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PETITIONER: S.S. DHANOA

       Vs.

RESPONDENT: MUNICIPAL CORPORATION, DELHI & ORS.

DATE OF JUDGMENT08/05/1981

BENCH: REDDY, O. CHINNAPPA (J) BENCH: REDDY, O. CHINNAPPA (J) SEN, A.P. (J) ISLAM, BAHARUL (J)

CITATION:  1981 AIR 1395            1981 SCR  (3) 864  1981 SCC  (3) 431        1981 SCALE  (1)919  CITATOR INFO :  E          1986 SC1571  (56)  D          1991 SC 855  (16,23)

ACT:      Public servant-Services  of an Officer belonging to the Indian  Administrative   Service  loaned  to  a  Cooperative Society-Prior approval  of Central  Government under section 197 Cr. P.C. if required for prosecution under Prevention of Food Adulteration  Act-Officer,  whether  a  public  servant within the meaning of clause Twelfth of section 21 I.P.C.      Penal  code-Clause  Twelfth  of  section  21-Scope  of- Services of  a government  servant loaned  to a  Cooperative Society-Government servant  if  continued  to  be  a  public servant.

HEADNOTE:      The services  of the  appellant,  a  Member  of  Indian Administrative Service,  were placed  at the disposal of the Co-operative Store  Ltd. for  being appointed as the General Manager of the Super Bazaars run by the Co-operative Store.      On a  complaint being  filed against  the appellant for commission of  alleged offence  punishable under  section  7 read with  s. 16  of the Prevention of Food Adulteration Act 1954 before  the Metropolitan Magistrate Delhi the appellant contended that he was a public servant within the meaning of clause Twelfth of section 21 of the Penal Code, that the act complained of was done by him in the discharge of his duties as a  public servant  and that since, as required by section 197, Cr.  P.C., previous  sanction of the Central Government had not  been obtained  the court  was not competent to take cognizance of the offence.      The Magistrate  rejected all these contentions. He held that the appellant could not be regarded as a public servant within the  meaning of clause Twelfth of section 21 and that at the relevant time he was neither in the service or pay of the Government  nor was  he employed "in connection with the affairs of the Union".      The High  Court, on  appeal, upheld  tho  view  of  the Magistrate.      Before this  Court  it  was  contended  that  the  term "corporation" used  in clause  Twelfth of section 21 is wide

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enough to  include not  merely a  statutory corporation  but also a body corporate such as the Cooperative Stores 865 established under  the State Act like the Bombay Cooperative Societies Act,  1925 and  that as  General  Manager  he  was employed in  connection with  the affairs  of the  Union  by reason of  the fact that the Central Government had advanced a huge  loan to  the  Society  for  carrying  on  commercial activities.      Dismissing the appeal, ^      HELD:  The   appellant  does  not  answer  any  of  the essential requirements  of  clause  Twelfth  of  section  21 I.P.C. He  was neither  an officer  in the service or pay of the Government  nor of  a  local  authority,  a  corporation established by or under an Act or a Government company. [869 D]      Mere incorporation  of a  society under  a  Central  or State Act  does not  make a  body a  corporation within  the meaning of  clause Twelfth  of section  21.  The  expression "corporation" must,  in  the  context,  mean  a  corporation created by the legislature and not a body or society brought into existence  by an  act of  a  group  of  individuals.  A cooperative  society   is,  therefore,   not  a  corporation established by  or under  an Act  of the  Central  or  State legislature. [870 B]      Corporation  in   its  widest   sense  may   mean   any association of individuals entitled to act as an individual. But that  is not  the sense  in which  it is  used in clause Twelfth of  section 21.  There is  a well marked distinction between a  body created by a statute and a body which, after coming into  existence, is  governed in  accordance with the provisions of  a statute.  A corporation  established by  or under an  Act of  legislature can only mean a body corporate which owes  its existence,  and  not  merely  its  corporate status to  the Act.  An association  of persons constituting themselves into  a company  under the  Companies  Act  or  a society under Societies. Registration Act owes its existence not to  the Act of legislature but to acts of parties though it may  owe its  status as a body corporate to an Act of the legislature. [871 C-G]      In the  instant case  the  Cooperative  Society  was  a society registered  under the  Bombay Cooperative  Societies Act. It  is not  a body  created by  a statute  but  a  body created by  an act  of a  group of individuals in accordance with the provisions of the statute. [872 F]      Nor did  the  fact  that  the  Central  Government  had advanced a huge loan to the Society and held major shares in the total shareholding of the Society make the Super Bazaars run by  the Society  an instrumentality of the State and the appellant "employed  in connection  with the  affairs of the Union" within  the meaning  of section 197, Cr. P.C. [872 H- 873 B]      The clause  in the  agreement advancing the loan to the Society which  provided that  the General  Manager and other important incumbents  of key posts shall not be appointed or removed from  their posts  by the  Society except  with  the prior approval  of the  Government  in  writing  was  merely incorporated to  safeguard  the  interests  of  the  Central Government. Legally the Super Bazaars were owned and managed by the Society and not by the Central Government [873 E-F]      Explanation to  rule 2  (a) of  the All  India Services (Conduct) Rules,  1968 which  provides that  a member of the services whose services were Placed at the 866

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disposal of  any  organisation  by  the  Central  Government shall, for  the purposes  of these  rules, be deemed to be a member of the service serving in connection with the affairs of the  Union notwithstanding  that his salary is drawn from sources other  than the  Consolidated Fund of India serves a limited purpose, that is, "for the purposes of these Rules". Similarly rule  2(c) of  the All  India Services (Discipline and Appeal)  Rules, 1969 is for the purposes of these Rules. These two  Rules could  not  be  pressed  into  service  for improving the  language of  clause Twelfth  of section 21 of the Penal Code. [873 G, 874 D]

JUDGMENT:      CRIMINAL APPELLATE  JURISDICTION: Criminal  Appeal  No. 520, of 1976.      Appeal by  Special Leave  from the  judgment and  order dated the  17th September,  1975 of  the Delhi High Court in Criminal Misc. (M) 212 of 1974      D. Mukherjee, and O.P. Sharma for the Appellant.      P.R. Mridul,  B.P. Mridul,  B.P. Maheshwari  and Suresh Sethi for the Respondents.      The Judgment of the Court was delivered by      SEN, J. This appeal by special leave from a judgment of the Delhi  High Court upholding an order of the Metropolitan Magistrate,  Delhi,   raises  a   question  of  some  public importance. The question is as to whether the appellant, who is a  member of the Indian Administrative Service, and whose services were  placed at  the disposal  of  the  Cooperative Store  Ltd.,   a  society   registered  under   the   Bombay Cooperative Societies  Act,  1925  (hereinafter  called  the Society), was  a public  servant within  the meaning  of cl. Twelfth of  s. 21  of  the  Indian  Penal  Code,  1860,  for purposes of  s. 197 of the Code of Criminal Procedure, 1973. The question arises in this way.      The appellant  is a member of the Indian Administrative Service. By  notification No.  27-942-Estt.  1,  dated  23rd April, 1972,  issued by  the  Government  of  India  in  the Ministry  of   Agriculture  (Department   Agriculture),  the services of  the appellant,  who was  a  Joint  Commissioner (State  Liaison)  in  that  Ministry,  were  placed  at  the disposal of  the  Department  for  his  appointment  as  the General Manager,  Super Bazaar,  Connaught Place,  New Delhi with effect  from April  7, 1972, on which date he took over charge as  General Manager.  At the  request of the Managing Committee of  the Society,  the Government of India extended the period  of his  deputation for  a further  period of one year with effect from April 7, 1973. On completion 867 of his period of deputation, the appellant reverted as Joint Secretary in the Ministry of Agriculture.      On October  10, 1973,  the Food  Inspector purchased  a sealed bottle  of honey  from the  Super Bazaar  at the  INA Market. The  Public Analyst’s  report showed the honey to be adulterated. On  April 5,  1974, the  Municipal Corporation, Delhi, filed  a complaint  against the  appellant and  other officials  of   the  Super   Bazaar  as   also  against  the manufacturer  of  honey  for  having  committed  an  offence punishable under  s. 7 read with s. 16 of Prevention of Food Adulteration  Act,   1954.  On   being   summoned   by   the Metropolitan Magistrate,  Delhi, to  appear before him as an accused, the  appellant raised  a preliminary objection that the taking  of cognizance  of the  alleged  offence  by  the Magistrate was  barred under  s. 197 of the Code of Criminal

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Procedure,  1973,  for  want  of  sanction  of  the  Central Government, since  the act  complained of was nothing but an act done  by him  in the discharge of his duties as a public servant.      The Metropolitan  Magistrate, Delhi, by his order dated October 9,  1974, rejected  the objection,  holding that the appellant, at the time of commission of the alleged offence, was not  a public  servant within the meaning of cl. Twelfth of s.  21 of  the Indian  Penal Code  and, therefore, he was competent to  take cognizance  of the  alleged  offence.  In coming to  that conclusion, the learned Magistrate held that the services  of the  appellant having  been placed  at  the disposal of  the Society, he was in foreign service under FR 9 (7)  and, therefore,  could not  be regarded  as a  public servant within  the meaning  of cl.  Twelfth of s. 21 of the Indian Penal  Code for  two  reasons,  namely:  (a)  as  the General Manager, he was not an officer in the service or pay of the  Government, and  (b) while  functioning  as  General Manager, he  was not employed in connection with the affairs of the  Union. On  appeal, the High Court confirmed the view of the learned Magistrate.      The short  question that falls for our determination in this appeal is whether a member of the Indian Administrative service, whose  services are  placed at  the disposal  of an organisation which  is neither  a  local  authority,  nor  a corporation established by or under a Central, Provincial or State  Act,   nor  a  Government  Company,  by  the  Central Government or  the Government  of a State, can be treated to be a  ’public servant’  within the meaning of cl. Twelfth of s. 21 of the Indian Penal Code for purposes of s. 197 of 868 the Code  of Criminal  Procedure, 1973.  The answer  to  the question turns  on the  construction of cl. Twelfth of s. 21 of the  Indian Penal  Code, 1860  and s.  197 of the Code of Criminal  Procedure,   1973,  which,  so  far  as  they  are relevant, are as follows:           21. The  words ’public  servant’ denote  a  person      falling  under  any  of  the  descriptions  hereinafter      following, namely:-      Twelfth: Every person-      (a)  in  the  service  or  pay  of  the  Government  or           remunerated  by   fees  or   commission  for   the           performance of any public duty by the Government;      (b)   in the  service or  pay of  a local  authority, a           corporation established  by or  under  a  Central,           Provincial or State Act or a Government company as           defined in section 617 of the Companies Act, 1956.           S. 197 Prosecution of Judges and public servants.      (1)   When  any  person  who  is  or  was  a  Judge  or           Magistrate or  a public servant not removable from           his office  save by  or with  the sanction  of the           Government is  accused of  any offence  alleged to           have  been   committed  by  him  while  acting  or           purporting to act in the discharge of his official           duty, no  Court  shall  take  cognizance  of  such           offence except with the previous sanction:-      (a)  in the case of a person who is employed or, as the           case may  be, was at the time of commission of the           alleged offence  employed, in  connection with the           affairs of the Union, of the Central Government;      In support  of the  appeal,  learned  counsel  for  the appellant has urged two grounds. The first is that the chain of Departmental  Stores known  as Super  Bazaar at Connaught Place, New  Delhi, together  with 12  other super bazaars in the metropolitan city of Delhi, including the one at the INA

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market, is nothing but a com- 869 mercial activity  of the  Central Government and, therefore, the appellant  was, at  the time  of the,  commission of the alleged offence,  employed in connection with the affairs of the Union.  That being  so, the  prosecution  could  not  be launched without  sanction from the Central Government under s. 197  of the  Code of Criminal Procedure, 1973. The second is that  the Cooperative  Store Limited which runs the super bazaars, having  been registered  under s.  10 of the Bombay Cooperative Societies  Act, 1925,  was a  body corporate  by virtue of  s. 23  of that  Act and, therefore, the appellant was a public servant within the meaning of cl. Twelfth of s. 21 of  the Indian  Penal Code.  It is said that although the appellant may not be covered by sub-cl. (a), he falls within the ambit  of  sub-cl.  (b)  of  cl.  Twelfth.  We  find  it difficult to accept these submissions.      Clause Twelfth  of s.  21  of  the  Indian  Penal  Code protects two  classes of  public servants,  viz., (a)  every person  in   the  service   or  pay  of  the  Government  or remunerated by fees or commission for the performance of any public duty  by the  Government, and (b) every person in the service  or   pay  of   a  local  authority,  a  corporation established by  or under  a Central, Provincial or State Act or a  Government company  as defined  in section  617 of the Companies Act,  1956. The  appellant does  not answer any of these descriptions.  During his period of deputation, he was not an  officer in the service or pay of the Government, nor was he  in the  service of  a local authority, a corporation established by  or under  an Act or a Government company. It is,  however,   urged  that   the  expression  ’corporation’ appearing in  sub-cl. (b)  of cl.  Twelfth of  s. 21  of the Indian Penal  Code is  wide enough  to include  not  only  a corporation established by or under a Central, Provincial or State  Act,  but  also  a  body  corporate.  The  submission proceeds on  the basis  of s.  23 of  the Bombay Cooperative Societies Act, 1925, which reads:           23. The  registration of a society shall render it      a  body  corporate  by  the  name  under  which  it  is      registered, with  perpetual  succession  and  a  common      seal, and  with power  to hold  property, to enter into      contracts, to  institute and  defend  suits  and  other      legal proceedings  and to  do all  things necessary for      the purposes of its constitution. Clause Twelfth  does not use the words "body corporate", and the  question   is  whether   the  expression  "corporation" contained  therein,   taken  in  collocation  of  the  words "established by or under a Central, Provincial or State Act" would bring within its sweep a cooperative 870 society. Indubitably, the Cooperative Store Limited is not a corporation established  by a Central or State Act. The crux of the  matter is  whether the word ’under’ occurring in cl. Twelfth  of   s.  21  of  the  Indian  Penal  Code  makes  a difference. Does  the mere act of incorporation of a body or society under a Central or a State Act make it a corporation within the  meaning of cl. Twelfth of s. 21? In our opinion, the expression  ’corporation’ must,  in the  context, mean a corporation created  by the  Legislature and  not a  body or society brought  into existence  by an  act of  a  group  of individuals. A  cooperative society  is,  therefore,  not  a corporation established by or under an Act of the Central or State Legislature.      A corporation  is an  artificial being  created by  law having a  legal entity  entirely separate  and distinct from

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the  individuals   who  compose  it  with  the  capacity  of continuous existence and succession, notwithstanding changes in its membership. In addition, it possesses the capacity as such legal entity of taking, holding and conveying property, entering  into   contracts,  suing   and  being   sued,  and exercising such  other  powers  and  privileges  as  may  be conferred on it by the law of its creation just as a natural person may.  The following  definition  of  corporation  was given by  Chief Justice Marshall in the celebrated Dartmouth College case :           A corporation  is an  artificial being, invisible,      intangible, and  existing only in contemplation of law.      Being the mere creature of law, it possesses only these      properties which  the charter  of its creation, confers      upon it,  either expressly or as incidental to its very      existence.  These   are  such   as  are  supposed  best      calculated to  effect  the  object  for  which  it  was      created. Among the most important are immortality, and,      if the expression may be allowed, individuality; proper      ties, by  which a  perpetual succession of many persons      are considered  as the  same, and  may act  as a single      individual. They enable a corporation to manage its own      affairs, and  to hold  property, without the perplexing      intricacies, the  hazardous and  endless necessity,  of      perpetual conveyances  for the  purpose of transmitting      it from hand to hand. It 871      is chiefly  for the  purpose of clothing bodies of men,      in A  succession, with  these qualities and capacities,      that corporations  were invented,  and are  in use.  By      these means,  a perpetual succession of individuals are      capable of  acting for  the promotion of the particular      object, like one immortal being. The term ’corporation’ is, therefore, wide enough to include private corporations.  But, in the context of cl. Twelfth of s. 21 of the Indian Penal Code, the expression ’corporation’ must be given a narrow legal connotation.      Corporation,  in   its  widest   sense,  may  mean  any association of individuals entitled to act as an individual. But that  certainly is  not the  sense in  which it  is used here.  Corporation   established  by  or  under  an  Act  of Legislature can  only mean  a body  corporate which owes its existence, and  not merely its corporate status, to the Act. For example,  a Municipality,  a Zilla  Parishad or  a  Gram Panchayat owes  its  existence  and  status  to  an  Act  of Legislature. on  the other  hand, an  association of persons constituting themselves  into a  Company under the Companies Act or  a Society  under the Societies Registration Act owes its existence  not to  the Act of Legislature but to acts of parties though, it may owe its status as a body corporate to an Act of Legislature.      There  is   a   distinction   between   a   corporation established by or under an Act and a body incorporated under an Act.  The distinction  was brought  out by  this Court in Sukhdev Singh & ors. v. Bhagatram Sardar Singh Raghuvanshi & ors. It was observed:           A company  incorporated under the Companies Act is      not  created  by  the  Companies  Act  but  comes  into      existence in accordance with the provisions of the Act. There is  thus a  well-marked  distinction  between  a  body created by  a statute  and a  body which,  after coming into existence, is  governed in accordance with the provisions of a statute. In Sabhajit Tewary v. Union of India and ors  the question  arose   whether  the  Council  of  Scientific  and Industrial Research which was a society registered under the

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Societies Registration Act, was a statutory body. It was 872 urged that  because the Council of Scientific and Industrial Research had  government nominees  as the  President of  the body  and  derived  guidance  and  financial  aid  from  the Government,  it   was  a   statutory  body.   Repelling  the contention, the Court observed:           The Society  does not  have a  statutory character      like the  Oil and  Natural Gas  Commission, or the Life      Insurance    Corporation    or    Industrial    Finance      Corporation. It is a society incorporated in accordance      with the  provisions of the Societies Registration Act.      The fact  that the  Prime Minister  is the President or      that the  Government appoints nominees to the Governing      Body  or   that  the   Government  may   terminate  the      membership will  not establish  anything more  than the      fact that  the Government  takes special  care that the      promotion, guidance  and co-operation of scientific and      industrial research,  the institution  and financing of      specific researches,  establishment or  development and      assistance to  special institutions  or departments  of      the  existing  institutions  for  scientific  study  of      problems affecting  particular industry in a trade, the      utilisation of  the result  of the researches conducted      under  the   auspices  of   the  Council   towards  the      development of  industries in  the country  are carried      out in a responsible manner. Whatever has  been  said  with  regard  to  the  Council  of Scientific and  Industrial Research,  which  was  a  society registered under  the Societies  Registration  Act,  equally applies to the Cooperative Store Limited, which is a society registered under the Bombay Cooperative Societies Act, 1925. It is  not a  statutory body  because it is not created by a statute. It  is a  body created  by an  act of  a  group  of individuals in  accordance with the provisions of a statute. The Super  Bazaar at  Connaught Place  together with  its 12 branches in  Delhi, is  not an instrumentality of the State. In a welfare State like ours, there is greater participation by Government  in various  commercial activities. Some times the Government  directly engages  itself in  such commercial activities by  acquiring a  monopoly in  trade in the public interest. Or  it may,  by an  Act of  Legislature, establish statutory corporations  like the  State Trading Corporation, Life Insurance  Corporation of India, the Industrial Finance Corporation, the  Oil and Natural Gas Commission etc., or it may  set  up  Government  companies  under  s.  617  of  the Companies Act,  1956, like  the Hindustan Steel Limited etc. By no  stretch of  imagination, could  it be  said that  the appellant was employed in connection with the 873 affairs of  the Union  within the  meaning of  s. 197 of the Code of  Criminal Procedure, 1973. The Super Bazaars are not owned by  the Central Government. They are owned and managed by the  Cooperative Store  Limited. Pursuant to an agreement executed between the Cooperative Store Limited and the Union of India,  the Central Government has advanced a loan of Rs. 40,00,000/- to  the Society for establishment and management of the  Super Bazaars, and the Central Government also holds more than  97% shares  in the  total  share-holding  of  the Society. Clause 6 of the Agreement provides:           That the  incumbents of  supervisory and other key      posts  including   those  of  General  Manager,  Deputy      General  Manager,   Finance  Manager,   Asst.   General      Manager, Purchase  Manager, Sales  Manager and Accounts      Manager, by  whatever other  designation  they  may  be

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    known shall  not be  appointed or  removed  from  their      posts by  the Debtor  except with the prior approval of      the Creditor in writing. The Super  Bazaar at  Connaught Place  and at  various other places are  run by  the Cooperative  Store Limited under the control  of  the  Ministry  of  Agriculture  (Department  of Cooperation). The  incumbents of  supervisory and  other key posts including  that  of  the  General  Manager  cannot  be appointed or  removed without  the  prior  approval  of  the Central Government.  The whole  purpose  of  cl.  6  of  the Agreement in  the matter  of appointment  of General Manager and other  incumbents holding  key  posts  is  to  safeguard interests of  the Central  Government. Legally speaking, the Super Bazaars  are owned  and managed by the Society and not by the  Central Government and, therefore, the appellant was not employed  in connection  with the  affairs of  the Union within the  meaning of  s.  197  of  the  Code  of  Criminal Procedure, 1973.      Explanation to  r. 2  (a) of  the  All  India  Services (Conduct) Rules, 1968 and r. 2 (c) of the All India Services (Discipline and  Appeal) Rules,  1969, on which reliance was placed, can be of no avail. Explanation to r. 2 (a) enlarges the meaning  of the  expression "serving  in connection with the affairs  of the  Union or in connection with the affairs of the  State". It  provides that  a member  of the  Service whose services  are placed  at the  disposal of  a  company, corporation or  other organisation  or a  local authority by the Central  Government or the Government of a State. shall. for the 874 purpose of  those rules,  be deemed  to be  a member  of the Service serving  in connection with the affairs of the Union or in  connection with the affairs of the State, as the case may be,  notwithstanding that  his salary  is drawn from the sources other  than the  Consolidated Fund  of India  or the Consolidated Fund of that State. The legal fiction contained in Explanation  to r.  2 (a), is for a limited purpose. This is evident  by the  use of  the words "for purposes of these rules". Rule 2 (c) of the All India Services (Discipline and Appeal) Rules,  1969 defines  Government to  mean (i) in the case of  a member  of the Service serving in connection with the affairs of a State, or who is deputed for service in any company,  association   or  body   of  individuals   whether incorporated or  not, which is wholly or substantially owned or controlled  by the  Government of  a State, or in a local authority set  up by  an Act  of Legislature of a State, the Government of  that State;  and (ii)  in any other case, the Central Government.  That again  is for  purposes  of  these rules. These  provisions cannot  be pressed into service for improving upon  the language  of cl. Twelfth of s. 21 of the Indian Penal Code, 1860.      Before parting  with the  case, we would like to advert to one  aspect. It  is  common  ground  that  the  honey  in question  was   sold  in  a  sealed  container  bearing  the manufacture’s warranty  as to  quality as  required under r. 12-A of  the Prevention  of Adulteration  Rules, 1955.  That being so,  the  learned  Magistrate  shall  first  determine whether or  not the  appellant was protected under s. 19 (2) of the Prevention of Food Adulteration Act, 1954.      Subject to  this observation,  the appeal  fails and is dismissed. There shall be no order as to costs. P.B.R.                                    Appeal dismissed. 875

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