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CASE NO.: Appeal (civil)  4590 of 2004

PETITIONER: Mohammad Sadiq & Ors

RESPONDENT: State of Uttar Pradesh & Ors

DATE OF JUDGMENT: 21/09/2007

BENCH: Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO. 4590 OF 2004 [With Civil Appeal No.4606 of 2004]

Dr. ARIJIT PASAYAT, J.

1.      These appeals are inter-linked and are directed against  common judgment of the Allahabad High Court.  By the  impugned judgment the order passed by the learned Single  Judge was set aside.   

2.      Background facts in a nutshell are as follows:

       Retrenched employees of Institute of Engineering and  Rural Technology (for short ’IERT’), 105 in number, filed a writ  petition against the State of U.P. and its functionaries as well  as the IERT praying for quashing the order dated 24.3.1999 by  which it was decided that the Training-cum-Production Centre  of IERT was to be closed down w.e.f. 31.3.1999 and the  workmen employed were to be retrenched after paying  compensation.  

       While allowing the writ petition the learned Single Judge  gave directions which essentially read as follow:-

"\005The respondents are directed to prepare a  list of the employees who were appointed prior  to 1.10.1986 in the production-cum-training  Centre of IERT, and were working  continuously till the date of their retrenchment  i.e. 31.3.1999 by excluding those who have  retired, or have not given their option for  absorption, to be absorbed in the vacancies in  other polytechnics of the State of Government,  which are recognized and funded or in any  other technical institution, or any post which it  may deem to be fit, in accordance with their  eligibility and after relaxing age and other  terms and conditions of recruitment.  As and  when petitioners are offered absorption on any  equivalent post, they will vacate the quarters  occupies by some of them in the premises of  IERT. Since petitioners have accepted  retrenchment compensation, no direction with  regard to payment of salary is required to be  given.  The State Government is directed to

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draw the list, prepare the scheme and to offer  appointment by absorption, preferably within a  period of four months.  There is no order as  cost."                 

3.      The present respondents questioned correctness of the  order by filing special appeal before the High Court. By the  impugned judgment the High Court allowed the special  appeal. It held that IERT is not an instrumentality of the State  and/or could not be termed to be State Government or a  public Corporation. It was held that the finding of learned  Single Judge that IERT is wholly owned, controlled and  managed by the State Government is not correct.   

4.      Learned counsel for the appellants submitted that the  basic questions are as follows:-

(a)     Whether IERT was an instrumentality of the State.        (b)     Whether the Uttar Pradesh Absorptions of Retrenched  Employees of Government/Corporations in Government  Service Rules, 1991 (in short the ’Absorption Rules’) is  applicable to the writ petitioners-appellants.           (c)     Whether after receiving compensation, the concerned  employees could question the closure.

5.      It was submitted that IERT is registered under the  Societies Registration Act, 1860 (in short the ’Societies Act’)  and in terms of the Absorption Rules the concerned employees  were entitled to be given protection of the Absorption Rules.  It  is submitted that the expression "established" means that the  institution has come into existence and, therefore, even  though IERT has been registered under the Societies Act, that  does not mean it is not established or constituted under any  Uttar Pradesh Act.   

6.      In response, learned counsel for the respondent  submitted that the concept of "established" or "constituted" is  different from a body registered under the Societies Act.

7.      The contentions raised need consideration.  It has been  accepted that there was no material placed before the High  Court to establish that IERT is an instrumentality of the State.  In Pradeep Kumar Biswas v. Indian Institute of Chemical  Biology and Ors. (2002 (5) SCC 111), it has been clearly stated  that even if a society or institute is registered under the  Societies Act and some functionaries of the State Government  and other members of the institute, such an institute may not  be termed as an instrumentality of the State, if deep and  pervasive control over the affairs of the institute was not with  the State Government.  Texts formulated in Ajay Hasia and  Ors. v. Khalid Mujib Sehravardi and Ors. (1981 (1) SCC 722)  were highlighted. There is basic distinction between a society  and a corporation. In Board of Trustees, Ayurvedic and Unani  Tibia College, Delhi v. State of Delhi (Now Delhi  Administration) and another (AIR 1962 SC 458), it was inter  alia held as follows: "(9)    The first and foremost question is  whether the old Board was a corporation in the  legal sense of that word. What is a  Corporation? Corporations may be divided into  two main classes, namely, corporations  aggregate and corporations sole. We are not  concerned in the present case with corporation  sole. "A Corporation aggregate has been  defined as a collection of individuals united

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into one body under a special denomination,  having perpetual succession under an artificial  form, and vested by the policy of the law with  the capacity of acting in several respects as an  individual, particularly of taking and granting  property, of contracting obligations and of  suing and being sued, of enjoying privileges  and immunities in common, and of exercising  a variety of political rights, more or less  extensive, according to the design of its  institution, or the powers conferred upon it,  either at the time of its creation or at any  subsequent period of its existence". (Halsbury’s  Laws of England, 3rd Edn. Vol. 9, page 4.) A  corporation aggregate has therefore only one  capacity, namely, its corporate capacity. A  corporation aggregate may be a trading  corporation or a non-trading corporation. The  usual examples of a trading corporation are (1)  charter companies, (2) companies incorporated  by special acts of parliament, (3) companies  registered under the Companies Act, etc. Non- trading corporations are illustrated by (1)  municipal corporations, (2) district boards, (3)  benevolent institutions, (4) universities etc. An  essential element in the legal conception of a  corporation is that its identity is continuous,  that is, that the original member of members  and his or their successors are one. In law the  individual corporators, or members, of which it  is composed are something wholly different  from the corporation itself; for a corporation is  a legal persona just as much as an individual.  Thus, it has been held that a name is essential  to a corporation; that a corporation aggregate  can, as a general rule, only act or express its  will by deed under its common seal; that at the  present day in England a corporation is  created by one or other of two methods,  namely, by Royal Charter of incorporation from  the Crown or by the authority of Parliament  that is to say, by or by virtue of statute. There  is authority of long standing for saying that the  essence of a corporation consists in (1) lawful  authority of incorporation, (2) the persons to  be incorporated, (3) a name by which the  persons are incorporated, (4) a place, and (5)  words sufficient in law to show incorporation.  No particular words are necessary for the  creation of a corporation; any expression  showing an intention to incorporate will be  sufficient.  10. The learned Advocate for the petitioners  has referred us to various provisions of the  Societies Registration Act, 1860 and has  contended that the result of these provisions  was to make the Board a corporation on  registration. It is necessary now to read some  of the provisions of that Act. The Act is entitled  an Act for the registration of literary, scientific  and charitable societies and the preamble  states that it was enacted for improving the  legal condition of societies established for the  promotion of literature, science, or the fine  arts, or for the diffusion of useful knowledge

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etc., or for charitable purposes. Section 1 of  the Act states that any seven or more persons  associated for any literary, scientific, or  charitable purpose, or for any such purpose as  is described in Section 20 of the Act may, by  subscribing their names to a memorandum of  association and filing the same with the  Registrar or Joint-stock Companies form  themselves into a society under the Act.  Section 2 lays down that the memorandum of  association shall contain and one of the  particulars it must contain is "the objects of  the society". Section 3 deals with registration  and the fees payable therefor. Sections 5 and 6  are important for our purposes and should be  read in full.  "5. The property, movable and  immovable, belonging to a society registered  under this Act, if not vested in trustees, shall  be deemed to be vested, for the time being, in  the governing body of such society, and in all  proceedings, civil and criminal, may be  described as the property of the governing  body of such society by their proper title.  6. Every society registered under this Act  may sue or be sued in the name of the  president, chairman, or principal secretary, or  trustees, as shall be determined by the rules  and regulations of the society, and, in default  of such determination, in the name of such  person as shall be appointed by the governing  body for the occasion :  Provided that it shall be competent for any  person having a claim or demand against the  society, to sue the president or chairman, or  principal secretary of the trustees thereof, if on  an application to the governing body some  other officer or person be not nominated to be  the defendant."  Section 7 provides for non-abatement of suits  or proceedings and the continuance of such  suits or proceedings in the name of or against  the successor of the person by or against  whom the suit was brought. Section 8 says  that if a judgment is recovered against a  person or officer named on behalf of the  society, such judgment shall not be put in  force against the property, movable or  immovable, or against the body of such person  or officer, but against the property of the  society. Section 10 provides that in certain  circumstances mentioned therein a member of  the society may be sued by the society; but if  the defendant shall be successful in any such  suit brought at the instance of the society and  shall be adjudged to recover his costs, he may  elect to proceed to recover the same from the  officer in whose name the suit was brought, or  from the society. Sections 13 and 14 provide  for dissolution of societies and the  consequences of such dissolution. These  provisions have also an important bearing on  the questions before us and are quoted in full.  "13. Any number not less than three- fifths of the members of any society may

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determine that it shall be dissolved, and  thereupon it shall be dissolved forthwith, or at  the time then agreed upon, and all necessary  steps shall be taken for the disposal and  settlement of the property of the society, its  claims and liabilities, according to the rules of  the said society applicable thereto, if any, and,  if not then as the governing body shall find  expedient, provided that, in the event of any  dispute arising among the said governing body  or the members of the society, the adjustment  of its affairs shall be referred to the principal  court of Original civil jurisdiction of the district  in which the chief building of the society is  situate, and the Court shall make such order  in the matter as it shall deem requisite :  Provided that no society shall be  dissolved unless three-fifths of the members  shall have expressed a wish for such  dissolution by their votes delivered in person,  or by proxy, at a general meeting convened for  the purpose :  Provided that whenever any Government  is a member of, or a contributor to, or  otherwise interested in any society registered  under this Act, such society shall not be  dissolved, without the consent of the  Government of the State of registration.  14. If upon the dissolution of any society  registered under this Act there shall remain,  after the satisfaction of all its debts and  liabilities, any property whatsoever, the same  shall not be paid to or distributed among the  members of the said society or any of them,  but shall be given to some other society, to be  determined by the votes of not less than three- fifths of the members present personally or by  proxy at the time of the dissolution, or, in  default thereof, by such Court as aforesaid :  Provided, however, that this clause shall  not apply to any society which shall have been  founded or established by the contributions of  shareholders in the nature of a Joint Stock  Company."  

8.      The other crucial question is whether the Absorption  Rules applied to IERT.  The relevant provisions in the rules  read as follows:

"In exercise of the powers conferred by the  proviso to Article 309 of the Constitution, the  Governor is pleased to make the following  rules to provide for the absorption in  Government Service of the retrenched  employees of the Government or of Public  Corporations.       THE UTTAR PRADESH ABSORPTION OF  RETRENCHED EMPLOYEES OF  GOVERNMENT OR PUBLIC CORPORATIONS  IN GOVERNMENT SERVICE RULES, 1991.

       xx              xx              xx              xx

2(b)    "Public Corporation" means a body

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corporate established or constituted by or  under any Uttar Pradesh Act expect a  University of local authority constituted  for the purpose of Local Self Government  and includes a government Company  within the meaning of Section 617 of the  Companies Act, 1956 in which the State  Government has prepondering interest.               

2(c)    "Retrenched Employees" means a person  who was appointed on a post under the  Government or a public corporation on or  before October 1, 1986 in accordance  with the procedure laid down for  recruitment to the post and was  continuously working in any post under  the Government or such corporation up  to date of his retrenchment due to  reduction in, or winding up of, any  establishment or the Government of the  Public Corporation, as the case may be  and in respect of whom a certificate of  being retrenched employees has been  issued by his appointing authority."    9.      A bare reading of the provisions makes the positions  clear that in order to bring application of the Rules the public  corporation has to be a body corporate established or  constituted by or under any Uttar Pradesh Act.

10.     The fundamental requirement is that the corporation  should have been constituted by or under any Uttar Pradesh  Act. Undisputedly, the Societies Act is a Central Act.   

11.     The impugned judgment of the High Court does not  suffer from any infirmity to warrant interference.  The appeals  are dismissed but without any order as to costs.