REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  1572           OF 2009 [Arising out of SLP (Civil) No. 16203 of 2006]

State of U.P. & Anr. …Appellants

Versus

Radhey Shyam Rai …Respondent

J U D G M E N T  

S.B. SINHA, J :

1. Leave granted.

2. The  short  question  which  arises  for  consideration  herein  is  as  to

whether  the  Uttar  Pradesh  Ganna  Kishan  Sansthan  (for  short  “the

Sansthan”),  a  society registered under  the Societies  Registration Act is  a

‘State’ within the meaning of Article 12 of the Constitution of India.  

3. Indisputably,  before  constituting  the  Sansthan,  its  functions,  viz.,

imparting  of  knowledge  and  training  to  the  cane-growers  and  connected

persons so as to effect increase in the production of sugar in the State was

being performed by the Cane Development Department.  The Sansthan was

established  by  a  Government  Order  dated  4.08.1975.   The  State  had

established training centers at Shahjahanpur, Muzaffarnagar and Gorakhpur.

These training centers, as noticed hereinbefore, were being run by the Cane

Development  Department  of  the  Government  of  Uttar  Pradesh.

Management of the said training centers  was transferred to the Sansthan.

The expenses thereof were to be met from U.P. Sahkari Ganna Samiti Sangh

and Sakkar Vishesh Nidhi.

4. Respondent  was  appointed  in  the  post  of  Computer  Officer/  Data

Processing Officer.  The Governing Council of the Sansthan in its meeting

held on 28.04.1997 resolved to abolish the posts created and to cancel the

appointments made, pursuant whereto the services of the respondent were

dispensed with by an order dated 17.05.1997.   

Feeling aggrieved by the said order dated 17.05.1997, he filed a writ

petition  before  the  Lucknow  Bench  of  the  High  Court  of  Judicature  at

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Allahabad being Writ Petition No. 869 of 1998 wherein one of the issues

raised was whether the Sansthan is a ‘State’ within the meaning of Article

12 of the Constitution of India.  

5. The writ petition filed by the respondent came up for consideration

before a Division Bench of the High Court.  It noticed an earlier decision of

another Division Bench of the said Court wherein it  was opined that  the

appellant  No. 2  is  not  a ‘State’  within  the meaning of  Article  12  of  the

Constitution of India.  However, a different view was taken.   

The  question  as  to  whether  the  Sansthan  would  answer  the

description of a ‘State’ within the meaning of Article 12 of the Constitution

of India was, therefore, referred to a Full Bench of the High Court.   

The Full Bench held that the Sansthan being an authority would come

within the purview of definition of ‘State’ within the meaning of Article 12

of the Constitution of India.

6. Article 12 of the Constitution of India reads as under:

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“12. Definition.—In this part, unless the context otherwise  requires,  ‘the  State’  includes  the Government  and  Parliament  of  India  and  the Government  and  the  legislature  of  each  of  the States and all local or other authorities within the territory  of  India  or  under  the  control  of  the Government of India.”

7. Law in this behalf has developed a lot.  With the changing societal

conditions, a large number of bodies exercising public functions have been

brought within the purview of the definition of ‘State’.  We need not dilate

on the development of law in this regard in view of the decisions rendered

by this Court beginning from  Rajasthan State Electricity Board v.  Mohan

Lal [(1967) 3 SCR 377], Ajay Hasia v. Khalid Mujib Sehravardi [(1981) 1

SCC 722] and other decisions including a Seven – Judge Bench decision of

this Court in Pradeep Kumar Biswas v. Indian Institute of Chemical Biology

[(2002) 5 SCC 111].

8. We may also notice that P.K.   Ramachandra Iyer and Others   v. Union

of  India  and  Others [(1984)  2  SCC  141]  wherein  Indian  Council  for

Agricultural Research (ICAR) was held to be a ‘State’ within the meaning

of  Article  12  of  the Constitution  of  India,  was distinguished  in  Chander

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Mohan Khanna v.  National Council of Educational Research and Training

[(1991)  4  SCC  578].   However,  Chander  Mohan  Khanna (supra)  was

overruled in  Pradeep Kumar Biswas (supra)  to  the extent it  followed the

decision in Sabhajit Tewary v. Union of India [(1975) 1 SCC 485].

In  Mysore  Paper  Mills  Ltd. v.  Mysore  Paper  Mills  Officers’

Association and Another [(2002) 2 SCC 167] Mysore Paper Mills Ltd. was

held to be a ‘State’ within the meaning of Article 12 of the Constitution of

India as  it  was substantially  financed and controlled by the Government,

managed by the Board of Directors nominated and removable at the instance

of the Government  and carrying on functions of public interest  under its

control.

9.  In Pradeep Kumar Biswas (supra), the following tests for the purpose

of determining the nature of activities which would make the body come

within  the  definition  of  ‘State’  have  been  laid  down  by  a  Seven-Judge

Bench of this Court:

(i) Formation of the body

(ii) Objects and functions

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(iii) Management and control

(iv) Financial aid, etc.

The dicta of Mathew, J. in Sukhdev Singh v. Bhagatram Sardar Singh

Raghuvanshi [(1975)  1  SCC 421]  was  quoted  with  approval  in  Pradeep

Kumar Biswas (supra), which is in the following terms:

“17.  For  identifying  such  an  agency  or instrumentality he propounded four indicia: (1) “A finding of the State financial support plus an unusual degree of control over the management and  policies  might  lead  one  to  characterize  an operation as State action.” (SCC p. 454, para 96) (2) “Another factor which might be considered is whether  the  operation  is  an  important  public function.” (SCC p. 454, para 97) (3)  “The  combination  of  State  aid  and  the furnishing  of  an  important  public  service  may result in a conclusion that the operation should be classified as a State agency. If a given function is of such public importance and so closely related to governmental  functions  as  to  be  classified  as  a governmental  agency,  then  even  the  presence  or absence of State financial aid might be irrelevant in making a finding of State action. If the function does not fall within such a description, then mere addition of State money would not  influence the conclusion.” (SCC p. 454, para 97) (4)  “The ultimate  question  which  is  relevant  for our  purpose  is  whether  such a  corporation  is  an agency or  instrumentality of the Government for carrying on a business for the benefit of the public. In other words, the question is, for whose benefit

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was  the  corporation  carrying  on  the  business?” (SCC p. 458, para 111)”

This Court referred to  Ajay Hasia (supra) wherein the tests gathered

from the decision of this Court in Ramana Dayaram Shetty v. International

Airport Authority of India [(1979) 3 SCC 489] were stated in the following

terms:

“(1)  One  thing  is  clear  that  if  the  entire  share capital of the corporation is held by Government, it would go a long way towards indicating that the corporation  is  an  instrumentality  or  agency  of Government. (SCC p. 507, para 14) (2) Where the financial assistance of the State is so much as to meet almost entire expenditure of the corporation, it would afford some indication of the corporation being impregnated with Governmental character. (SCC p. 508, para 15) (3) It may also be a relevant factor ... whether the corporation enjoys monopoly status which is State conferred or State protected. (SCC p. 508, para 15) (4) Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality. (SCC p. 508, para 15) (5) If the functions of the corporation are of public importance  and  closely  related  to  Governmental functions,  it  would  be  a  relevant  factor  in classifying the corporation as an instrumentality or agency of Government. (SCC p. 509, para 16) (6) ‘Specifically, if a department of Government is transferred to a corporation, it  would be a strong factor  supportive  of  this  inference’  of  the

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corporation being an instrumentality or agency of Government.” (SCC p. 510, para 18)”

It was held in Pradeep Kumar Biswas (supra):

“40.  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 — 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.”

10. In  Virendra  Kumar  Srivastava v.  U.P.  Rajya  Karmachari  Kalyan

Nigam and Another [(2005)  1 SCC 149],  this  Court  held  the  respondent

therein to be a ‘State’ within the meaning of Article 12 of the Constitution

of India, applying the tests of administrative control, financial control and

functional control.

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11. The question as to whether the Board of Control for Cricket in India

(BCCI) which is a private body but had a control over the sport of cricket in

India is a ‘State’ within the meaning of Article 12 of the Constitution of

India came up for consideration before a Constitution Bench of this Court in

Zee Telefilms Ltd. and Another v. Union of India and Others [(2005) 4 SCC

649] wherein the majority felt itself bound by the dicta laid down in Pradeep

Kumar Biswas (supra) to opine that it was not a ‘State’ within the meaning

of Article 12 of the Constitution of India.

However, the minority view was as under:

“70.  Broadly,  there  are  three  different  concepts which  exist  for  determining the questions  which fall within the expression “other authorities”: (i) The corporations  and the societies  created by the State  for  carrying  on  its  trading activities  in terms of Article 298 of the Constitution wherefor the  capital,  infrastructure,  initial  investment  and financial aid, etc. are provided by the State and it also exercises regulation and control thereover.  (ii)  Bodies  created  for  research  and  other developmental  works  which  are  otherwise governmental functions but may or may not be a part of the sovereign function. (iii) A private body is allowed to discharge public duty  or  positive  obligation  of  public  nature  and furthermore is allowed to perform regulatory and

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controlling  functions  and  activities  which  were otherwise the job of the Government.

71. There cannot be same standard or yardstick for judging  different  bodies  for  the  purpose  of ascertaining as to whether any of them fulfils the requirements of law therefor or not.

80. The concept that all public sector undertakings incorporated  under  the  Companies  Act  or  the Societies  Registration  Act  or  any  other  Act  for answering  the  description  of  State  must  be financed by the Central Government and be under its deep and pervasive control has in the past three decades undergone a sea change. The thrust now is not  upon  the  composition  of  the  body  but  the duties and functions performed by it. The primary question which is required to be posed is whether the body in question exercises public function.

110. Tests evolved by the courts have, thus, been expanded  from time to  time  and  applied  having regard to the factual matrix obtaining in each case. Development in this branch of law as in others has always found differences. Development of law had never been an easy task and probably would never be.”

The majority despite  holding that  BCCI is  not  a ‘State’ within the

meaning of Article 12 of the Constitution of India opined that a writ petition

under  Article  226  of  the  Constitution  of  India  against  it  would  be

maintainable.

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12. Keeping in view the aforementioned principles, we may consider the

fact of the present matter.

For the purpose of determining the question as to whether a society

registered under the Societies Registration Act would be a ‘State’ within the

meaning of Article 12 of the Constitution of India or not, the history of its

constitution plays an important role. [P.K.   Ramachandra Iyer   (supra)]  The

functions  which  are  being  performed  by  the  Sansthan  were  used  to  be

performed by the Government directly.  The main purpose and object for

which the training institutes were established at different places in the State

of  Uttar  Pradesh  admittedly was to  provide scientific  ways of  sugarcane

cultivation and management so as to improve the production of cane with a

view to achieve better production of sugar.  Such a function indisputably is

a State function.  The State established the ‘Sansthan’ so as to take over its

own  functions.   It  even  transferred  the  entire  management  relating  to

imparting of training in various institutes in its favour.  All the assets held

by it for the aforementioned purpose including the infrastructural facilities

stood  transferred  in  favour  of  the  Sansthan.   It  was  created  under  a

Government  charter  contained in  the  Government  Order  dated  4.08.1975

issued in the name of the Governor of Uttar Pradesh.  A budget of Rs. 6.00

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lakhs was sanctioned in the year 1975-76, 50% of which was made by the

Government and the remaining 50% by the Mills  run by the State Sugar

Corporation,  Indian  Mill  Association,  U.P.  Sugarcane  Cooperative

Federation and Cane Development  Societies.   A sum of Rs.  2 lakhs was

released  immediately  from  the  Contingent  Fund  of  the  State  and  the

remaining amount was released on acceptance of supplementary demands

and  passing  of  Appropriation  Bill  by  the  Legislature.   Some  of  the

objectives stated in the Memorandum of Association are:

(i) To establish, run and maintain training institute for the benefit of

cane  growers  and  the  personnel  in  the  Cane  Development

Department;

(ii) To purchase land or  building,  etc.  for  establishing  the  institute,

auditorium, etc.

(iii) To diffuse practical and scientific ways of sugar cane cultivation

and management through sugar cane research workers.

It started with eight members of the Governing Council; all of whom

were public servants  including the Cane Commissioner,  Uttar  Pradesh or

were nominated by the State.   

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The  Sansthan  framed  rules  called  the  Rules  of  Association  of

Sansathan, some of which are as under:

(1) Co-opted Members not exceeding two (Rule-4) (II) Donors Members with right to elect two of them to be members of Sansthan. (III) The Governing Council (having 12 members) headed by Minister, In charge of the Cane Department of the Government of U.P., with majority of the  members,  by  virtue  of  their  respective  offices  under  the  State Government (Rule-9) (IV) Chairman  of  the  Governing  Council,  to  be  the  Chief  Executive Authority of Sansthan (Rule -25) (V) Vice-Chairman  who  shall  be  pramukh  Sachiv,  Sugar  industry  and Cane  Development  of  the  Government  and  will  preside  the  meetings  in absence of Chairman (Rule – 26). (VI) The  affairs  of  Sansthan  shall  be  carried  on  and  managed  by  the Governing  Council,  which  shall  have  also  power  to  appoint  officers, employees of Sansthan and to fix their pay scales and remuneration (Rule- 29). (VII) The  Director  of  Sansthan,  to  be  the  ex-officio  Secretary  of  the Governing Council and he shall be officers, of the Government of U.P., on deputation (Rule -30). (VIII) Account  Officer  of  Sansthan,  to  be  taken  on  deputation  from amongst,  servants  of  the  State  Government.   He shall  be responsible  for maintenance of the accounts etc. (Rule – 32). (IX) The Governor of Uttar Pradesh may from time to issue directives to the society as to the exercise and performance of its  functions in matters involving the security of the State or substantial  public interest  and such other  directives  as  he  considers  necessary  in  regard  to  the  finances  and conduct of business and affairs of the society and in the like manner may vary and annual any such directives and the society shall  give immediate effect to the directives so issued (Rule -41(a)). (X) The Governor of Uttar Pradesh may call  for such returns, accounts and other  information with respect  to the properties  and activities  of  the society as may be required by him from time to time (Rule -41(b)).

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13. The  Government  had  constituted  and  re-constituted  a  Committee

consisting  of officers  of  the Government and other  holders  of  the public

office  with  the  Cane  Commissioner  to  streamline  curriculum of  training

courses to be undertaken by it.  The provisions of the Uttar Pradesh Sugar

Cane (Purchase Tax) Act, 1961 provided for appropriation of 50% of the

amount of tax from the Consolidated Fund of the State and credited to and

vested  in  ‘Sakkar  Vishesh  Nidhi’  which  was  to  be  administered  by  a

Committee headed by the Secretary to the Government in the sugar industry.

The Government withdrew a huge amount from the said fund for making it

available to the Sansthan in the financial year 1988-89.

14. The documents produced before the High Court reveal that 80 to 90%

of the expenditure of Sansthan was met out of the funds made available to it

by the Government.   The majority of the office bearers of the Governing

Council were holders of various offices of the Government.  It had, thus, a

dominance of the holders of the office in the Government of Uttar Pradesh;

the Minister-Incharge of Cane Department being its ex-officio Chairman of

the Governing Council.  He is the Chief Executive Authority.  The Director

and Accounts Officer are also the government servants and the Sansthan is

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not free to appoint anybody on those posts who is not a government servant.

This itself clearly shows that the composition and constitution of Sansthan

and its Governing Council was nothing but a show of the Government and

only a cover of the Society was given.  Rule 41 of the Rules of Sansthan

provides that the Governor shall have power to issue any directives to the

Sansthan concerning any matter of public importance and the Sansthan shall

give immediate effect to the directives so issued.  Furthermore, Rule 41(b)

of the Rules of Sansthan reads as under:

“The Governor of Uttar Pradesh may call for such returns,  accounts  and  other  information  with respect  to  the  properties  and  activities  of  the society as  may be required by him from time to time.”

The functions of the Sansthan are public functions.

15. From the materials placed before the court there cannot be any doubt

whatsoever that the State exercises a deep and pervasive control over the

affairs of the Sansthan, the Cane Commissioner being at the helm of the

affairs.  The Accounts Officer is the officer of the State Government and, is

also  sent  on  deputation.   The  Majority  of  members  of  the  Governing

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Council, as noticed hereinbefore, are holders of different offices of the State

Government.   They  play  a  vital  role  in  carrying  out  the  affairs  of  the

Sansthan.  They alone have power to appoint anybody of their choice on the

post.  It is required to obey all the directions issued by the State Government

from time to time.  We, therefore, are of the opinion that the Full Bench of

the High Court has rightly held the Sansthan a ‘State’ within the meaning of

Article 12 of the Constitution of India.

16. For the reasons aforementioned, the appeal is dismissed with costs.

Counsel’s fee assessed at Rs. 50,000/-.  

………………………….J. [S.B. Sinha]

..…………………………J.     [Cyriac Joseph]

New Delhi; March 06, 2009

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