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CASE NO.: Appeal (civil)  3272 of 2003

PETITIONER: LT. GOVERNOR OF DELHI & ORS

RESPONDENT: V.K. SODHI & ORS

DATE OF JUDGMENT: 14/08/2007

BENCH: P.K. BALASUBRAMANYAN & P.P. NAOLEKAR

JUDGMENT: J U D G M E N T  

[with C.A. No. 8132 of 2003]

P.K. BALASUBRAMANYAN, J.

1.              In this appeal, the challenge is to the decision  of the Delhi High Court holding that the State Council of  Education, Research and Training (’SCERT’ for short) is  a State within the meaning of Article 12 of the  Constitution of India and the conclusion that the  Lieutenant Governor of Delhi, SCERT and others are  bound to implement the policy decision of SCERT as  reflected in Regulation 67 framed by it as also the  Advanced Career Promotion Scheme.  But a caveat was  entered that those who have not been absorbed, cannot  be given the benefit of the decision unless they are  absorbed permanently in SCERT.  The writ petition was  allowed on the above terms with costs.  

2.              We may notice that the writ petition was not  allowed as prayed for nor was a mandamus as such  issued to the respondents.  The prayer in the writ  petition was for the issue of a writ of mandamus or any  other suitable writ, order or direction to the respondents  to extend the benefits of pension, gratuity and general  provident fund on retirement in favour of the writ  petitioners, to provide facilities of loan, advances for  betterment of career, status and life in terms of housing  loan, car loan, computer loan etc. in favour of the writ  petitioners and also to extend the benefits of the same  pay and allowances in favour of the writ petitioners as  are admissible to the academic staff of National Council  of Educational, Research and Training (’NCERT’ for  short) at par or to pass any other order or direction as  may be deemed fit and proper.   It may be noticed that  Regulation 67 of SCERT Rules and Regulations which  provided that the terms and tenure of service of the  academic staff at the Council shall remain the same as  available for the academic staff of NCERT was amended  by notification dated 7.12.1999 retrospectively to the  effect that the terms and tenure of service of academic  and other staff of the Council should remain the same as  available for the academic and other staff of the  Directorate of Education, G.N.C.T. of Delhi with such

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modifications that may be specifically adopted by the  Executive Committee from time to time.  This  amendment was not challenged in the writ petitions in  the context of the prayers in the writ petition. But in the  context, it is clear that the High Court has issued a  direction to SCERT to implement Regulation 67 as it  stood prior to its amendment in respect of a class of  employees and to implement certain resolutions adopted  by the Governing Committee of SCERT.  We may  incidentally notice and it is the common case, that the  unamended Regulation 67 had never been implemented  in SCERT in respect of any of its employees and there is  no case of any discrimination in the implementation of  that Regulation.   

3.              While allowing the writ petition, the High Court  negatived the plea of SCERT that it was merely a society  registered under the Societies Registration Act and it was  not a State within the meaning of Article 12 of the  Constitution of India.  The High Court also overruled the  plea of SCERT that it mainly relied on the grant by the  Government for the purpose of achieving the objects with  which the society was formed and without the sanction  or approval of the State Government, it was not in a  position to spend any part of the grant by way of  additional benefits to its employees.  It is feeling  aggrieved by the decision thus rendered by the High  Court that this Appeal has been filed.  

4.              We may notice here that the High Court held  that the decision by this Court in Chander Mohan  Khanna Vs. N.C.E.R.T. & ors.[(1991) 4 S.C.C. 578]  could not govern the case of SCERT in view of the  decision in Pradeep Kumar Biswas Vs. Indian Institute  of Chemical Biology & ors. [(2002) 5 S.C.C. 111] and in  that view, it was held that the Society was a State and  that the amendment of the Regulation would not affect  the employees who had joined SCERT prior to the date of  the amendment.  

5.              It is argued on behalf of the appellants that the  High Court was clearly in error in not properly examining  the question whether SCERT was a State or other  authority within the meaning of Article 12 of the  Constitution of India even going by the principle laid  down in Pradeep Kumar Biswas’s case (supra).  It was  further submitted that the High Court has given no  reasons for holding that the decision in Chander Mohan  Khanna  could not be applied to the case in view of the  position emerging from the bye-laws of both the  societies.  It was submitted that going by the tests laid  down, SCERT was a society registered under the  Societies Registration Act, which was a master of its  affairs and which was not subservient to the Government  and that the Government did not have effective or  pervasive control over the working of the society which  was governed by a Committee constituted by its bye-laws  and the mere fact that the Government was making  available grants to SCERT and SCERT was entrusted  with the looking after of a facet of education, which was  part of the duty of the State and the existence of some ex  officio members in the Committee are not sufficient to  uphold the plea that SCERT was a State especially since  in Pradeep Kumar Biswas  case, the decision in  Chander Mohan Khanna  had not been overruled and

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only one aspect relied on in Chander Mohan Khanna  decision had been found to be not sustainable.  The  respondents, on the other hand, contend that the larger  bench in Pradeep Kumar Biswas’s case had specifically  overruled Sabhajit Tewary’s case [(1975) 1 S.C.C. 485]  and this meant that the decision in Chander Mohan  Khanna  was no more good law and the High Court was  right in its conclusion on that basis.  It is further  submitted that going by the tests laid down by this Court  in various decisions, it has to be held that SCERT was a  State or other authority within the meaning of Article 12  of the Constitution in view of the financial control the  State Government had over the Society and the other  circumstances relied on by the High Court.  Thus, it was  submitted that the High Court was justified in directing  the implementation of Regulation 67 as it stood in  respect of the writ petitioners.  

6.              On merits, it was contended on behalf of the  appellants that the High Court was in error in ignoring  the financial implications for the society while issuing  the direction and that the court is not entitled to ignore  the financial constraints of a society like SCERT while  called upon to issue a direction to it to incur additional  expenditure, eating up a major portion of the grant that  is made available to it by the Government.  It is  submitted that if a major portion of the grant is utilized  for salaries and allowances and other benefits to the  employees, the very object with which the society was  formed would be defeated and certainly, a court is bound  to consider that aspect while issuing directions for  incurring of financial liability.  It is also pointed out that  Regulation 67 had been amended with retrospective  effect and the same was not in challenge before the High  Court and there was no justification in the High Court  holding that the non existant Regulation 67 as it existed  prior to the amendment, should be implemented in  respect of the writ petitioners.    

7.              These submissions are sought to be met by the  respondents by contending that the employees were  entitled to benefit on the principle of ’equal pay for equal  work’, that the original Regulation 67 applied to  employees who were in service prior to its amendment  and that the High Court was right in holding that the  retrospective amendment of Regulation 67 could not  affect the employees who were in place before the date of  the amendment.  Learned counsel further submitted that  the direction issued by the High Court was only to direct  SCERT to implement its own resolutions without waiting  for governmental clearance for their implementation and  considering that SCERT was an autonomous body, the  direction in that behalf was justified.  It was thus  submitted that the appeal was liable to be dismissed.  

8.              Civil Appeal No. 8132 of 2003 is filed by  SCERT challenging a direction subsequently issued by  the High Court in another writ petition following the  decision of the Division Bench giving rise to Civil Appeal  No. 3272 of 2003.  The fate of this Appeal depends upon  the decision in Civil Appeal No. 3272 of 2003 and no  separate discussion of the facts therein is needed.  

9.              As the decisions of this Court show, there is no  simple litmus test, to determine whether an entity is a

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State or other authority within the meaning of Article 12  of the Constitution of India.  What is clear from the  decisions is that the various facets of the foundation and  the working of the entity would be relevant in  determining the question in the context of the duties  entrusted to it or taken up by it for performance.  It is in  that context that in the latest larger Bench decision in  Pradeep Kumar Biswas (supra), the majority summed  up the position in paragraph 40 thus:-  

"The picture that ultimately emerges is that  the tests formulated in Ajay Hasia are not a  rigid set of principles so that if a body falls  within any one of them it must, ex  hypothesi, be considered to be a State  within the meaning of Article 12.  The  question in each case would be \026 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 must be particular to the body  in question and must be pervasive.  If this  is found then the body is a State within  Article 12.  On the other hand, when the  control is merely regulatory whether under  statute or otherwise, it would not serve to  make the body a State."

What therefore falls for consideration is whether in the  context of the functions entrusted to it, the rules and  bye-laws that govern it and the financial position enjoyed  by it, SCERT can be said to be financially, functionally  and administratively dominated by or under the control  of the Government.  

10.             It is in this context that the decision in  Chander Mohan Khanna  (supra) assumes importance.   It appears to be common case that SCERT and NCERT  are organizations parallel in nature and the High Court  has also recorded: "It is accepted that the third respondent  (SCERT) was formed basically on the same  lines as NCERT."

This Court in Chander Mohan Khanna (supra) on  discussing the relevant provisions of the Memorandum of  Association and the Rules of NCERT came to the  conclusion that NCERT was not a State or other  authority within the meaning of Article 12 of the  Constitution of India.  This Court after quoting from the  decision of the High Court regarding the relevant Rules  of NCERT stated: "The object of the NCERT as seen from the  above analysis is to assist and advise the  Ministry of Education and Social Welfare in the  implementation of the Governmental policies  and major programmes in the field of  education particularly school education. The  NCERT undertakes several kinds of  programmes and activities connected with the  coordination of research extension services and  training, dissemination of improved  educational techniques, collaboration in the  educational programmes. It also undertakes

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preparation and publication of books,  materials, periodicals and other literature.  These activities are not wholly related to  Government functions. The affairs of the  NCERT are conducted by the Executive  Committee comprising of Government servants  and educationists. The Executive Committee  would enter into arrangements with  Government, public or private organisations or  individuals in furtherance of the objectives for  implementation of programmes. The funds of  the NCERT consist of: (i) grants made by the  Government, (ii) contribution from other  sources and (iii) income from its own assets. It  is free to apply its income and property  towards the promotion of its objectives and  implementation of the programmes. The  Government control is confined only to the  proper utilisation of the grant. The NCERT is  thus largely an autonomous body."

Their Lordships concluded that in their Lordships’  opinion having regard to the indications to which they  had called attention earlier, NCERT did not qualify as a  State under Article 12 of the Constitution of India.  The  provisions of the Memorandum of Association and the  bye-laws of SCERT are more or less the same as that of  NCERT.  Whereas NCERT was to assist the National  Government in the matter of coordinating education,  SCERT was to assist the State Government in the matter  of promoting education within the State of Delhi.  It is  also governed by an Executive Committee.  The income  and property of the Council however derived has to be  applied towards the promotion of the objectives set forth  in the Memorandum of Association.  The membership of  the Council included ex officio the Lieutenant Governor  of Delhi, the Executive Councilor (Education) of Delhi  Administration and various educational authorities.  The  Executive Committee was to be the main authority of the  Council and it was entitled to create or constitute other  authorities for carrying out the objectives.  The affairs of  the Committee shall be administered subject to the rules  and orders of the Council by an Executive Committee  which was to consist of various officers of the Delhi  Administration.  The Committee had the power, with the  previous approval of the Council, to frame Regulations  including Regulations regarding terms and tenure of  appointments, emoluments, allowances, rules of  discipline and other conditions of service of the officers  and the staff of the Council. The Council was to be fully  financed by the Government and the funds of the  Council was to consist of grants made by the  Administration of Delhi/Delhi State and Government of  India for the furtherance of the objects of the Council,  contributions from other sources, income from assets  and publication of the Council and receipt of the Council  from other sources.  The accounts had to be audited  annually by Chartered Accountants and to be approved  by the Annual General Meeting of the Council.  The State  Government had no role to play on the administration of  the Council or in the working of the Council or over its  finances, once the grant was made.  

11.             The two elements, one, of a function of the

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State, namely, the coordinating of education and the  other, of the Council being dependant on the funding by  the State, satisfied two of the tests indicated by the  decisions of this Court.  But, at the same time, from that  alone it could not be assumed that SCERT is a State.  It  has to be noted that though finance is made available by  the State, in the matter of administration of that finance,  the Council is supreme.  The administration is also  completely with the Council.  There is no governmental  interference or control either financially, functionally or  administratively, in the working of the Council.  These  were the aspects taken note of in Chander Mohan  Khanna (supra) to come to the conclusion that NCERT is  not a State or other authority within the meaning of  Article 12 of the Constitution of India.  No doubt, in  Chander Mohan Khanna (supra), the Bench noted that  the fact that education was a State function could not  make any difference.   This part of the reasoning in  Chander Mohan Khanna (supra) case has been  specifically disapproved by the majority in Pradeep  Kumar Biswas  (supra).  The majority noted that the  objects of forming Indian Institute of Chemical Biology  was with the view of entrusting it with a function that is  fundamental to the governance of the country and  quoted with approval the following passage in Rajasthan  SEB Vs. Mohan Lal [(1967) 3 S.C.R. 377]:

"The State, as defined in Article 12, is thus  comprehended to include bodies created for  the purpose of promoting the educational  and economic interests of the people."

The majority then stated:

"We are in respectful agreement with this  statement of the law.  The observations  to the contrary in Chander Mohan  Khanna V. NCERT relied on by the  learned Attorney-General in this context,  do not represent the correct legal  position."

12.             But, it may be noticed that in conclusion, the  majority only overruled the decision in Sabhajit Tewary  (supra) and did not say anything further regarding the  decision in Chander Mohan Khanna (supra).

13.             We also find substantial differences in the two  set ups.  Sabhajit Tewary (supra), after referring to the  rules of the Council of Scientific and Industrial Research  which was registered under the Societies Registration  Act, concluded that it was not a State within the  meaning of Article 12 of the Constitution.  While  overruling the said decision, the majority in Pradeep  Kumar Biswas (supra) took the view that the dominant  role played by the Government of India in the governing  body and the ubiquitous control of the Government in  the Council and the complete subjugation of the  Governing Body to the will of the Central Government,  the inability of the Council to lay down or change the  terms and conditions of service of its employees and the  inability to alter any bye-law without the approval of the  Government of India and the owning by the Central  Government of the assets and funds of the Council

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though normally owned by the society, all indicated that  there was effective and pervasive control over the  functioning of the Council and since it was also  entrusted with a Governmental function, the justifiable  conclusion was that it was a State within the meaning of  Article 12 of the Constitution.  The majority also noticed  that on a winding up of that Council, the entire assets  were to vest in the Central Government and that was  also a relevant indication.  Their Lordships in the  majority also specifically overruled as a legal principle  that a Society registered under the Societies Registration  Act or a company incorporated under the Companies  Act, is by that reason alone excluded from the concept of  State under Article 12 of the Constitution.  In the case of  SCERT, in addition to the operational autonomy of the  Executive Committee, it could also amend its bye-laws  subject to the provisions of the Delhi Societies  Registration Act though with the previous concurrence of  the Government of Delhi and that the proceedings of the  Council are to be made available by the Secretary for  inspection of the Registrar of Societies as per the  provisions of the Societies Registration Act.  The records  and proceedings of the Council have also to be made  available for inspection by the Registrar of Societies.  In  the case of dissolution of SCERT, the liabilities and  assets are to be taken over at book value by the  Government of Delhi which had to appoint a liquidator  for completing the dissolution of the Body.  The creditors’  loans and other liabilities of SCERT shall have preference  and bear a first charge on the assets of the Council at  the time of dissolution.  This is not an unconditional  vesting of the assets on dissolution with the  Government.  It is also provided that the provisions of  the Societies Registration Act, 1860 had to be complied  with in the matter of filing list of office-bearers every year  with the Registrar and the carrying out of the  amendments in accordance with the procedure laid down  in the Act of 1860 and the dissolution being in terms of  Sections 13 and 14 of the Societies Registration Act,  1860 and making all the provisions of the Societies  Registration Act applicable to the Society.  These  provisions, in our view, indicate that SCERT is  subservient to the provisions of the Societies Registration  Act rather than to the State Government and that the  intention was to keep SCERT as an independent body  and the role of the State Government cannot be  compared to that of the Central Government in the case  of Council of Scientific and Industrial Research. 14.             As we understand it, even going by paragraph  40 of the judgment in Pradeep Kumar Biswas (supra),  which we have quoted above, we have to consider the  cumulative effect of all the facts available in the case.  So  considered, we are inclined to hold that SCERT is not a  State or other authority within the meaning of Article 12  of the Constitution of India.  As we see it, the High Court  has not independently discussed the relevant rules  governing the functioning and administration of SCERT.   It has proceeded on the basis that in the face of Pradeep  Kumar Biswas (supra) decision, the decision in Chander  Mohan Khanna (supra) must be taken to be overruled  and no further discussion of the question is necessary.    But, in our view, even going by Pradeep Kumar Biswas  (supra), each case has to be considered with reference to  the facts available for determining whether the body  concerned is a State or other authority within the

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meaning of Article 12 of the Constitution of India.  So  considered, we find that the Government does not have  deep and pervasive control over the working of SCERT.   It does not have financial control in the sense that once  the finances are made available to it, the administration  of those finances is left to SCERT and there is no further  governmental control.  In this situation, we accept the  submission on behalf of the appellants and hold that  SCERT is not a State or other authority within the  meaning of Article 12 of the Constitution of India.  After  all, the very formation of an independent society under  the Societies Registration Act would also suggest that the  intention was not to make the body a mere appendage of  the State.  We reverse the finding of the High Court on  this aspect.  

15.             Once we hold that SCERT is not a State or  other authority within the meaning of Article 12 of the  Constitution of India, we do not find ourselves persuaded  to issue any such direction as sought for by the writ  petitioners (the respondents herein).  In fact, it becomes  unnecessary to go into the question of validity of the  amendment of Regulation 67, the effect of the uniform  non implementation of Regulation 67 as it stood earlier,  and the effect of the absence of a challenge in the writ  petition to the amendment to the Regulation itself.  It is  also not necessary to go into the question whether  SCERT should seek the permission of the Government  for incurring additional expenditure in terms of service  benefits to its employees.  

16.             It appears to us that in the case of bodies like  SCERT, the court cannot ignore the financial  implications of implementing the directions that it is   called upon to issue.  The object of SCERT is laudable  and it has to coordinate and promote education in the  State.  Its resources are limited and the main income is  by way of grant from the State Government.  When  SCERT pleads that it cannot spend the whole of the  grant or a major portion of the grant in paying salaries  and emoluments to its employees and if it does so, that  may tend to frustrate the very object with which the  society was formed, it is an argument that has to be  considered weighty by a court called upon to exercise  jurisdiction under Article 226 of the Constitution of  India.  A court cannot issue a direction which would  tend to frustrate the very object with which a society like  SCERT is formed or a body like SCERT is created.  After  all, there may be a point of time in a welfare State where  the right of the employees must be subservient to the  right of the society.  In the matter of education, surely,  the interests of the society at large should prevail and  issue of any direction that may endanger such interests  must be done with extreme caution and only after  careful deliberation.   

17.             In our view that SCERT is not a State or other  authority within the meaning of Article 12 of the  Constitution and normally not amenable to the  jurisdiction of the High Court under Article 226 of the  Constitution of India, we do not find it necessary to  pursue further, these other aspects.  Suffice it to say,  that the direction issued by the High Court cannot be  sustained.  

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18.     In the result, both the appeals are allowed and  the directions issued by the High Court are set aside and  the writ petitions filed by the writ petitioners are  dismissed.  In the circumstances, the parties are  directed to suffer their respective costs.