Authored by Aashi Goyal, a 3rd-year law student at National Law School of India University, Bangalore
Case Background
The appellants had filed a writ petition in the Calcutta High Court challenging the termination of their services by the Respondent, which is a unit of the Council of Scientific and Industrial Research (“CSIR”). The Hon’ble HC had rejected the writ application on the prima facie ground that the petition was not maintainable given the pronouncement in Sabhajit Tewary v. UOI, which had held that CSIR is not a State under Article 12. The appellants filed an appeal against the Calcutta HC order in SC. The bench referred the matter to a seven-judge Constitution bench, believing that the decision in Sabhajit Tewary required reconsideration. Therefore, the question before the Supreme Court was whether CSIR qualifies to be a State within the meaning of Article 12 of the Indian Constitution.
Article 12 states that “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.” This article defines the meaning of State for the purposes of Part III of the Indian constitution. It is imperative to define the state for the purposes of Part III as it signifies the bodies that have the authority to enforce, restrict and protect the fundamental rights of the citizens of India. Considering the importance of defining what is state, the long line of judicial precedents has attempted to shed light on what constitutes as “other authorities” and P K Biswas has attempted to do the same.
Judgment
The SC, in a majority judgment of 5:2, held that the CSIR is a "State" within the meaning of Article 12 of the Constitution, overruling its earlier decision in Sabhajit Tewary v. UOI. The majority judgment, penned by Justice Ruma Pal, traced the trajectory of judicial precedents on the interpretation of "other authorities" under Article 12. Initially, the interpretation of "other authorities" was narrow, based on the principle of ejusdem generis. However, the Supreme Court in Rajasthan State Electricity Board v. Mohan Lal rejected this and expanded the meaning to include statutory corporations that carry out quasi-judicial functions, even if some powers were for commercial activities. Following a similar trend, in Sukhdev Singh v. Bhagat Ram, the court opined that a public authority is a body that performs public or statutory duties for the benefit of the public, not for private profit. Moreover, Justice Mathew’s concurring opinion introduced the concept of instrumentality or agency of the state, proposing the control test and the public function test to determine whether a corporation is an instrumentality of the state and, therefore, a "State" under Article 12.
The obiter dicta in Sukhdev Singh was solidified as the ratio decidendi in Ajay Hasia v. Khalid Mujib, clarifying that the genesis of the corporation is immaterial. Ajay Hasia enumerated six factors to determine if a corporation is an instrumentality of the state. The subsequent over-enthusiastic application of the 6 factors led to the court curbing such tendencies in Chander Mohan Khanna v. National Council of Educational Research and Training. It was noted that the factors were merely indicative and not conclusive and the test formulated in Ajay Hasia was not a rigid set of principles. This meant that if a body falls within the enumerated factors it isn’t ex-hypothesi be held to be a State.
After careful consideration of these judicial precedents, the majority in PK Biswas proposed that the question to be asked in each case is – whether in light of the facts, the body is financially, functionally and administratively dominated by or under the control of the Government. The control should be pervasive and particular to the corporation. Subsequently, considering the facts established about CSIR, such as ex-officio appointments, bylaws, functions, funds, etc, the Court concluded that CSIR is a State under Article 12.
Justice Lahoti and Justice Raju couldn’t agree with the majority’s conclusion and asserted that CSIR is not a State under Article 12. They opined that there is a distinction between the State and the instrumentality of the State. If a corporation is an instrumentality of the State, it doesn’t necessarily qualify as a State. An authority is “other authorities” under Article 12 only if it’s an authority sui juris i.e., an authority in its own right. They further contended that for an authority to be a State under Article 12, it should be a statutory body and have the powers to make laws or issue binding directions that act as law within the meaning of Article 13(2) to govern its relation with citizens.
Analysis
P K Biswas emerged as a landmark decision that laid a concrete standard for future application. The judgment seems to have settled the debate on the interpretation of “other authorities” under Article 12. The three-pronged onerous test propounded by PK Biswas served to narrow down the instrumentality or agency of state test and impliedly did away with the public function test. The purpose behind this move towards narrow structuralism, perhaps, was due to the living nature of our constitution. A broad and liberal view of the meaning of the State was adopted, keeping in view the socio-economic needs of the society at the time as a majority of the industries were monopolised by the government. However, the country’s socio-economic policy shifted with the introduction of liberalisation, privatisation, and globalisation under the New Economic Policy of 1991, which reduced the number of monopolised industries to a mere eight. It led to a trend of the State distancing itself from commercial activities and focusing on governance. The shift in trend signified that, unlike previously, society no longer needed to widen the scope of Article 12. Moreover, there is a distinction between a State and non-state entity and this distinction cannot be voided by the judiciary unless the circumstances so require.
The question that arises in light of this social need argument in favour of P K Biswas is whether the circumstances that allow for the voiding of the distinction between state and non-state entities have ceased.
The ambiguity of the phrase “other authorities” had been raised before the Constituent Assembly. Dr B.R. Ambedkar elucidated that fundamental rights must be binding on “every authority that which has been created by law and which has got certain power to make laws, to make rules, or to make by-laws.” At the time of the creation of the Constitution, it was a fairly intuitive exercise to identify a body that had the power to make laws, rules or by-laws that governed its relation with the citizens of the country. However, with the onset of the LPG revolution, the understanding of the relationship between the government and its apparatuses and, consequently, its relationship with citizens needed to be reconstrued in the view of the State as the constitutionally ordained welfare state. It is not enough to satisfy a structural test, like the one given by PK Biswas, to determine if a body is a State. With the policy of disinvestment, deregulations and denationalisation, to achieve the goal of LPG, the State has increasingly recused itself from welfare areas in favour of privatisation.
A leading example of this is the education sector. The educational institutions that previously would be considered states wouldn’t be States anymore, due to the mere fact that it’s managed by a private entity. For instance, in Manmohan Singh v. Commissioner, UT of Chandigarh (1984), the SC held that an aided school receiving 95% of its expenses by way of a government grant and subject to regulations made by the Department of Education, though managed by a registered Body, is an authority under Article 12. However, when the PK Biswas standard is applied, the institution falls short of being a State due to its failure to meet the three-pronged standard even though it’s financially dominated by the government and is acting as an instrumentality of the State by performing the public function of ensuring right to education under Article 21-A of the Constitution. This illustrates the fact that the government has increasingly sought to bypass its constitutional obligations by allowing the privatisation of welfare functions. This has created a power imbalance as the entities are allowed to perform important public functions but citizens cannot enforce their fundamental rights against them. The citizens are left with negligible bargaining power. Thus, the circumstances that allow for the voiding of the distinction between state and non-state entities have not ceased but changed in form.
Subsequently, in light of PK Biswas, these circumstances necessitated the adoption of an artificial distinction between the application of Article 32 and Article 226. This is evident in the Zee Telefilms case, where the court held that while BCCI is not a state under Article12, it performs public duties, so if there is a violation of constitutional obligations, the body will not go scot-free due to the mere fact that it's not a State. It further held that while a remedy under Article 32 doesn’t exist, HC can be approached under this Writ jurisdiction. This meant that a body that does not pass the PK Biswas standard may not be amenable to the writ jurisdiction of the SC, but it is amenable to the writ jurisdiction of the HC if it performs a public function. This distinction has been followed in various cases. The distinction arises from the broader definition of authorities adopted by the court in the context of Article 226 in Sri Anadi Mukta Sadguru v. V.R. Rudani.
In this case, an interesting observation made by the court is that Article 12 is relevant only when the Supreme Court is approached under Article 32. This leads to a rather absurd conclusion that Article 12 merely controls Article 32 and not the Fundamental Rights enumerated in Part III. It implies that the horizontal nature of fundamental rights depends on the court that has been approached rather than the inherent nature of the right. Gautam Bhatia argued that this should be construed to mean that the source of the claim differs depending on the body's structural form. For example, in a case of unequal treatment, the aggrieved can claim violation of Article 14 if committed by a State entity but the claim lies in public law if a non-state entity even if both perform the same function and the content of the duties (duty to act fairly) is the same. This interpretation does not adequately address the conundrum that may arise as a consequence of such a justification. It should be noted that Article 136 vests in the SC the power to grant special leave to appeal from any judgment made by any court or tribunal. This implies that an aggrieved has a claim against a non-state entity for violation of an obligation that is substantively the same as a Fundamental Right even in the SC under its appellate jurisdiction. This would lead us to the conclusion that the distinction between state and non-state entities created by Article 12 is merely of procedural relevance. Hence, the distinction being drawn by the courts between Article 32 and Article 226 amounts to being an artificial distinction, made merely to meet a social need that has been ignored by the narrow structuralist approach of the three-pronged standard set by PK Biswas.
Conclusion
P.K. Biswas adopted a narrow structuralist approach to determine the State under Article 12 which is inadequate for addressing the post-liberalization landscape. The increasing privatisation of public functions and the state's retreat from welfare areas have created an imbalance, with private entities escaping Article 12's purview despite performing public duties. The artificial distinction between Articles 32 and 226 in dealing with such violations is a mere stopgap, creating inconsistencies and undermining fundamental rights protection.