioning?
3. Whether the company is under the deep and pervasive control of the government?
4. Whether the financial assistance is so much as to meet the entire expenditure of the
company?
5. Whether any government department has been transferred to the company?
6. Whether the company performs a public function?

This is not a rigid set of guidelines. The court will take into consideration the cumulative effect
of these guidelines in determining whether the entity is an instrumentality or agency of the state.

The ratio was whether it is under the effective and pervasive control (functionally, financially,
and administratively) of the state? Regulatory control is not enough.

Som Prakash v. UOI (1981 SC)

Facts:

Burma Shell Refineries was acquired by the government under law enacted in 1976. The
legislation was the Burma Shell Acquisition of Undertaking Act, 1976

Initially, it was vested in the government, and was later transferred under Section 7 of the 1976
Act to a public company floated and registered under the Companies Act – the Bharat Petroleum
Corporation (which is not a statutory corporation)

There was an issue of pension, and half of the amount of the pension payable to the employees
was cut. This was questioned on the ground of violation of FR.

The question was whether Bharat Petroleum was State.

Judgment:

The Court made a reference to the statutory format of the 1976 Act.

STATUTORY FORMAT OF THE 1976 ACT:

Section 3  object
Section 7  vesting of property in the transferee (in the later transfer, to Bharat Petroleum)
Sections 9 and 10  service conditions of the employees (pension, gratuity, salary etc).
There was a clause that if a dispute in relation of any of the abovementioned arose, it would
be decided by arbitration. If it is a corporation registered under Company law, the Company
Act should apply. In this case, this provision provided certain additional security to
employees.
 Section 11  Primacy to 1976 Act over all other laws with respect to the rights of the
employees
Section 13  Penalties to anyone who tampered with the property of the undertaking – and
criminal consequences for the same
Section 16  Immunity to officers of corporations – who acted honestly, in the course of
their official duties

- In light of the statutory format, the judge came to the conclusion that Bharat Petroleum
has a statutory flavour – is it the alter ego of the state, it is almost under the control of the
state government in all its functioning
- Therefore it was a state.

3. Private Companies

All the previous cases deal with public companies incorporated in the Companies Act. But what
about private companies incorporated in the Companies At?

The same tests apply i.e. pervasive and effective control. The court has not clarified that where it
is regulatory, it is inadequate

M. C. Mehta v. UOI

Issue

The issue was whether Sriram Food and Fertilizers was a state?

Judgment:

Bhagwati, J. examined gamut of case law. He said it was in domain of private law

Although the company was performing an important public function (production of fertilizers),
there was no sharing of governing power with the state. The corporation is purely a merchant
doing business for private profit.

In order for it to fall within the meaning of the phrase “other authorities”, it has to be more than a
mere merchant, and must share governmental power. There is no nexus between the government
and the company, and is therefore not a state

Zee Telefilms v. UOI

Issue:

The question was whether BCCI is state

Judgment:
The BCCI was registered under the Tamil Nadu Societies Registration Act.

Majority

- The majority court said that there is no financial control, no creation under statute. The
finances have been raised by the company itself, and it is completely autonomous.
- Although it enjoys monopoly in the area of cricket, that is not state conferred monopoly
nor it is statutorily created monopoly
- This company is not functionally, financially, and administratively under the pervasive
control of the government of India. There is only regulatory control.

Minority (Sinha, J.)

He said that it was a state.

Chander Mohan Khanna v NCERT

- The issue was whether the NCERT was state
- The SC held that it was not a state – although it assisted policy making, it was an
autonomous institution, and there was no functional control
- Even in the light of Pradip Kumar’s case, the NCERT and SCERT are not part of state –
they are autonomous, their assets do not vest in the state if they happen to get dissolved
(this is not a test in itself, Errabbi said, but link to one of the parameters laid down –
whether complete share capital vests in the state, or whether the function was earlier
being performed by the state)
- The court looked into the property aspect
- SCIR – property owned by share company – state is the owner
- This influences the court to overrule pradip kumar

Pradip Kumar Biswas v. Indian Institute of Chemical Biology

- The court in this case overruled Tiwari’s ratio
- It did not overrule Chander Mohan’s case
- If there is a function which is fundamental to the governance of a country, and it is
transferred to an entity – in Khanna it was said that it was not conclusive (in that case,
education), and that cannot be considered to be enough to declare that the entity in
question was part of the state
- In this case (PK) , there is disagreement – it can be considered to be one of the indicators
for it being a state. It cannot be ignored
- There is no express overruling of Khanna’s case – but of this aspect, the court
disapproved
- It is not a conclusive indicator – it must be examined cumulatively depending on the
dacts and functioning
- This case overruled Tiwari’s case, though.

What is Tiwari’s case?

Tiwari’s case
- CSIR – Council for Scientific and Industrial Research – whether state?
- The court said that iw as not a state because although it is an institution which is
registered, and finances came from the government, the SC said that it was autonomous
was not part of state
- The SC in PK disagreed with the ratio in this – said that it is under effective control in
such a situation
- Thus, Tiwari’s case was expressly overruled in PK.