0What is the “State”?

– I: Article 12 and Constitutional Obligations

When we think of a Bill of Rights, we must answer two structural questions before we even
get to analysing its substantive content. Against whom are the rights enforceable – i.e., which
parties are subject to the obligations that the rights impose? And who is entitled to enforce the
rights – a question that often (but by no means always) translates into the question of which
parties do the rights protect. Both these questions have been controversial. Evidently,
individuals are beneficiaries of fundamental rights. But what about corporations? If
individuals incorporate in order to do business, it would seem perverse to deny the right to
carry on a business or profession to the corporation. But how about other non-commercial
rights, like the freedom of speech and the freedom of religion? The church exists in a
corporate form, but surely the church has freedom of religion rights separate and independent
from the rights of its members? But what about a for-profit corporation whose owners have
certain religious beliefs, which they wish to exercise in hiring decisions? Again, the press
exists in corporate form, and if there’s anything that free speech includes, it’s the freedom of
the press. But what about corporations donating large sums of money to political candidates,
and justifying it on free speech grounds? The issues are endless, complex and often
intractable.
In this series of posts, however, I wish to examine the first question: against which entities
can fundamental rights be invoked?
Textually, the answer is present in Article 12 of the Constitution:
“In this part [i.e., Part III], 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.”
One of the important rules of legal interpretation is the rule of ejusdem generis. When a legal
text has a number of specific and concrete terms, followed by a general term, then the general
term must be interpreted to contain only that which would broadly be consistent with the
specific terms. Insofar as Article 12 begins with the terms “the Government and Parliament
of India and the Government and Legislature of each of the States”, the phrase “other
authorities” – under the rule of ejusdem generis, ought to be interpreted in a manner
consistent with the concrete terms that come before it. That is, “other authorities” must be
confined to State-like entities.
This is not altogether surprising. Classically, bills of rights are designed to structure
a vertical  relationship between State and citizen. The regime of private law – the law of
contract and tort – operate between citizens, while the regime of non-Constitutional public
law – e.g., criminal law – operates between citizens via enforcement by the State. That, very
roughly, is what the legal map would look like.
To understand why, a brief excursion into history would be apposite. Bills of rights – in their
modern form – first emerged out of the Glorious Revolution in England (1689), the American
Revolution (1776) and the French Revolution (1789). These revolutions were driven by a
rising bourgeois class, against the dying vestiges of feudalism, and its concomitant aspects
such as hereditary nobility, a landed gentry, and an economic system based around feudal
relations of lord and vassal, serf and master. Consequently, while the bourgeois framed the
language of the revolution in universal terms, it ultimately reflected their class interests. This
is particularly evident in these Bills of Rights. Because the greatest threat to the bourgeois
was an over-intrusive State meddling with trade, the primary functions that Bills of Rights
played was to wall off an entire sphere of action from State interference, within which the
bourgeois were free to shape their economic relations as they saw fit. The rights that we now
take for granted as universal human rights – rights of expression, religion and so on – had
their origins in the bourgeois’ desire to construct an unregulated economic realm free from
State interference.
This explains why bills of rights were exclusively enforceable against the State. The standard
answers – that there is something particularly egregious about State oppression as opposed to
private oppression, and/or the State has much greater power, and so we must be particularly
solicitous in protecting individuals against the State – might explain part of the issue, but not
all of it. We are well aware that economic relations exist between private parties, and
ultimately, are as powerful a weapon in a society of deeply unequal resource distribution, as
is the coercive power of the State (the history of industrial Europe in the 19th century bears
this out). The complete explanation, as we have noticed, lies elsewhere.

This model was upset in the mid-20th century, with the philosophical discrediting of laissez-
faire economics, and the advent of the welfare State. The conception of the State changed
from the classical liberal vision of simply guaranteeing law and order so that private parties
could shape their own economic relations without interference, to a provider of important
public goods ranging from education to healthcare to transport to essential commodities.
Oftentimes, especially in mixed economies, the State would carry out many functions
working alongside private corporations.
The philosophical shift in the functions of the State, however, also led to a corresponding
philosophical shift in the idea of a bill of rights. If, now, the baseline of legitimate State
action is the provision of public goods, then it stands to reason that whoever is in charge of
providing those public goods ought to be subject to obligations under the bill of rights. So, for
example, if we hold that it is the State’s task to provide low-cost, accessible healthcare to all
its citizens, then insofar as that function is outsourced to a private party, that private party
continues to perform a State function. Correspondingly, the argument goes, we are justified in
imposing fundamental rights obligations upon that private party, as long as it continues to be
in the shoes of the State.
We will see strands of these arguments in the important cases that the Supreme Court has
decided under Article 12. Interestingly, however, there is a textual hook on which to hang this
ideas. Consider again:

“In this part [i.e., Part III], 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.”
An equally important interpretive principle is the principle against surplusage. The legislature
is deemed not to have wasted its words, and thus, an interpretation that renders a word or a
phrase superfluous, is to be avoided. Here we can see that two phrases have been used:
“within the territory of India” and “under the control of the Government of India”. They are
connected by the word “or”, which implies that they are disjunctive. Consequently, there is a
set of bodies that comes under Article 12, which is not under the control of the Government
of India.
There are three possible ways of interpreting this. First, this refers to bodies under the control
of the State governments. This is unsatisfactory, however, because it is clear that where the
framers wanted to specify “under the control of…”, they expressly included it in the
constitutional text. In other words, it seems strangely inconsistent drafting to specify “under
the control of” when it comes to the federal government, and imply the same when it comes
to the State government. It would have been far more convenient – and lucid – to have said,
for example, “under the control of the Government of India or the legislatures of the States“.
Secondly, “within the territory of India” might be narrower than “under the control of the
Government of India”, referring only to bodies expressly set up under statute. This would
seem, again, to make part of the provision superfluous, because presumably statutory bodies,
that owe their very existence to parliamentary legislation, are “under the control” of the
Government.
The last option is to read “within the territory of India” as covering a set of circumstances
parallel to that of bodies “under the control of the government”: that is, private bodies not
under the control of the government, but performing governmental functions. This, of course,
was the upshot of our theoretical distinction – and I argue that it is the interpretation
supported by the most natural reading of the text, and the historical circumstances in which
the Constitution came about.

This means, in turn, that the interpretation of Article 12 must be steeped in political
philosophy. The interpreter needs to set her conceptual baseline for what she considers
legitimate State functions  – and it is on that basis that the term “other authority” will be
interpreted.
Keeping this framework in mind, both historical and conceptual, we shall examine the
Supreme Court’s approach to this question, in the coming posts.

What is the State – II: Two Approaches to Interpreting Article 12

Previously, we discussed some textual approaches to Article 12’s definition of “State”. Recall
the key question: against which entities can claims of fundamental rights be raised? At one
end of the spectrum is the State itself, and at the other end are private individuals performing
private acts. There can be no quibble against the early decision of the Supreme Court
in Shrimati Vidya Verma v. Shiv Narain Verma,  where the Court refused to find an Article 21
violation in the case of one individual being detained by another. Quoting Patanjali Shastri
J.’s opinion in A.K. Gopalan, the Court held that “as a rule, constitutional safeguards are
directed against the State and its organs and that protection against violation of rights by
individuals must be sought in the ordinary law.”
But there are – as we discussed previously – a host of problematic cases that lie between
“State” and “individual”. Bodies created by a statute, bodies that whose management has
government representatives, bodies under the administrative control of the government,
bodies funded entirely by the government, bodies performing government-outsourced tasks,
and so on. Which of these fall within Article 12, and why?

The first time the Court was called upon to seriously grapple with these issues was in the
1967 case of Rajasthan State Electricity Board v. Mohan Lal. The case involved a
promotion dispute between some workmen and the Rajasthan State Electricity Board.
Articles 14 and 16 claims were raised, and consequently, the preliminary question that fell to
be determined by the Court was whether the Board came within the purview of Part III, by
virtue of being “State” (other authority) under Article 12.
The Rajasthan State Electricity Board was a corporate body that had been constituted under
an Act (the Electricity Supply Act, 1948), for the purposes of supplying electricity within the
State of Rajasthan. The Board argued that the phrase “other authority” must be read “ejusdem
generis” – that is, when a law refers to a number of specific categories, and then ends with a
general clause, that general clause must be understood only to contain those things which are
part of the common genus to which the specific categories belong. To take a banal example,
“BJP, Congress, AAP, TMC and other political parties” does not include the American
Democratic Party, because clearly, what is being referred to is Indian political parties.
According to the board, the common class running through Article 12 was bodies
exercising governmental functions. The Electricity Board, on the other hand, was set up by a
statute to carry out commercial activities. Thus – the Board argued – it could not be brought
within the ambit of Article 12. It cited decisions from the High Courts of Madras
(UNIVERSITY OF MADRAS v SHANTA BAI), Mysore and Punjab to contend that Article
12 was limited to “a person or a group of persons who exercise the legislative or executive
functions of a State or through whom or through the instrumentality of whom the State
exercises its legislative or executive power. In those cases, State Universities had been found
not to fall within the ambit of Article 12.

Rejecting this argument – and overturning the judgments of the High Courts – the Supreme
Court declined to apply the principle of ejusdem generis, holding that there was no common
“genus” running through Article 12. Instead, it turned to the dictionary for the meaning of the
word “authority”:
“[Authority means]  a public administrative agency or corporation having quasi-
governmental powers and authorised to administer a revenue- producing public enterprise.”
This dictionary meaning of the word “authority” is clearly wide enough to include all bodies
created by a statute  on which powers are conferred to carry out governmental or quasi-
governmental functions. The expression “other authorities” is wide enough to include within
it every authority created by a statute and functioning within the territory of India, or under
the control of the Government of India.”
According to this language, the test appears to be two-pronged: either the body is created by a
statute, or it is under the control of the government. Subsequently, however, the Court
appears to run them together, holding that “the expression “other authorities” in Art. 12 will
include all constitutional or statutory authorities on whom powers are conferred by law.” Or,
in other words, they key test is a statutory connection between the government and the body
in question (“control”, perhaps, is a function of creation by statute). The fact that the
functions were commercial were irrelevant, since the State itself could clearly carry out trade
and business. Thus, the Board – having been established by Statute – was found to come
within the scope of Article 12.
Justice Shah concurred in the judgment, but differed on the reasoning. He approached the
issue not from the standpoint of the meaning of “Authority”, but from the place of Article 12
in the Constitution – in particular, at the beginning of Part III. According to Justice Shah,
Article 12 must be interpreted in the context of Part III, which guaranteed that fundamental
individual rights would not be encroached upon. Therefore, what mattered was whether
“the  authority was invested with the sovereign power to impose restrictions on very
important and basic fundamental freedoms… authorities constitutional or statutory invested
with power by law but not sharing the sovereign power do not fall within the expression
“State” as defined in Art. 12. Those authorities which are invested with sovereign power
i.e., power to make rules or regulations and to administer or enforce them to the detriment of
citizens  and others fall within the definition of “State” in Art. 12.”
Justice Shah thus placed special importance on “sovereign power”, which he appeared to
understand as an ability to affect fundamental freedoms in a far-reaching. Therefore, his
reasons for holding that the Board fell within Article 12 was not that it was created by statute,
but that:

“The Board is an authority invested by statute with  certain sovereign powers of the State. It
has the power of promoting coordinated development, generation, supply and distribution of
electricity and for that purpose to make, alter, amend and carry out schemes under Ch. V of
the Electricity (Supply) Act, 1948, to engage in certain incidental undertakings; to organise
and carry out power and hydraulic surveys; to conduct investigation for the improvement of
the methods of transmission; to close down generating stations; to compulsorily purchase
generating stations, undertakings, mains and transmission lines; to place wires, poles,
brackets, appliances, apparatus, etc; to fix grid tariff; to issue directions for securing the
maximum economy and efficiency in the operation of electricity undertakings, to make rules
and regulations for carrying out the purposes of the Act; and to issue directions under
certain provisi ons of the Act and to enforce compliance with those directions. The Board is
also invested by statute with extensive powers of control over electricity undertakings. The
power to make rules and regulations and to administer the Act is in substance the sovereign
power of the State delegated to the Board.”
The majority and the concurrence represent two approaches to Article 12, which we may
label the “legal approach” and the “functional approach”. The legal approach begins with
a certain understanding of the paradigm case of the “State” (the government itself”, and
assimilates to “State” those entities that seem to bear a close family resemblance to it. This
translates into entities that the government itself creates, or seems to have near-complete
control over. The “functional approach”, on the other hand, starts from the perspective of
the individual, and the individual’s guaranteed rights that act as limits upon the sovereign
power of the State. Bodies that can affect those rights in a manner similar to that of the
State, are – under this view – assimilated to the State. The crucial difference between the
two approaches is evident if we consider the fact that under Justice Shah’s approach, had the
electricity distribution been entirely outsourced to a private party (say, Reliance), it too would
have fallen within the ambit of Article 12.

Subsequently, however, in Sukhdev Singh v. Bhagat Ram, a majority of the Court

read Rajasthan Electricity Board  to have established the narrower proposition that Article 12
was attracted if the body had the power to issue directions whose disobedience could be
punished by criminal law, or if it had the power to make, administer and enforce rules and
regulations. That case involved three public corporations – the Oil and Natural Gas
Corporation, the Life Insurance Corporation and the Industrial Finance Corporation. The
majority’s narrow decision holding all three corporations to fall within the meaning of
“State”, although clearly correct under both the majority and the concurrence opinions
in Rajasthan Electricity Board does not, however, get us very far in a conceptual
understanding of Article 12.
Such an analysis was provided by Justice Mathew, in a concurring opinion, although it is
extremely difficult to determine a coherent ratio from that judgment. In the beginning, Justice
Mathew seemed to adopt both the legal and the functional approach, merging them into
one test, which he called “the agency and instrumentality” approach. Entering into a
lengthy historical disquisition, he argued that as the role of the State changed from merely
establishing law and order to providing for the public welfare, much of those welfare
functions began to be performed through the means of corporations. The key observations
comes in paragraph 90 of the judgment:
” The Constitution was framed on the theory that limitation should exist on the exercise of
power by the State. The assumption was that the State alone was competent to wield
power.  But the essential problem of liberty and equality is one of freedom from arbitrary
restriction and discrimination whenever and however imposed. The Constitution, therefore,
should, wherever possible, be so construed as to apply to arbitrary application of power
against individuals by centers of power. The emerging principle appears to be that a public
corporation being a creation of the State is subject to the Constitutional limitation as the
State itself.  The pre-conditions of this are two, namely, that the corporation is created by
State, and, the existence of power in the corporation to invade the Constitutional right of
individual.”
The intriguing point about this paragraph is that it is based on a non-sequitur. If the
Constitution ought to apply to wherever there is arbitrary application of power be centers of
power, it does not follow – at all – a corporation must be State-created to fulfill those
conditions (again, Reliance is a classic example). In other words, in substance, Justice
Mathew put forward an argument for the functional approach, but in conclusion, he
subordinated it entirely to the legal approach. In fact, he takes the majority and concurring
opinions in Vidya Verma, and holds that the requirements laid out in both must be satisfied
for Article 12 to be attracted!
Immediately afterwards, however, he moved away from that conclusion, noting that:

“Generally speaking, large corporations have power and this power does not merely come
from the statutes creating them. They acquire power because they produce goods or services
upon which the community comes to rely.”

The rest of the opinion is devoted to a meandering analysis that seems to constantly shift back
and forth between some variants of the legal and the functional approach, talking about
financial aid, tax exemptions, control over management policies, public functions… and
ultimately comes to rest somewhere midway, expressed as:
” 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.”
“Agency or instrumentality” is not a self-interpreting term, however, and the true test, after
the judgments in Rajasthan Electricity Board and Bhagat Ram, was still fuzzy. It would be
up to later judgments to clarify it.

What is the State – III: Adopting the “Instrumentality or Agency” Test

In the last post, we discussed two approaches towards interpreting the term “other authority”
in Article 12, exemplified by the majority and the concurrence in Rajasthan State Electricity
Board v. Mohan Lal. The “legal approach” assimilates to the State those entities that the
State creates (via statute), or has extensive control over. Or, in other words, the State must, in
some way, be closely connected with the workings of the entity in question. The “functional
approach”, on the other hand, brings within Article 12 all entities that perform State-like
functions. Justice Mathew’s concurring opinion in Sukhdev Singh v. Bhagat Ram, as we saw,
shuttled back and forth between the two conceptions, and his “agency and instrumentality”
test appears to be agnostic about which approach it favours.
The question came before the Court again, in the 1979 case of R.D. Shetty vs International
Airport Authority. The International Airport Authority was a corporate body constituted
under the International Airport Authority Act of 1971. It invited tenders for running
restaurants and snack bars at the Bombay International Airport, and ultimately accepted the
highest bid. This decision was challenged, on the ground that in awarding the contract, the
Authority had failed to abide by its own stipulations, and in treating similarly situated persons
differently, had violated Article 14. The first question, therefore, was whether the
International Airport Authority was subject to Article 14 obligations.

The Court’s analysis can be divided into five parts (although the Court itself does not do the
division). In the Part I (paragraphs 10 to 12), the Court set out some general principles
constraining the action of the government, when it acts as a contractor. In Part II (paragraphs
13 to 18), it analysed the situations under which a corporation can be subjected to the same
public law constraints that apply to the government, as listed out in the Part I. In the Part III
(paragraphs 19 to 27), it cited precedents that also located Article 14 as the source of these
constraints. In Part IV (paragraphs 28 to 32), it extended its analysis in the first and second
parts to Article 12, in order to determine when Article 14 obligations would apply to
corporations. And in Part V (paragraphs 33 to 36), it applied its legal findings to the case of
the International Airport Authority. The key conclusion of the Court is found in paragraph 28
of the judgment, where it referred to the two lines of precedent that we have discussed before,
and adopted the broader “instrumentality and agency” test Justice Mathew propounded in his
concurring opinion in Sukhev Singh vs Bhagat Ram,  as a “perhaps more satisfactory [test]…
for determining whether a body… falls within the definition of ‘State’.”
The Court first established the unexceptionable proposition that even when the government is
acting as a contractor, it is bound by public law obligations of fairness, non-discrimination
and non-arbitrariness. It held that these obligations arose both from Article 14, and from
general principles of public and administrative law. The basis for this, the Court found, was
in the rapidly expanding functions of the State in the welfare era, where “the power of the
executive Government to affect the lives of the people is steadily growing. The attainment of
socio-economic justice being a conscious end of State policy, there is a vast and inevitable
increase in the frequency with which ordinary citizens come into relationship of direct
encounter with State power-holders.  This renders it necessary to structure and restrict the
power of the executive Government so as to prevent its arbitrary application or exercise.”

Having established this proposition, the Court then held “that the Government which
represents the executive authority of the State, may act through the instrumentality or agency
of natural persons or it may employ the instrumentality or agency of juridical persons to
carry out its functions.” Once again, the Court referred to the expanding role of the State,
which created the environment for the creation and flouring of the public corporation, “as
incidental to or in aid of governmental functions.” Naturally, such corporations would be
subject to the same public and constitutional law obligations as the State. The key question
then became the question of determining when a corporation was an “instrumentality or
agency” of the State.
The Court held that that there could be no “ cut and dried formula” that would provide the
answer, and proceeded to examine a range of alternatives. Citing the American doctrine of
State action, it noted that “extensive and unusual financial assistance” from the government
might be a relevant consideration. The same considerations applied to an “unusual degree
of [State] control over the policies and management” of the corporation (paragraph 15).
These two considerations – financial and administrative control – are, as we can see, part of
the legal approach to the meaning of State. In the next paragraph, however, the Court shifted
gears: “another factor which may be regarded as having a bearing on this issue and it is
whether the operation of the corporation is an important public function.” This, as we have
seen before, is a deeply fraught question, and depends almost entirely upon resolving the
normative question about the proper role of the State. The Court was acutely aware of the
problem, referring to the difficulty in determining “what functions are governmental, and
what are not”, and noting that the answer to that question was changing continuously, even
as the place of the State in society changed over the years. Nonetheless, ultimately it
seemed to settle upon a largely descriptive test: “the modern State operates a multitude of
public enterprises and discharges a host of other public functions. If the functions of the
corporation are of public importance and closely related to governmental fun ctions, it
would be a relevant factor in classifying the corporation as an instrumentality or agency of
Government.”  (Paragraph 16). Of course, there is a very important problem with this: what
do you do when the State retreats from functions that it used to perform (as is happening
under the present, neo-liberal model?). It is quite clear that a descriptive test can be of no help
in such a situation: a normative baseline of “State function” is essential.
In affirming the public function test, the Court relied upon the American case of Marsh v.
Alabama, which we have discussed before on this blog. In Marsh, a privately owned
company-town was required to permit a Jehovah’s Witness to exercise her First Amendment
rights by preaching on the sidewalk. In Marsh, there were a number of considerations that
went into the final decision: the fact that traditionally, parks, public squares and sidewalks
were places for the exercise of First Amendment rights, that there was no viable alternative
for the residents of the company town (leading to unequal treatment between people who
lived in company towns, and those who lived in ‘regular towns’), and that First Amendment
rights were deemed to be superior in importance to property rights. Therefore, Marsh was not
decided solely on the ground of a “public function”, and this ambiguity is reflected in the
Court’s conclusion, where it held that “the  public  nature of the function, if impregnated
with  governmental character  or “tied or entwined with Government” or fortified by some
other additional factor, may render the corporation an instrumentality or agency of
Government.” (Paragraph 18) The exact distinction between a “public function” and
“governmental character” remains unclear.
The Court then went on to cite precedents that also required the government to act
fairly, when contracting, under Article 14. At this point, the Court had established the
public law obligations that apply to the government when it acts as a contractor (Part
I), extended those obligations to corporations that were acting as instrumentalities or
agencies of the State (Part II), and located a further ground of the obligations in Article
14). Part IV, therefore, became a mirror image of Part II: also extending the Article 14
obligations – in addition to public law obligations – to corporations, by interpreting
Article 12. It is here that – as we saw above – the Court simply lifted its
“instrumentality or agency” discussion from Part II, and applied it to Article 12 as well,
concluding that “[what is relevant and material] is  “whether the Corporation is an
instrumentality of the Government in the sense that a part of the governing power of the
State is located in the Corporation and though the Corporation is acting on its own behalf
and not on behalf of the Government, its action is really in the nature of State action.”
In its analysis of whether or not the International Airport Authority fell within the definition
of “State”, the Court undertook an extensive investigation of the nature and form of
governmental control, from state financial and administrative control, to the corporation
performing the erstwhile governmental function of administering airports, and so on.
Crucially, the fact that the International Airports Authority was set up under a statute did not
play a determinative (or even significant) role in the Court’s analysis, as it had in previous
cases.

Thus, in R.D. Shetty,  the Court adopted the language of Justice Mathew –
“instrumentality or agency” – but incorporated within it both the legal and the
functional approaches, developing one composite test that took into account financial
and administrative control as well as public function (the Court’s reliance upon Marsh is
particularly significant, since in that case the holding turned not upon the company town’s
formal association with the State, but almost entirely upon what it was doing), in a holistic,
case-specific enquiry.
In the next post, we will continue to chart this development in subsequent cases.

What is the State – IV: Agency/Instrumentality as a Function of State Control

In the last post, we saw how the impact of R.D. Shetty was to create a blended legal-
functional approach towards interpreting Article 12. Two years afterwards, in 1981, a
Constitution Bench of the Court considered the question yet again, in Ajay Hasia vs Khalid
Mujib. Justice Bhagwati, who wrote for the Court in R.D. Shetty, also authored the
unanimous opinion in Ajay Hasia. This makes the marked shift in tone between the two cases
both striking and surprising.
In Ajay Hasia, the question was whether the Regional Engineering College of Srinagar was
“State” within the meaning of Article 12. The College had been established, and its
administration was carried on, by a Society that was registered under the J&K Societies Act.
Consequently, the first argument of the Society was that it had not been set up by the
government under a statute, and so could not come within the meaning of Article 12.
Unsurprisingly, following R.D. Shetty, the Court rejected this contention. It cited R.D.
Shetty copiously, and declared itself to be following its decision. The impact, however, was
rather different.
From the beginning of its analysis (which starts at paragraph 7 of the judgment), the Court
focused continuously – and almost exclusively – upon government control as the determining
test for Article 12. The tone of the judgment resembles a corporate-veil analysis from
company law. The purpose of Article 12’s expanded definition, according to the Court, was
to cover those corporations where, “behind the formal ownership which is cast in the
corporate mould, the reality is very much the deeply pervasive presence of the
Government… it is really the Government which acts through the instrumentality or agency
of the corporation and the juristic veil of corporate personality worn for the purpose of
convenience of management and administration cannot be allowed to obliterate the true
nature of the reality behind which is the Government.” (Paragraph 7) What seemed to be
concerning the Court was the government’s attempt to doing an end run around its Part III
obligations by creating the corporate form as a separate legal personality, while maintaining
control over it: or, in other words, fraud. Comments to that end are scattered throughout the
core of the Court’s analysis, in paragraph 7.
Immediately after that, the Court cited extensive excerpts from R.D. Shetty, before
“summarising” that case through six markers of the ambit of “State”: (1) holding of the
corporation’s entire share capital by the government; (2) extensive financial assistance; (3) a
State-conferred monopoly status; (4) deep and pervasive State control; (5) functions of public
importance, or closely related to governmental functions; and (6) transferring a government
department to a corporation. (Paragraph 9)
While all six of these features were admittedly present at various points in the  R.D.
Shetty  judgment, the Court here dilutes the functional aspect of the test, by relegating it
to one among six factors, most of which are directly about governmental control.
In R.D. Shetty, on the other hand, government control (which could be financial, or
administrative, or both) was treated as being equally important as the performance of a
public function. Not so in Ajay Hasia, where the judgment – and its six criteria – are
primarily about preventing the State from acting colourably via a corporate shield.
The Court’s application of the principles to the facts of the case (paragraph 15 onwards) bears
this out. After examining the composition of the Society and its board of governors, its
finances and its administration, the Court concluded that the “control of the State and the
Central Governments is indeed so deep and pervasive”, that the Society was undeniably an
instrumentality or agency of the State under Article 12. On the other hand, the Court paid no
attention to the function performed by the Society – that of higher education – in its analysis.
The functional test, therefore, is conspicuously missing from the Court’s analysis
(interestingly, the function of education as a ground for attracting Part III obligations was
considered a few years later by Justice Mohan, in his concurring judgment in
the Unnikrishnan case).
In cases following Ajay Hasia – P.K. Ramachandra Iyer vs Union of India, B.S. Minhas vs
Indian Statistical Institute,  Central Inland Water Transport Corporation vs Brojo Nath
Ganguly, and Chander Mohan Khanna vs NCERT – the judgment invariably turned upon the
aspect of control. However, the triumph of the legal test was completed in 2002, in the case
of Pradeep Kumar Biswas vs Indian Institute of Chemical Biology, a judgment delivered by a
seven-judge bench. The factual matrix of the case is complex: briefly, it involved the
reconsideration of Sabhajit Tewari’s case, in which a Constitution bench had held that the
Council of Scientific and Industrial Research was not “State” within the meaning of Article
12. In Pradeep Kumar Biswas, Justice Ruma Pal went into the history of the Supreme Court’s
Article 12 jurisprudence, and distinguished between a “narrow” and a “broad” approach to
Article 12. For her, however, the difference was not between the legal and the functional
approach, as we have discussed, but between the statutory approach (in the earliest cases),
and the legal approach (Rajasthan Electricity Board onwards). In her judgment, the
functional test is erased out of history: Justice Mathew’s concurrence in Sukhdev Singh and
the judgment in R.D. Shetty are simply treated as affirming the legal approach, which was
ultimately crystallised in Ajay Hasia.
Having listed Ajay Hasia’s six factors, Justice Ruma Pal decided to crystallise them further.
The teaching of the cases that culminated in Ajay Hasia, she held, was “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.” Here, the entire
focus is on control, and the public-function aspect has disappeared altogether.
Justices Lahoti and Raju recorded a dissenting opinion. They argued that the majority – as
well as the line of cases that it had relied upon – had gone fundamentally wrong in
equating “instrumentality or agency” with “other authorities”, under Article 12. If –
following Justice Bhagwati’s opinion in Ajay Hasia – the point of the “instrumentality or
agency” test was to prevent the government from hiding behind the corporate form, then the
actions of the corporation so created could simply be equated to those of the “State” itself,
without the necessity of going through “other authorities”. Or, in other words, the actions of a
corporation whose directing mind and will is the State, are actions of the State, simply put.
Article 12 defines “State” inclusively, but there is no need to resort to terms such as “other
authorities”, when the corporate veil has been – colloquially – pierced, and the identity of the
corporation equated with the identity of the State.
What then does “other authorities” mean? Justices Lahoti and Raju commenced their
enquiry from Article 13. Article 13(1) states that all laws inconsistent with Part III, at the
time of the commencement of the Constitution, are void to the extent of such inconsistency.
Article 13(2) prohibits the State from passing laws contravening Part III. Article 13(3)
defines a “law” as “any Ordinance, order, bye law, rule, regulation, notification, custom or
usages having in the territory of India the force of law.” Latching upon this definition of
“law”, Justices Lahoti and Raju argued that because the whole point of Part III – as Article 13
demonstrated – was to protect citizens from certain kinds of laws, Article 12’s “other
authority” must be such that is competent to make these kinds of laws. This took them back
to the “narrow” approach, which they drew from the writings of Seervai, and attributed (in
my submission, incorrectly) to Justice Mathew’s concurrence in Sukhdev Singh’s Case. They
held that “to be an authority, the entity should have been created by a statute or under a
statute and functioning with liability and obligations to public. Further, the statute creating
the entity should have vested that entity with power to make law or issue binding directions
amounting to law within the meaning of Article 13(2) governing its relationship with other
people or the affairs of other people – their rights, duties, liabilities or other legal relations.”
While Justices Lahoti and Raju’s objections to the majority’s use of “instrumentality or
agency” are compelling, in my submission, in their interpretation of the term “other
authorities”, the conclusion does not necessarily follow from the premise. It is, of course, true
that Article 13 lists a specific way in which fundamental rights can be violated (by a law,
which will be accordingly void), but that does not imply that that is the only way in which
fundamental rights can be violated. Consider the wordings of two different kinds of
fundamental rights. Article 14 reads: “The State shall not deny to any person equality
before the law, or equal protection of the laws within the territory of India.” Article 15(1)
reads: “the State shall not discriminate against any citizen on grounds only of religion,
race, caste, sex, place of birth or any of them.” The difference between the two provisions
shows that where the framers envisioned fundamental rights as being violated only by a
“law” (under its expanded definition in Article 13(2)), they were explicit about it; at the
same time, many of the fundamental rights are worded affirmatively, and make no
mention of violation through law. Indeed, in cases like Kharak Singh, the Court has held
that Articles 19(2) to 19(6) – which permit reasonable restrictions – by law – on Article
19 fundamental rights – apply only when there is a “law”; if there is no “law”, but only
State action, then there is a straightforward violation of fundamental rights. This
buttresses the conclusion that – at least in theory – it is possible for violations of
fundamental rights to take place in the absence of law. Justice Lahoti and Raju’s dissent
is eloquently argued, and their view has much to recommend itself, but the case still
remains to be made out.

What is the State – V: Zee Telefilms, the Death of the Functional Approach, and
an Alternative

In the last post, we saw how Ajay Hasia, and the cases following it up to Pradeep
Kumar Biswas, gradually began to adopt the legal approach to the meaning of “State” under
Article 12, at the expense of the functional approach. 
If Pradeep Kumar Biswas impliedly did away with the public function test, Zee Telefilms vs
Union of India did so expressly. In that case, the question was whether the Board of Control
for Cricket in India was “State” within the meaning of Article 12. The Board argued that its
autonomous nature took it out of the ambit of Article 12, per Pradeep Kumar Biswas. Zee
Telefilms, on the other hand, pointed to the “governmental functions exercised by the Board
in the area of cricket.” The Court held in favour of the Board. Following Pradeep Kumar
Biswas, it noted that the Board was not created by statute, the Government held no share
capital, provided no financial assistance, conferred no monopoly, exercised no pervasive
control, and had not transferred a government-owned corporation. Consequently, Article 12
was not applicable. Responding to the petitioners’ contentions, the Court then stated: “Even
assuming that there is some element of public duty  involved in the discharge of the Board’s
functions even then as per the judgment of this Court in Pradeep Kumar Biswas  that by itself
would not suffice for bringing the Board within the net of “other authorities” for the purpose
of Article 12″  (paragraph 25)
The petitioners also argued a variant of the functional test – i.e., the power of the Board, by
virtue of its near-exclusive control over cricket in India, to impact an important fundamental
right on a national scale: the Article 19(1)(g) right to carry on a trade, business or profession
– brought it within the ambit of Article 12. Rejecting this contention, the Court held that “the
pre-requisite for invoking the enforcement of a fundamental right under Article 32 is that the
violator of that right should be a State first… [but] we have already held that the petitioner
has failed to establish that the Board is State within the meaning of Article 12. Therefore
assuming there is violation of any fundamental right by the Board that will not make the
Board a “State” for the purpose of Article 12.” (paragraph 28)
The functional argument – as we have seen through this series of posts – has two (connected
justifications). First, there is an idea of a “public function” – certain tasks that, because of
their very nature, a government ought to perform, and that shouldn’t be left to the market
(policing and defence are uncontroversial examples), such as provisions of social or
individual goods that we think every person is entitled to in a modern democracy (education
and healthcare are more contested examples). Secondly, it is argued that “centres of power”
(a term used by the Supreme Court) are under particular obligations because of their ability to
affect basic rights in a deep and pervasive manner, across the board (for instance, control
over the country’s police force) – whether those centres of power are State entities, or private
ones (like large corporations). In the two paragraphs excerpted above, we can see that the Zee
Telefilms  court directly rejected both these arguments, unambiguously consigning the
functional argument to judicial oblivion.
The Court also rejected the contention that the control of cricket was in the nature of a “State
function”, holding that “the State/Union has not chosen the Board to perform these duties
nor has it legally authorised the Board to carry out these functions under any law or
agreement. It has chosen to leave the activities of cricket to be controlled by private bodies
out of such bodies’ own volition (self-arrogated). In such circumstances when the actions of
the Board are not actions as an authorised representative of the State, can it be said that the
Board is discharging State functions? The answer should be no. In the absence of any
authorisation, if a private body chooses to discharge any such function which is not
prohibited by law then it would be incorrect to hold that such action of the body would make
it an instrumentality of the State.”
But what if, tomorrow, the State “chooses” to leave the function of policing – or maintaining
prisons – or national defence – or the judicial system – to private parties? Here, we have the
classic problem of a purely descriptive baseline for State function, that we first highlighted in
our discussion of R.D. Shetty. With a descriptive baseline, as the State retreats, the areas
within which fundamental rights operate become more and more constricted. In fact, this
is precisely the argument that the Court made at the end of Zee Telefilms. Cases such
as Rajasthan Electricity Board and Sukhdev Singh, it held, were decided in a different socio-
economic climate; now, on the other hand, “the State is… distancing itself from commercial
activities and concentrating on governance rather than on business.” Yet surely, this cannot
be right. Constitutional rights cannot depend upon the economic policy that a State follows at
any given time. Intuitively, as well, it seems somewhat strange to visualise a situation where,
for instance, a private corporation is given control over the country’s water supply, which it
then withholds from people of a particular religion – and to imagine that the Constitution will
have nothing to say about that. Again, these thought experiments highlight the need for a
normative baseline of “State functions”, that the Court – throughout its jurisprudence – has
consistently failed to engage with.
After Pradeep Kumar Biswas and Zee Telefilms, it seems clear that Article 12 is strictly
limited to instances of pervasive governmental control, and the public function test is
irrelevant to the enquiry. We must look elsewhere for the solution to the problems
highlighted above.
One possible solution lies in R.D. Shetty. Recall our original analysis of the case: the Court’s
reasoning proceeded along two distinct prongs. One was an Article 12 analysis. The other –
which preceded it – was a public law analysis. That is, the Court began with examining the
government’s obligations when it acted as a contractor – that is, obligations of fairness and
non-discrimination – and then extended the argument to instrumentalities or agencies of the
government (which included a strong functional component). It then located another source
of those obligations within Article 14 of the Constitution, which launched it off into its
Article 12 analysis. In other words, obligations of fairness and non-discrimination stem both
from Article 14 and from general principles of public law. The judiciary’s subsequent
narrowing down of Article 12 affects the reach of Article 14, limiting it to pervasively
government-controlled bodies, but leaves the reach of public law – as outlined in R.D.
Shetty – untouched.
Two Supreme Court cases support this proposition. The first is Justice Mohan’s concurring
opinion in Unnikrishnan.  The question in that case was whether Article 14 applied to private
educational institutions. Justice Mohan observed: “What is the nature of functions discharged
by these institutions? They discharge a public duty. If a student desires to acquire a degree,
for example, in medicine, he will have to route through a medical college. These medical
colleges are the instruments to attain the qualification. If, therefore, what is discharged by
the educational institution, is a public duty that requires…  [it to]  act fairly.
The duty to act fairly – which, in content, is identical to the Article 14 obligation – stems
directly from the public duty performed by the entity. As R.D. Shetty teaches, the source of
that duty might be either the Constitution, or public law. Pradeep Kumar Biswas  and Zee
Telefilms close off the first avenue, but not the second.
The second case is – interestingly enough – Zee Telefilms itself. Recognising the trouble with
unaccountable private bodies wielding vast swathes of power, the Court held that “it cannot
be denied that the Board does discharge some duties like the selection of an Indian cricket
team, controlling the activities of the players and others involved in the game of cricket.
These activities can be said to be akin to public duties or State functions and if there is any
violation of any constitutional or statutory obligation or rights of other citizens, the
aggrieved party may not have a relief by way of a petition under Article 32.  But that does not
mean that the violator of such right would go scot-free merely because it or he is not a State.
Under the Indian jurisprudence there is always a just remedy for violation of a right of a
citizen. Though the remedy under Article   32  is not available, an aggrieved party can always
seek a remedy under the ordinary course of law or by way of a writ petition under
Article  226 of the Constitution which is much wider than Article 32.”
Thus, the Court does not hold that non-State bodies do not have a duty to abide by the content
of the fundamental rights; it expressly limits its holding to restricting the application of Part
III, qua  Part III, to non-State bodies. In fact, it specifically refers to Article 226, which vests
in the High Court to issue orders and writs to “any person or authority” for the “enforcement
of any of the rights conferred by Part III, and for other purposes.” The implications are that it
is at least conceptually possible to hold a non-State body accountable for a substantive Part
III violation – only not by invoking Part III via an Article 32 petition before the Supreme
Court. The only way this is possible is by holding that while the content of the duties in both
cases is identical (e.g., the duty to act fairly), their source is different (Article 14 and public
law).
This, I would suggest, is sensible. Instead of applying Part III in a blanket manner to any
“centre of power”, leading to strange and incongruous results (e.g., what connection could
exist between a corporation in control of the nation’s water supply, and the right of minorities
to preserve their culture?), the public-law approach allows us to calibrate the scope of an
entity’s obligations to its function. For example, in Zee Telefilms, this would entail applying
the substance of Article 19(1)(g) to the BCCI; and in Unnikrishnan, the substance of Article
14 to the admissions decisions of educational institutions. Ultimately, the logic boils down to
this: entities that – as a structural (and not individual, or isolated) matter, have control over
the effective exercise of individuals’ fundamental rights, ought to be accountable within their
sphere of control.
If we examine Marsh vs Alabama (which the R.D. Shetty Court relied upon), we find
something of this logic at work. In Marsh, one important reason why the Court held that First
Amendment rights applied to the sidewalks and streets of a privately-owned company town,
was the lack of a feasible exit option: people living in the company town couldn’t simply
pack up and go elsewhere to engage in free speech and expression; thus, they would simply
be denied any effective exercise of their constitutional rights, if the private owners’ property
interests were allowed to trump the First Amendment. Or, in other words, the company-town
was in a position where it effectively had  exclusive power and control over the constitutional
rights of a significant number of people. Consequently, the First Amendment applied. I
suggest that, in the last analysis, examining the extent to which such power and control exists
in individual cases, and accordingly deciding the scope of the (public-law sourced)
obligations of private entities (for which there is precedent, in the form
of Unnikrishnan and Zee Telefilms), is both intellectually the most defensible approach, and
pragmatically the most sensible one.

Net Neutrality and Public Highways

MARCH 31, 2015 GAUTAM BHATIA7 COMMENTS
—

With the recent release of the Telecom Regulatory Authority of India’s [“TRAI”]
“Consultation Paper” on the regulatory framework for over-the-top [“OTT”] services, net
neutrality is up for sustained debate in India. Previously, I had written about how net
neutrality, in the context of the internet, should be understood as a core free speech issue, and
it might be helpful to consider the controllers of the “gateways” to the internet (or, in other
words, the owners of the infrastructure of speech on the internet) as having public obligations
of non-discriminatory access (even though they might be private parties). The idea of public
obligations inhering upon private parties because of their control of public infrastructure, or
their performing of a public function, has been upheld by the American Supreme Court
in Marsh vs Alabama and by the Indian Supreme Court in the concurring judgment of Mohan
J. in Unnikrishnan.
In the net neutrality debate this time, another bit of imagery has been doing the rounds: that
of a public highway. It is permissible to charge a toll for the use of a highway, the rate of
which might be proportional to how much one uses – so goes the analogy – but it is
impermissible to charge differential toll rates based upon the make of the car you drive, or
depending upon whether you’re going to work, or to vacation.

This is a particularly interesting analogy, because, as it turns out, the Indian Supreme Court
has ruled upon precisely this point: that of non-discriminatory access to public
highways. Saghir Ahmed vs State of UP, decided in 1954 by a five-judge bench, involved a
constitutional challenge to the UP Road Transport Act, which allowed the State government
to take exclusive control of running and operating road transport services within the state, if it
believed such a step to be necessary in the public interest. Or, in other words, it allowed the
State government to create a transport monopoly by executive fiat – which it actually did, for
a part of the road network.
In deciding upon the validity of the State government notification, as well as the
constitutionality of the Act, the Court noted:

“According to English law, which has been applied all along in India, a highway has its
origin, apart from statute, in dedication, either express or implied, by the owner of land of a
right of passage over it to the public and the acceptance of that right by the public . In the
large majority of cases this dedication is presumed from long and uninterrupted user of a
way by the public, and the presumption in such cases is so strong as to dispense with all
enquiry into the actual intention of the owner of the soil and it is not even material to enquire
who the owner was.“
In response to the Attorney-General’s argument that the rights of commercial passage over a
highway were determined by the Motor Vehicles Act, the Court observed:
“But the right of the public to use motor vehicles on the public road cannot, in any sense, be
regarded as a right created by the Motor Vehicles Act. The right exists anterior to any
legislation on this subject as an incident of public rights over a highway. The State only
controls and regulates it for the purpose of ensuring safety, peace, health and good morals of
the public.  Once the position is accepted that a member of the public is entitled to ply motor
vehicles on the public road as an incident of his right of passage over a highway, the
question is really immaterial whether he plies a vehicle for pleasure or pastime or for the
purpose of trade and business.  The nature of the right in respect to the highway is not in any
way affected thereby and we cannot agree with the learned AdvocateGeneral that the user of
a public road for purposes of trade is an extraordinary or special use of the highway which
can be acquired only under special sanction from the State.”
A few things ought to be noted:

(1) Although Saghir Ahmed was a case about State action, and consequently, implicated the
petitioners’ Article 19(1)(g) and 14 rights, the Court’s logic here is based upon the nature of
the utility (public highway) rather than the nature of the owner. In the first excerpted
paragraph, the Court makes it clear that the question of ownership is immaterial, since
whatever property rights the owner has, he is deemed to have intended  to give up his right to
the extent that passage requires.
(2) The power of the State to control and regulate the public utility must be for the purposes
of ensuring safety, peace, health and morals.

(3) The nature of the use of the public utility (i.e., in this case, whether commercial or for
pleasure) does not affect the scope of the right of use in any way.
(4) The right stems from long and uninterrupted prior use, presumably stretching back to the
beginning of road networks, and consequently, being somehow part of the very nature, or
essential characteristic, of a “road”.

Note the striking similarities with the net neutrality debate, with respect to each of the
elements. There is, of course, a danger with pushing any analogy too far, but the vocabulary
of the TRAI Consultation Paper itself conjures up an image of the internet “highway”. In
paragraph 2, it states:
“The term over-the-top (OTT) refers to applications and services which are accessible over
the internet and ride on operators’ networks offering internet access services e.g. social
networks, search engines, amateur video aggregation sites etc.”
And, in para 3:

“Carriage  is separated from content in internet networks, enabling OTT content and
application service providers to deal directly with end users.”
A full elaboration, of course, would need significant unpacking. What, precisely, is the public
highway here? Is it the spectrum? And is the argument then that a spectrum auction by the
original owner (i.e., the government) does not carry with it complete rights of ownership, but
rather, attendant obligations that act as limits upon those rights. One of those obligations
being to provide non-discriminatory access to a public utility, whose public character remains
unchanged despite the ownership being in private hands. Of course, such an argument would
also need to establish the analogy between roads and the internet, both in terms of their public
character (perhaps not so difficult), and the establishment of a right of non-discriminatory
access through a long period of uninterrupted usage (perhaps harder in the case of the
internet).

Deemed Universities and Article 12 of the Constitution

Krupakar Manukonda has drawn my attention to an interesting Supreme Court judgment

handed down yesterday. In Dr. Janet Jeyapaul v SRM University, the question was whether a
writ petition was maintainable against the SRM University, which is a “deemed University”
within the meaning of S. 3 of the UGC Act (the petitioner had filed a writ petition
complaining of unfair termination of services).
The Supreme Court held that the petition was maintainable under Article 226 of the
Constitution, since SRM University had been constituted for – and was engaged in –
performing a “public function”. In paragraphs 15 and 16, it relied upon De Smith, “a well-
known treaty (sic!)” on judicial review, and the English case of R v Panel. This is somewhat
curious, since both the treatise and the judgment deal with the scope of judicial review in a
common law system sans  a Constitution, while in the present case, the issue turned upon the
scope of Article 226 of the Constitution. In any event, in paragraph 22, the Court provided
five reasons for its decision:
“Firstly, respondent No. 1 is engaged in imparting education in higher studies to students at
large. Secondly, it is discharging “public function” by way of imparting education. Thirdly,
it is notified as a “Deemed University” by the Central Government under Section 3 of the
UGC Act. Fourthly, being a “Deemed University”, all the provisions of the UGC Act are
made applicable to respondent No. 1, which inter alia provides for effective discharge of the
public function – namely education for the benefit of public. Fifthly, once respondent No. 1
is declared as “Deemed University” whose all functions and activities are governed by the
UGC Act, alike other universities then it is an “authority” within the meaning of Article 12
of the Constitution.  Lastly, once it is held to be an “authority” as provided in Article 12 then
as a necessary consequence, it becomes amenable to writ jurisdiction of High Court under
Article 226 of the Constitution.”
The underlined paragraph is a little curious. It is by now well-established that the correct test
for determining whether or not a particular body falls within the meaning of “other authority”
under Article 12, is whether it is within the “functional, financial and administrative” control
of the State. The fact that the legal status of a body is determined by a statute is neither
necessary, nor sufficient, for it to fall within Article 12. In the early case of Sukhdev Singh v
Bhagat Ram, the Supreme Court had noted:
“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. It is not a statutory body
because it is not created by the statute. It is a body created in accordance with the provisions
of the statute.”
There is a distinction, therefore, between a body that is conferred with a certain legal status
under a statute, and a body that is created by the statute. Unarguably, in the former case, the
legal status, without anything more, is insufficient to bring the body within the meaning of
Article 12. Here, however, the Supreme Court seems to have held that the mere fact that the
SRM University is brought within the purview of the UGC Act automatically brings it within
Article 12, without any analysis of whether the control test has been satisfied.
Indeed, in 2012, while dealing with an identical issue, the Rajasthan High Court observed:
“Perusal of the pleadings reveals that no facts pertaining to financial or administrative
involvement and control of the Central or the State Government in any manner has been
pleaded. The only argument is in regard to section 3 of the UGC Act whereby BITS has been
declared as ‘deemed to be university’. Merely declaring respondent BITS as deemed to be
university does not cover it under Article 12 of the Constitution.”
(The single judge’s opinion has been challenged on the ground that a previous division bench
of the Rajasthan High Court had already held BITS to fall within Article 12. Interestingly, in
that case, the Court had gone into a detailed analysis of the functional, financial, and
administrative control exercised upon BITS by the government – see here).
It is unclear why the Supreme Court needed to go into Article 12 at all. As we have discussed
before on this blog, the tests for maintainability under Articles 12 and 226 are different, and
the word “authority” has a much broader meaning under Article 226 than it does under
Article 12. A public function test is sufficient to attract Article 226, as compared to the much
stricter control test under Article 12. This, being an Article 226 case, could have been decided
solely on public function grounds. The introduction of Article 12, and the manner in which it
has been discussed, raises some concerns about the future direction of law on the point.

The BCCI Controversy, Public Functions and Cultural Goods, and the Return (?) of the
Functional Test
AUGUST 25, 2016 GAUTAM BHATIA9 COMMENTS

Last month, a two-judge bench of the Supreme Court delivered its judgment in Board of
Control for Cricket vs Cricket Association of Bihar. The Court accepted most of the
recommendations of the Lodha Committee, which it had established through its previous
order in the same case, in January 2015, and directed their implementation. These
recommendations included extensive restructuring of the BCCI (e.g., age limits, conflicts of
interest, and so on). Unsurprisingly, this has proven controversial. Markandey Katju, the
BCCI’s ‘legal advisor’, has strongly criticised the judgment for violating the separation of
powers, and also for contravening the Tamil Nadu Societies’ Registration Act (under which
the BCCI is registered) by judicially altering the terms of association of a private society.
There are, however, two separate questions here. The first is whether  the BCCI’s structure
and functioning is subject to judicial review at all, and if so, on what basis and under which
principles. The second is whether the kind of systematic overhaul recommended by the
Lodha Committee ought to be implemented by the judiciary, or by Parliament (Katju’s
separation of powers argument). The two questions are tangled up, because it is only after
providing a principled basis (if any exists) justifying judicial intervention into the workings
of a (technically) private society such as the BCCI, can we then ask whether the manner in
which the Lodha Committee did it was justified or not. For this, we need to go back to the
Supreme Court’s January 2015 order.
The facts that led up to the passing of that order are rather complex, but very briefly,
allegations of match-fixing had dogged the Indian Premier League (IPL). In response, the
BCCI constituted a probe panel. The Cricket Association of Bihar filed a writ petition against
this in the High Court of Bombay, and also filed another writ praying for the removal of the
BCCI President as well as the cancellation of the franchise of two IPL teams. And in yet
another proceeding, the Association challenged Rule 6.2.4. of the BCCI Regulations, which
allowed administrators to have commercial interests in the IPL. After the Bombay High Court
passed various orders on these proceedings, the matter reached the Supreme Court. On 8th
October 2013, ‘with the consent of the parties’, the Supreme Court constituted a ‘probe
committee’ to look into the allegations of match-fixing. The Probe Committee returned
damning findings against both players and officials. On 16th May 2014, the Supreme Court
then constituted an investigation team to help the Probe Committee conduct an enquiry into
the specific accusations. Its report was placed before the Court towards the end of 2014. The
Supreme Court then framed seven questions, including whether allegations of match-fixing
stood proven, the quantum and nature of punishment, the legality of Rule 6.2.4., and
consequential orders.

Before the Court could do any of that, however, it had to work out the exact relationship
between the judiciary and the BCCI, an ostensibly private body. Consequently, the first
question that the Supreme Court framed was:

“Whether the Board of Cricket Control of India is ‘State’ within the meaning of Article 12
and if  it is not, whether it is amenable to the writ jurisdiction of the High Court under Article
226 of the  Constitution of India?”
The Court’s discussion of this question is contained in paragraphs 20 – 30 of the judgment.
Previously on this blog, we have discussed the history of the Supreme Court’s Article 12
jurisprudence. Very briefly, for a few decades, the Court fluctuated between a ‘functional
test’ (i.e., looking to the functions a body is performing in order to determine whether it could
be equated to ‘State’ under Article 12, and therefore subject to fundamental rights claims),
and a ‘legal’ test (i.e., whether the legal form of the body can be equated with that of the
State). In Pradeep Kumar Biswas, and then in Zee Telefilms, the Court finally – and
decisively – adopted the legal test, holding that a body fell within Article 12 only if it was
“functionally, financially or administratively” under the control of the State.
However, while the Supreme Court ultimately decided upon a narrow interpretation of
Article 12, in a parallel set of cases, it began to develop a jurisprudence around ‘private
bodies dealing with public functions’. The genesis of this was Justice Mohan’s concurring
opinion in Unnikrishnan, where he held that educational institutions discharged a public duty,
which require them to “act fairly“. This approach saw its culmination in the Zee Telefilms
Case  – which, as a matter of fact, was about the Article 12 status of the BCCI (!). After
holding that the BCCI was not State under Article 12, on an application of the control test,
the Court then went on to observe that ““it cannot be denied that the Board does discharge
some duties like the selection of an Indian cricket team, controlling the activities of the
players and others involved in the game of cricket. These activities can be said to be akin to
public duties or State functions and if there is any violation of any constitutional or statutory
obligation or rights of other citizens, the aggrieved party may not have a relief by way of a
petition under Article  32.  But that does not mean that the violator of such right would go
scot-free merely because it or he is not a State. Under the Indian jurisprudence there is
always a just remedy for violation of a right of a citizen. Though the remedy under
Article 32 is not available, an aggrieved party can always seek a remedy under the ordinary
course of law or by way of a writ petition under Article 226 of the Constitution which is
much wider than Article 32.”
A private body discharging public functions, therefore, could be subject to the writ
jurisdiction of the High Courts under Article 226, for the vindication of the rights of citizens
(for a discussion of what exactly this might mean, see the comments to this post).
Let us come back to the BCCI judgment. From paragraph 20 to 29, Thakur CJI recounted the
judicial history of Article 12, with its culmination in Zee Telefilms. In paragraph 30, he
explained why, in his view, the BCCI was performing a ‘public function’. The reasons can be
broadly summarised as follows:
● The BCCI had complete control over the game of cricket in India (including control
over the careers of players)
● The BCCI’s activities were of considerable financial scope (infrastructure,
expenditure on coaches, pension schemes, selling broadcast and telecast rights)
● The BCCI was exercising these functions with the “tacit concurrence” of the
government, which had chosen not pass any law diluting the BCCI’s monopoly.
For this reasons, Thakur CJI held that the BCCI would be subject to “the standards generally
applicable to judicial review of State action.” Later in the judgment, he noted that the setting
up of the Probe Committee “was issued in exercise of appellate powers vested in this Court
in proceedings under Article 226 of the Constitution” – thus linking the Court’s actions to the
public function test, via Article 226.
After an extensive discussion of the match-fixing itself (which need not concern us here), the
Court moved on to the validity of Rule 6.2.4., which allowed administrators to have
commercial interests in the IPL and other T20 tournaments. Note that, technically, Rule 6.2.4.
was an internal regulation of a private society, something that the Court had repeatedly held
was (more or less) beyond judicial scrutiny (see, e.g., Zoroastrian Cooperative  and other
cases). In paragraph 69, this was Thakur CJI’s response:
“We have, while dealing with question No.1 above, held that BCCI is amenable to
writ jurisdiction under Article 226 of the Constitution as it discharges “Public Functions”.
The natural corollary flowing  from that finding is that all actions which BCCI takes
while  discharging such public functions are open to scrutiny by the Courts in exercise of
their powers under Article 226 of the Constitution. It also implies that such actions shall
when under scrutiny be judged by the standards and on principles that govern similar
actions when taken by the State or its  instrumentalities. The approach which a Court
exercising  powers of judicial review of administrative action adopts  will remain the same
irrespective of whether the action under review is taken by the State or its instrumentality or
by any  non statutory non government organisation like the BCCI in the case at hand. It
follows that Rule 6.2.4 will be subject to the same tests and standards as would apply to
any  similar provision emanating from a statute or the general  executive power of the State.”
There is, however, a crucial elision in the two underlined portions. In the first, the Court
made the (uncontroversial) claim that when adjudicating upon the performance of a public
function, it would exercise its jurisdiction following principles of judicial review of
administrative action (that is, the Wednesbury standards, or one of its variants, most of which
are marked, to different degrees, by judicial deference). However, at the end of the paragraph,
the Court equated judicial review of Rule 6.2.4. to that of a statute, or executive action. This,
however, is an entirely different standard altogether. When considering a challenge to a
statute or to an executive act, the Court, far from employing standards governing judicial
review of administrative action, tests the statute for compliance with legislative competence,
and with Part III. In other words, if Rule 6.2.4. is akin to a statute, then Part III would apply
to it directly, in the same manner as if the BCCI was State under Article 12 – which, as we
have already seen, it is not.
The waters were further muddied in paragraph 73, when Thakur CJI noted that “in the light
of the Articles of Association, we find no infirmity in the amendment to Rule 6.2.4 in so far as
the legislative competence  (if we may use that expression) of the authority that brought
about the amendment is concerned.”  Surely, this usage is not innocuous!
Subsequently, considering Rule 6.2.4. on its merits, the Court invalidated it on two
grounds: first, that in allowing a man to be a judge in his own cause, it violated principles of
natural justice, noting specifically that “the significance of the principles of natural justice
visa-vis Article 14 of the Constitution is no longer res integra. The principles have been held
to be a part and parcel of the guarantee contained in Article 14.” Secondly, it struck the Rule
down on grounds of public policy, holding that it defeated the “high ideals of fairness and
objectivity in the discharge of public functions.”
Bracketing out the second argument for the moment, if we read paragraph 69 alongside the
Court’s examination of Rule 6.2.4., then I would suggest that it is at least strongly
arguable that the Court held that private bodies performing public
functions are directly subject to Part III of the Constitution. It treated the BCCI’s internal
regulations as a statute, and then applied Article 14 to it. This would seem to mark a return of
the functional test through the back door, with the rider that since private bodies performing
public functions are (technically) not ‘State’, you cannot go straight to the Supreme Court
under Article 32, but must first go to the High Court under Article 226.
Such a position (I would submit) requires a close and careful definition of what, precisely,
constitutes a ‘public function’. It is here that the Court’s analysis is not entirely satisfactory.
The three reasons – complete control over cricket, large-scale financial stakes, and State
concurrence – are indicative of public functions, but they are surely not determinative.
Without any examination of what it is about cricket that makes a monopoly over it public in
nature, or that gives financial transactions a public character, the analysis is incomplete; and
the State concurrence point could be applied to any other field of work as well, where there is
no existing statute.
In a recent article, Suhrith Parthasarathy provides an important justification. He writes
that “in India, where cricket plays such a pervasive role, the sport would therefore have to
necessarily be seen as a primary cultural good, one which, to borrow from another
American, the philosopher John Rawls, is critical to the fulfilment of a person’s conception
of a good life.” As Rawls (and many other scholars) have noted, human beings need access
to a basic set of goods to be able to lead a dignified and full life. At a basic level these include
access to food, shelter, and so on, but at a more abstract level, they also include intangible
goods such as cultural and social membership. Communal participation in events such as
popular sports constitute an important manner in which people establish meaning in their
lives. Consequently, bodies that act as gatekeepers of access to cultural goods must be
deemed to be performing public functions.
The access-to-basic-goods approach, I would suggest, ought to be the blueprint upon which
the Supreme Court builds its private-bodies-public-functions approach. Arguably, we claim
and enforce fundamental rights against the State primarily because of the power that it
exercises over us, a power that gives it the ability to control access to the most basic human
goods (such as life). Similarly, when non-State bodies wield and exercise such power
(including power over cultural goods), then the too must be subjected to similar standards.
Note that the kind of standards to which it would be subjected to would have to have a
relevant link to the question of access (for instance, if a private body controlled the entire
water supply of a community, we would impose standards of Article 15 non-discrimination
upon it as far as distribution of water went; but would we also directly, and in the absence of
a statute, impose the same standards upon its hiring policies?)
All this, of course, is independent of what the Supreme Court actually did, finally, which was
to impose a whole new structure upon the BCCI through the Lodha Committee Report. I do
not claim here that the access/public functions argument justifies such intervention (in fact, I
do not think that it does). It is one thing to say that the BCCI is subject to public law or Part
III standards, and quite another for an external authority to so fundamentally transform it. The
debate on this second aspect will continue; on the first, however, the BCCI judgment
provides us with an important platform upon which to further think through issues of public
functions and public standards; and – arguably – it sets a precedent for applying Part III of
the Constitution directly to private bodies performing public functions.

Round-Up: The Delhi High Court’s Experiments with the  Constitution

(This is the second part of three blog posts that round-up some recent judicial
pronouncements. For work-related reasons, I did not have the time to write about them when
they were delivered. – Ed.)
—

Benches of the Delhi High Court have issued a series of interesting rulings in the first half of
2018. A summary follows.
Article 14 and Genetic Discrimination
In United India Insurance Company v Jai Parkash Tayal, a single-judge bench of the Delhi
High Court invalidated a clause of an insurance contract that excluded “genetic disorders”
from the scope of insurance. The judgment proceeded on multiple grounds, and makes for
fascinating reading. In particular, Justice Pratibha Singh invalidated the clause on the grounds
of Article 14 (equality before law), 21 (right to health), and the impermissibility of changing
an insurance contract to the detriment of the insured. The Article 21 issue is not one I will
discuss here: as readers of this blog will know, the reading in of broad socio-economic rights
into Article 21, and their exceedingly uneven application on a case-to-case basis, is not
something I am very comfortable with. This case, like so many others, tells us that there is a
right to health, and then uses it to achieve a specific outcome, but somewhere along the way,
the precise spelling out of the scope, contours and limits of this right, and the nature of the
obligations it places upon the State, is lost by the wayside.
What I find much more interesting, however, is the manner in which the Court used Article
14. In paragraph D1, Justice Singh observed:

Article 14 of the Constitution of India prohibits discrimination of any kind. This would

include discrimination based on genetic heritage of an individual.
There is, however, something odd about this framing. Article 14 is the equality clause. The
non-discrimination clause is Article 15(1), which prohibits the State from discriminating on
grounds of race, religion, caste, sex, and place of origin. Moreover, Article 15(1) is a closed
list – unlike certain other Constitutions, no additional, analogous grounds can be brought
within its ambit. Article 14, on the other hand, is a general equality clause that has been
interpreted by the Courts to exclude irrational classification or arbitrary State action, on a
case-to-case basis. Unlike Article 15(1), Article 14 does not – a priori – rule out
specific grounds upon which differentiation may be based. The distinction between Articles
14 and 15(1) was expressed by Patanjali Sastri CJ in a classic exposition, in Kathi Raning
Rawat v The State of Saurashtra (1952)
As we can see, Justice Singh’s observation that Article 14 prohibits discrimination on the
basis of genetic heritage appears to conflate Sastri CJI’s distinction between Articles 14 and
15(1).

In the latter part of the judgment, however, Justice Singh modulates the claim. In the context
of insurance contracts, she concedes that there may be a class of narrowly defined cases (to
be articulated by the policy-makers) where certain kinds of genetic diseases can be excluded
by the insurer. Her specific problem is with the width of this exclusion clause (covering all
“genetic disorders”) which – as she states in the operative part of the judgment – violates
Article 14. Consequently, Justice Singh’s argument is not that “discrimination” on the basis
of genetic characteristics will automatically violate Article 14, but rather, it
will presumptively violate Article 14, unless strong reasons can be shown that justify the
violation. In other words, differentiation based on genetic differences will be subjected to
stricter judicial scrutiny than other classifications.
Is there any constitutional warrant for this reading of Articles 14 and 15? I have recently
argued that there is, in a defence of the Delhi High Court’s Naz Foundation judgment (SSRN
version here). Briefly, the argument is as follows: an analysis of the Constituent Assembly
Debates shows that the framers did not intent Articles 14 and 15 to operate as separate silos.
Rather, Article 14 was the general expression of the concrete commitment towards non-
discrimination  under Article 15(1). The framers took the five most publicly salient grounds at
the time – race, religion, caste, sex, place of origin – and prohibited all discrimination
involving those grounds. However, the framers also realised that forms and sites of
discrimination evolve, and what is not salient today can become salient tomorrow (classic
examples: sexual orientation, disability, and age, which are all present in some more recent
Constitutional documents). For this reason, the framers included Article 14, whose more
open-ended language would allow future Courts to develop new grounds of discrimination,
and subject them to stricter scrutiny (something akin to a proportionality standard).
Unfortunately, however, this possibility has never seriously been explored by the Courts, who
have been caught between the classification and the arbitrariness standards under Article
14. Naz Foundation represented the first serious articulation of this vision of Articles 14 and
15(1). United India Insurance Company is another small, incremental step towards it.
Uncertainties over Horizontality
The Delhi High Court was very clear that Articles 14 and 21 applied to all insurance
contracts, whether entered into by a State insurer or a private insurance company. This,
however, is a problematic conclusion. Articles 14 and 21 very categorically apply to State
action. “State”, under Article 12, is limited to government and entities under the “functional,
financial, and administrative” control of government. Without some additional reasoning, a
private insurance company cannot be brought within the ambit of the fundamental rights
chapter.
The Court’s response was to argue that insurance contracts are unequal (like contracts of
adhesion, although the Court did not use the term), and place the insurance applicant at a
disadvantage. That is correct – and many jurisdictions recognise that such contracts are of a
special kind, that cannot be interpreted in a normal way (see the recent decision of the UK
Employment Tribunal involving Uber’s contracts with its drivers). However, the remedies for
that are provided within  contract law: interpret ambiguous terms in favour of the weaker
party, and if the unconscionability is clear, void the contract on grounds of public policy. The
Court could even have said – as it came close to doing – that such contracts had
a public element, and therefore could be subjected to public law norms (which include norms
of non-discrimination). There is no warrant, however, for making Part III of the
Constitution directly  applicable to private insurance contracts, and to the extent the Court did
so, I submit that it erred.
The same issue arose in another Delhi High Court decision that made the news
recently, Sanghamitra Acharya v State (NCT) of Delhi. Sanghamitra Acharya involved the
commitment of an adult woman into a mental hospital at the instance of her parents. Justice
Muralidhar, writing for the division bench, held that the woman’s rights to liberty, autonomy
and dignity had been violated (especially in view of the Puttaswamy judgment), that the
parents, police, and the hospital were in breach of their legal obligations, and ordered
compensation. This is, of course, impeccable; in the course of the judgment, however, the
Court expressly held that Articles 19 and 21 (along with Articles 15(2), 17, and 23) were
horizontally applicable between private parties.
It is true that Articles 19 and 21 are not categorically framed as injunctions against the State.
Article 19 stipulates that “All citizens shall have the right… to freedom of speech and
expression…” and Article 21 states that “no person shall be deprived  of his life or personal
liberty except according to procedure established by law.” Therefore, there is no express
textual bar against reading Articles 19 and 21 horizontally. However, the reference to State
restrictions under Articles 19(2) to 19(6), and the specific reference to “procedure established
by law” under Article 21, strongly indicates that these Articles are meant to apply vertically,
between State and individual. This is buttressed by the fact that where the framers did intend
the horizontal application of fundamental rights, they were clear and unambiguous about it
(Articles 15(2), 17, 23, 24). And lastly, this is how the Courts have almost uniformly
understood and interpreted them (there are some exceptions, such as the Aruna
Shanbaug  judgment). It is, of course, open to the Delhi High Court to hold that this
jurisprudence is misguided; however, such a radical change in the interpretation of Articles
19 and 21, it needed to provide strong reasons for that holding, and also to elaborate its own
theory justifying the horizontal reading of Articles 19 and 21. With respect, the Court did not
do that.
Legal Interpretation in the Shadow of the Constitution
What the Court did do very well, in my opinion, was bring the Constitution to bear upon the
interpretation of the Mental Health Act, which was the relevant legislation at issue. The Court
was examining whether the “involuntary admission” into a mental hospital was consistent
with the scheme of the Act. Under Section 19, a person could be involuntarily admitted into a
mental hospital by their relative or friend, if the medical officer in-charge was “satisfied” that
it was in the interests of the patient. The Court held that although Section 19 was a “stand-
alone” provision, the rights under Article 21 required that the word “satisfaction” be read as
“objective satisfaction”; that is, the medical officer would have to follow the legal definition
of “unsoundness of mind” (which is narrow and circumscribed) before allowing involuntary
admission. On facts, it was found that the medical professional had not even attempted to
apply any objective standards in his determination.

The form of interpretation that the Court engaged in here is one that Indian Courts have
attempted in the past, but only sporadically: borrowed from German law, it is called “the
radiating effect” put broadly, holds that a Constitution is not merely a set of rights, but an
objective “order of values”, and these values “radiate” through the legal system. In concrete
terms, a Court is to interpret laws – including private law – in a manner that advances and
promotes the constitutional order of values. By interpreting “satisfaction” (an ambiguous
word) to refer to “objective satisfaction”, and to justify that reading by specifically pegging it
to constitutional rights, the Sanghamitra Acharya  is an important judgment in the context of
the theory of the radiating effect.
Traces of this are visible in two other judgments the Delhi High Court delivered, on the
subject of labour law. In Indu Munshi v Union of India, a division bench of the Delhi High
Court ordered the regularisation of a batch of Kashmiri Pandit schoolteachers. The
schoolteachers had been forced to flee from the Valley in 1993, and had come to Delhi. They
had been given contractual jobs as schoolteachers in 1994 – and then kept on contract for the
next twenty-four years. The issue of regularisation is a fraught one, and any Court that wishes
to order regularisation has to content with the challenge of the Supreme Court’s Constitution
Bench judgment in Uma Devi’s Case, which invoked the constitutional right to equality of
opportunity to hold that contractual employees who had been appointed by the “back door”
could not later be regularised “at the cost of” other employees. Uma Devi’s ratio has,
however, been subsequently whittled down (the High Court discussed some of these
judgments), and here Justice Bhat, writing on behalf of a Division Bench, held that, on facts,
there was no “back door appointment.” One of the crucial features that weighed with Justice
Bhat was the fact that the Kashmiri Pandits had arrived as refugees, and were compelled to
accept whatever offer of employment was open to them, without any genuine choice or
bargaining power. When combined with the fact that the process of appointments was
competitive, and that the teachers had worked against regular (unfilled) vacancies for twenty-
two years, as well as a number of other technical factors, Justice Bhat held that,
notwithstanding Uma Devi, the case for regularisation was unanswerable. The Court also held
that the contractual teachers deserved remuneration that was equal to the sanctioned
remuneration for regular schoolteachers. It adopted a broad version of the “equal pay for
equal work” doctrine (which focused on the nature of work) rather than a narrow version
(which made technical factors such as cadres and sources of appointment – which could
easily be undermined – determinative), and again, framed the issue as a right against
exploitation:
Turning to the issue of equal salary and remuneration, the Govt of NCT of Delhi had argued
that the teachers could not question their emoluments, because they had accepted their
contractual status and functioned in that capacity for over a decade and a half. The teachers’
argument is that they had practically no choice; the alternative to accepting the job with
reduced emoluments was starvation or no employment. Such a Hobson’s choice is not
meaningful. This court agrees with the contention and holds that there cannot be any
estoppel in such situations, barring claims to parity. Long ago, in Sanjit Roy v State of
Rajasthan, AIR 1983 SC 328, the Supreme Court characterized as forced labour the
acceptance, under compulsion of circumstances, by a person without employment,
remuneration that was lower than the minimum wage and stated “that it may therefore be
legitimately presumed that when a person provides labour or service to another against
receipt of remuneration which is less than the minimum wage, he is acting under the force of
some compulsion which drives him to work though he is paid less than what he is entitled
under the law to receive.”
And:

In the facts of the present cases too, the court is of the opinion that the mere nomenclature of
“contract teachers” is an artificial one given to the teachers who approached this court
through the writ petitions that have led to these appeals; they were appointed against regular
vacancies, their services are unbroken and have not been continued on account of any stay
or court directed interim order; their appointments were pursuant to a constitutionally
recognized and acceptable procedure of advertisement and calling names from employment
exchange; they each held and hold the requisite qualifications, including B.Ed; all of them
were interviewed before their appointment. For these reasons, having regard to their
unbroken employment for over two decades, in line with the decision in Umadevi (supra) as
understood in Pratap Kishore Panda (supra), Malati Dass (supra) and Sheo Narain Nagar
(supra), the said Kashmiri migrant teachers are entitled to be treated as regular appointees.
They shall also be entitled to provident fund benefit, gratuity and pension upon attaining the
age of superannuation. If any of the petitioners or any other Kashmiri migrant teacher has
already attained superannuation or has died in the interregnum the Govt of NCT of Delhi
shall calculate their entitlement and release them to such retired employees, and in the case
of death, release such amounts to the legal representatives of such deceased employees.
Of course, the Constitution was not directly involved in this case, in the sense that there was
no legal provision under challenge. However, it is obvious that the Constitution – and
especially, its egalitarian and anti-exploitative ethos – permeated each of the choices the
judges had to make. Uma Devi had invoked the doctrine of equality of opportunity to set up
“regular” and “back door” appointees in conflict with each other, competing for the same
scarce public good (jobs). The Delhi High Court rejected this race-to-the-bottom vision of
equality and, instead, focused upon an understanding of equality that was sensitive to
exploitation and disparities in bargaining power, to hold that Uma Devi was inapplicable to
the present case, and furthermore, the the constitutional principle of equal pay for equal work
would also apply.
The Constitution was more directly at play in M/s Metrro Waste Handling v Delhi Jal Board,
a brief judgment concerning manual scavenging, and bookending its holding by quotes from
Dr. B.R. Ambedkar. The Delhi Jal Board issued a tender for mechanised sewer cleaning,
where it did two things: first, it stipulated that only one machine would be issued per bidder;
and second, it stipulated that preference would be given to the families of deceased manual
scavengers and ex-manual scavengers. The first condition – it argued – was to encourage
small entrepreneurs and the underprivileged class to apply. The justification for the second is
obvious. The Petitioner challenged the first condition as being arbitrary, and the second as
imposing a “100 percent reservation”, which was unconstitutional.
The Court rejected both arguments. On the first, it found that the DJB had set up an elaborate
system of loans and other forms of aid to genuinely enable underprivileged sections to
effectively bid for the tender; the argument from arbitrariness, therefore, was dismissed.
From a constitutional point of view, however, the second issue is more interesting. The Court
rejected the argument that the DJB’s order of preference was establishing 100 percent
reservation. This was not – it observed – a system of “quotas”:

What is in issue, however, in this case is the attempt of the state, uniquely to ensure that the
livelihood and lives of sewage workers performing manual scavenging tasks are
meaningfully uplifted. The system of preference is not reservation, in any sense of the
term.  The court recollects what was held in Government of Andhra Pradesh v
Vijaykumar1995 (4) SCC 520 that the wording of Art. 15(3) enables “special provisions” is
wider than Article 16(4) which enables a special provision by way of reservations. Article
15(3) is wider and includes “positive action programmes in addition to reservations”.
However, if what was involved was not reservation, then the provisions of Articles 16(4)
(since it specifically mentions reservation). Nor could 15(3)’s “special provisions” be
invoked, since they are limited to women and children. The only alternative, therefore – as
the Court noted – was that preferential treatment of underprivileged classes
was itself  consistent with the guarantee of equality of opportunity under Article 16(1). Or, in
other words – as the concurring opinions of Justices Mathew and Krishna Iyer had famously
held in NM Thomas, but which were not subsequently developed in detail – the constitutional
vision of equality is a substantive vision, which factors in structural and systemic
discrimination, and views the overcoming of structural barriers as part of the very meaning of
equality. As Justice Bhat – again, writing for a division bench – held:
Seen from the context of the decisions quoted previously, the NIT conditions are not meant to
exclude the “general” class of citizens. They afford an opportunity to an utterly marginalized
section a “step up” (or to use the expression in Nagaraj (supra), “catch up”) with the other
citizens. The object of such preference is plainly to enable the meaningful participation of the
most marginalized section, i.e. workers involved in manual scavenging, and scheduled
caste/scheduled tribe communities (who are so chosen, having regard to what the
Constitution framers stated as  “a backward section of the Hindu community who were
handicapped by the practice of untouchability”). The state, i.e., DJB, in our opinion, had a
compelling interest in promoting the welfare of these class of citizens, while conceiving and
implementing this system of preferences, in the impugned NIT.
Indirect Discrimination
This provides an ideal segue into the last case: Madhu v Northern Railway. Madhu involved
the interpretation of certain Indian Railways rules. The dispute centred around a railway
employee taking his wife and daughter “off” his list of “dependents” entitled to free medical
treatment, on the ground that he had “disowned” them. The Railways argued that for a
person’s dependents to avail of treatment, he had to make a “declaration” that they were part
of his family; in this case, since the employee had refused to do so, the Railways was justified
in denying them medical treatment. The Division Bench, speaking through Justice Bhat – yet
again! – rejected this argument, arguing that not only was such an interpretation textually
untenable, but also that accepting it would perpetuate indirect discrimination:
The Northern Railways contends that the Appellants are not denied the medical card because
they are women, but rather because their husband and father had not made the requisite
declaration. However, this explanation is not enough. It is not sufficient to say that the
reasoning of Northern Railways did not intentionally discriminate against the Appellants
because they were women. Law does not operate in a vacuum and the reasoning and
consequent decision of Northern Railways must be examined in the social context that it
operates and the effects that it creates in the real world. Even a facially neutral decision can
have disproportionate impact on a constitutionally protected class.

The reason that the drafters of the Constitution included Article 15 and 16 was because
women (inter alia) have been subjected to historic discrimination that makes a classification
which disproportionately affects them as a class constitutionally untenable. The Northern
Railways decision to not grant the Appellants medical cards clearly has such a
disproportionate effect. By leaving an essential benefit such as medical services subject to a
declaration by the railway officer/servant, the dependents are subject to the whims and
fancies of such employee. The large majority of dependents are likely to be women and
children, and by insisting that the railway officer/servant makes a declaration, the Railway
authorities place these women and children at risk of being denied medical services.

It is irrelevant that the Railways did not deny them the medical card because the Appellants
were women, or that it is potentially possible that a male dependent may also be denied
benefits under decision made by the Railways. The ultimate effect of its decision has a
disparate impact on women by perpetuating the historic denial of agency that women have
faced in India, and deny them benefits as dependents.
The concept of indirect discrimination – discussed in some detail on this blog previously –
has been incorporated into the jurisprudence of many other constitutional courts (the High
Court cited some of them). Indian Courts have taken tentative steps towards it,
but Madhu represents perhaps the first full-blooded articulation and defence of indirect
discrimination as a form of discrimination prohibited by the Constitution. It will, hopefully,
be the first of many instances.

Excerpts From Rd Shetty In Paragraphs

As early as 1819 the Supreme Court of the United States in Mac Cullough v. Maryland 4
Wheat 315 held that the Congress has power to charter corporations as incidental to or in aid
of governmental functions and, as pointed out by Mathew, J., in Sukhdev v. Bhagat Ram
(supra) such federal corporations would ex-hypothesi be agencies of the Government. In
Great Britain too, the policy of public administration through separate corporations was
gradually evolved and the conduct of basic industries through giant corporations has now
become a permanent feature of public life. So far as India is concerned, the genesis of the
emergence, of corporations as instrumentalities or agencies of Government is to be found in
the Government of India Resolution on Industrial Policy dated 6th April, 1948 where it was
stated inter alia that "management of State enterprises will as a rule be through the medium of
public corporation under the statutory control of the Central Government who will assume
such powers as may be necessary to ensure this." It was in pursuance of the policy envisaged
in this and subsequent resolutions on Industrial Policy that corporations were created by
Government for setting up and management of public enterprises and carrying out other
public functions. Ordinarily these functions could have been carried out by Government
departmentally through its service personnel, but the instrumentality or agency of the
corporations was resorted to in these cases having regard to the nature of the task to be
performed. The corporations acting as instrumentality or agency of Government would
obviously be subject to the same limitations in the field of constitutional and administrative
law as Government itself, though in the eye of the law, they would be distinct and
independent legal entities. If Government acting through its officers is subject to certain
constitutional and public law limitations, it must follow a fortiori that Government acting
through the instrumentality or agency of corporations should equally be subject to the same
limitations.
But the question is how to determine whether a corporation is acting as instrumentality or
agency of Government. It is a question not entirely free from difficulty.

14. A corporation may be created in one of two ways. It may be either established by statute
or incorporated under a law such as the Companies Act 1956 or the Societies Registration
Act 1860. Where a Corporation is wholly controlled by Government not only in its policy
making but also in carrying out the functions entrusted to it by the law establishing it or by
the Charter of its incorporation, there can be no doubt that it would be an instrumentality or
agency of Government.

But ordinarily where a corporation is established by statute, it is autonomous in its working,

subject only to a provision, often times made, that it shall be bound by any directions that
may be issued from time to time by Government in respect of policy matters. So also a
corporation incorporated under law is managed by a board of directors or committee of
management in accordance with the provisions of the statute under which it is incorporated.
When does such a corporation become an instrumentality or agency of Government? Is the
holding of the entire share capital of the Corporation by Government enough or is it
necessary that in addition, there should be a certain amount of direct control exercised by
Government and, if so, what should be the nature of such control? Should the functions
which the corporation is charged to carry out possess any particular characteristic or feature,
or is the nature of the functions immaterial? Now, 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. But, as is quite often the
case, a corporation established by statute may have no shares or shareholders, in which case it
would be a relevant factor to consider whether the administration is in the hands of a board of
directors appointed by Government, though this consideration also may not be determinative,
because even where the directors are appointed by Government, they may be completely free
from governmental control in the discharge of their functions. What then are the tests to
determine whether a corporation established by statute or incorporated under law is an
instrumentality or agency of Government? It is not possible to formulate an all-inclusive or
exhaustive test which would adequately answer this question. There is no cut and dried
formula, which would provide the correct division of corporations into those which are
instrumentalities or agencies of Government and those which are not.

15. The analogy of the concept of State action as developed in the United States may not,
however, be altogether out of place while considering this question. The decisions of the
court in the United States seem to suggest that a private agency, if supported by extraordinary
assistance given by the State, may be subject to the same constitutional limitations as the
State. Of course, it may be pointed out that "the State's general common law and statutory
structure under which its people carry on their private affairs, own property and contract,
each enjoying equality in terms of legal capacity, is not such State assistance as would
transform private conduct into State action". But if extensive and unusual financial assistance
is given and the purpose of the Government in giving such assistance coincides with the
purpose for which the corporation is expected to use the assistance and such purpose is of
public character, it may be a relevant circumstance supporting an inference that the
corporation is an instrumentality or agency of Government. The leading case on the subject in
the United States is Kerr v. Eneck Pratt Free Library 149 F.d. 212. The Library system in
question in this case was established by private donation in 1882, but by 1944, 99 per cent of
the system's budget was supplied by the city, title to the library property was held by the city,
employees were paid by the city payroll officer and a high degree of budget control was
exercised or available to the city government. On these facts the Court of Appeal required the
trustees managing the system to abandon a discriminatory admission policy for its library
training courses. It will be seen that in this case there was considerable amount of State
control of the library system in addition to extensive financial assistance and it is difficult to
say whether, in the absence of such control it would have been possible to say that the action
of the trustees constituted State action. Thomas P. Lewis has expressed the opinion in his
article on "The meaning of State Action" (60 Columbia Law Review 1083) that in this case
"it is extremely unlikely that absence of public control would have changed the result as long
as 99% of the budget of a nominally private institution was provided by government. Such
extensive governmental support should be sufficient identification with the Government to
subject the institution to the provisions of the Fourteenth Amendment".

It may, therefore, be possible to say that 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. But where financial assistance is
not so extensive, it may not by itself, without anything more, render the corporation an
instrumentality or agency of government, for there are many private institutions which are in
receipt of financial assistance from the State and merely on that account, they cannot be
classified as State agencies. Equally a mere finding of some control by the State would not be
determinative of the question "since a State has considerable measure of control under its
police power over all types of business operations". But 'a finding of State financial support
plus an unusual degree of control over the management and policies might lead one to
characterise an operation as State action" vide Sukhdev v. Bhagatram
MANU/SC/0667/1975 : (1975)ILLJ399SC . So also the existence of deep and pervasive State
control may afford an indication that the Corporation is a State agency or instrumentality.

It may also be a relevant factor to consider whether the corporation enjoys monopoly status
which is State conferred or State protected.
There can be little doubt that State conferred or State protected monopoly status would be
highly relevant in assessing the aggregate weight of the corporation's ties to the State. Vide
the observations of Douglas, J., in Jackson v. Metropolitan Edison Co. 419 U.S. 345 : 42 L.
ed. 477.

16. There is also another factor which may be regarded as having a bearing on this issue and
it is whether the operation of the corporation is an important public function. It has been held
in the United States in a number of cases that the concept of private action must yield to a
conception of State action where public functions are being performed. Vide Arthur S.
Miller : "The Constitutional Law of the Security State" 10 SLR 620. It was pointed out by
Douglas, J., in Evans v. Newton 382 U.S. 296 : 15 L. ed 373 that "when private individuals or
groups are endowed by the State with powers or functions governmental in nature, they
become agencies or instrumentalities of the State". Of course, with the growth of the welfare
State, it is very difficult to define what functions are governmental and what are not, because,
as pointed out by Villmer, L.J., in Pfizer v. Ministry of Health [1964] 1 Ch. 614 there has
been, since mid-Victorian times, "a revolution in political thought and a totally different
conception prevails today as to what is and what is not within the functions of Government".
Douglas, J., also observed to the same effect in New York v. United States 326 U.S. 572 : "A
State's project is as much a legitimate governmental activity whether it is traditional or akin
to private enterprise, or conducted for profit." Cf. Helvering v. Gerhardt 304 U.S. 405. A
State may deem it as essential to its economy that it own and operate a railroad, a mill, or an
irrigation system as it does to own and operate bridges, street lights, or a sewage disposal
plant. What might have been viewed in an earlier day as an improvident or even dangerous
extension of state activities may today be deemed indispensible. It may be noted that besides
the so called traditional functions, the modern State operates a multitude of public enterprises
and discharges a host of other public functions. 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.

This is precisely what was pointed out by Mathew, J., in Sukhdev v. Bhagatram (supra)
where the learned Judge said that "institutions engaged in matters of high public interest or
performing public functions are by virtue of the nature of the functions performed
government agencies. Activities which are too fundamental to the society are by definition
too important not to be considered government functions."
….

33. We may examine, in the light of this discussion, whether the 1st respondent, namely, the
International Airport Authority of India, can be said to be an authority falling within the
definition of 'State' in Article 12. It is necessary to refer to some of the provisions of the
International Airport Authority Act, 1971 (hereinafter referred to as the Act) for the purpose
of determining this question. Sub-section (1) of Section 3 of the Act provides that the Central
Government shall constitute an authority to be called the International Airport Authority of
India, to whom we shall hereafter refer as the 1st respondent. Sub-section (2) states that the
1st respondent shall be a body corporate having perpetual succession and a common seal and
Sub-section (3) enacts that the 1st respondent shall consist of a Chairman to be appointed by
the Central Government, the Director General of civil Aviation ex-officio and not less than
six and not more than thirteen members to be appointed by the Central Government. The term
of office of every member of the 1st respondent is prescribed by Sub-section (1) of Section 5
to be 3 years, but the Central Government is given under the Proviso power to terminate the
appointment of any member who is not a servant of the Government after giving him notice
as also to terminate at any time the appointment of any member who is a servant of the
Government. The power to remove a member in certain specified circumstances is also
vested in the Central Government under Section 6. Section 12, Sub-section (1) provides that
as from the date appointed by the Central Government all properties and other assets vested
in the Central Government for the purposes of the airport and administered by the Director
General of civil Aviation immediately before such date shall vest in the 1st respondent and all
debts, obligations and liabilities incurred, all contracts entered into and all matters and things
engaged to be done by, with or for the Central Government immediately before such date
shall be deemed to have been incurred, entered into and engaged to be done by, with or for
the 1st respondent. This Sub-section also says that all non-recurring expenditure incurred by
the Central Government for or in connection with the purposes of the airport upto the
appointed date and declared to be capital expenditure by the Central Government shall be
treated as the capital provided by the Central Government to the 1st respondent and all sums
of money due to the Central Government in relation to the airport immediately before the
appointed date shall be deemed to be due to the 1st respondent. The 1st respondent is also
given the power to institute or continue all suits and other legal proceedings instituted or
which could have been instituted by or against the Central Government for any matter in
relation to the airport and every employee holding any office under the Central Government
immediately before the appointed date solely or mainly for or in connection with the affairs
of the airport shall be treated as on deputation with the 1st respondent. Sub-section (1) of
Section 12 also enacts similar provisions with regard to the air navigation services and the
buildings used exclusively for such services immediately before the appointed date. The
functions of the 1st respondent are specified in Section 16 Sub-section (1) provides that,
subject to the rules, if any, made by the Central Government in this behalf, it shall be the
function of the 1st respondent to manage the airports efficiently and Sub-section (2) casts an
obligation on the 1st respondent to provide at the airports such services and facilities as are
necessary or desirable for the efficient operation of air transport services and certain specific
functions to be performed by the 1st respondent are particularised in Sub-section (3). These
functions were, until the appointed date, being carried out by the Central Government but
now under Section 16 they are transferred to the 1st respondent. Section 20 provides that after
making provision for reserve funds, ba d and doubtful debts, depreciation in assets and all
other matters which are usually provided for by companies, the 1st respondent shall pay the
balance of its annual net profits to the Central Government. Section 21 requires the 1st
respondent to submit for the approval of the Central Government a statement of the
programme of its activities during the forthcoming financial year as well as its financial
estimate in respect thereof at least three months before the commencement of each financial
year and Section 24 provides that the accounts of the 1st respondent shall be audited annually
by the Comptroller and Auditor General and the accounts as certified by the Comptroller and
Auditor General or any other person appointed by him in this behalf, together with the audit
report thereon, shall be forwarded to the Central Government and the Central Government
shall cause the same to be laid before both Houses of Parliament. The 1st respondent is also
required by Section 25 to prepare and submit to the Central Government, as soon as may be
after the end of each financial year, a report giving an account of its activities during the
financial year and this report has to be laid before both Houses of Parliament by the Central
Government. The officers and employees of the 1st respondent are deemed by Section 28 to
be public servants and Section 29 gives them immunity from suit, prosecution or other legal
proceeding for anything in good faith done or intended to be done in pursuance of the Act or
any rule or regulation made under it. Section 33 confers power on the Central Government to
temporarily divest the 1st respondent from the management of any airport and to direct the
1st respondent to entrust such management to any other person. The Central Government is
also empowered by Section 34 to supersede the 1st respondent under certain specified
circumstances, Section 35 gives power to the Central Government to give directions in
writing from time to time on questions of policy and provides that the 1st respondent shall in
the discharge of its functions, and duties, be bound by such directions. Section 36 confers rule
making power on the Central Government for carrying out the purposes of the Act and power
to make regulations is conferred oil the 1st respondent under Section 37. Section 39 provides
that any regulation made by the 1st respondent under any of the Clauses (g) to (m) of Sub-
section (2) of Section 37 may make it penal to contravene such regulation.

34. It will be seen from these provisions that there are certain features of the 1st respondent
which are eloquent and throw considerable light on the true nature of the 1st respondent. In
the first place, the chairman and members of the 1st respondent are all persons nominated by
the Central Government and the Central Government has also the power to terminate their
appointment as also to remove them in certain specified circumstances. The Central
Government is also vested with the power to take away the management of any airport from
the 1st respondent and to entrust it to any other person or authority and for certain specified
reasons, the Central Government can also supersede the 1st respondent. The Central
Government has also power to give directions in writing from time to time on questions of
policy and these directions are declared binding on the 1st respondent. The 1st respondent has
no share capital but the capital needed by it for carrying out its functions is provided wholly
by the Central Government. The balance of the net profit made by the 1st respondent after
making provision for various charges, such as reserve funds, bad and doubtful debts
depreciation in assets etc. does not remain with the 1st respondent and is required to be paid
over to the Central Government. The 1st respondent is also required to submit to the Central
Government for its approval a statement of the programme of its activities as also the
financial estimate and it must follow as a necessary corollary that the 1st respondent can
carry out only such activities and-incur only such expenditure as is approved by the Central
Government. The audited accounts of the 1st respondent together with the audit report have
to be forwarded to the Central Government and they are required to be laid before both
Houses of Parliament. So far as the functions of the 1st respondent are concerned, the entire
department of the Central Government relating to the administration of airports and air
navigation services together with its properties and assets, debts, obligations and liabilities,
contracts, causes of action and pending litigation is transferred to the 1st respondent and the
1st respondent is charged with carrying out the same functions which were, until the
appointed date, being carried out by the Central Government. The employees and officers on
the 1st respondent are also deemed to be public servants and the 1st respondent as well as its
members, officers and employees are given immunity for anything which is in good faith
done or intended to be done in pursuance of the Act or any rule or regulation made under it.
The 1st respondent is also given power to frame Regulations and to provide that
contravention of certain specified Regulations shall entail penal consequence. These
provisions clearly show that every test discussed above is satisfied in the case of the 1st
respondent and they leave no doubt that the 1st respondent is an instrumentality or agency of
the Central Government and falls within the definition of 'State' both on the narrow view
taken by the majority in Sukhdev v. Bhagat Ram (supra) as also on the broader view of
Mathew, J., adopted by us.

35. It is, therefore, obvious that both having regard to the constitutional mandate of Article 14 as
also the judicially evolved rule of administrative law, the 1st respondent was not entitled to act
arbitrarily in accepting the tender of the 4th respondents, but was bound to conform to the standard
or norm laid down in paragraph 1 of the notice inviting tenders which required that only a person
running a registered IInd Class hotel or restaurant and having at least 5 years' experience as such
should be eligible to tender.

AJAY HASIA V KHALID MUJIB

7. While considering this question it is necessary to bear in mind that an authority falling
within the expression "other authorities" is, by reason of its inclusion within the definition of
'State' in Article 12, subject to the same constitutional limitations as the Government and is
equally bound by the basic obligation to obey the constitutional mandate of the Fundamental
Rights enshrined in Part III of the Constitution. We must therefore give such an interpretation
to the expression "other authorities" as will not stultify the operation and reach of the
fundamental rights by enabling the Government to its obligation in relation to the
Fundamental Rights by setting up an authority to act as its instrumentality or agency for
carrying out its functions. Where constitutional fundamentals vital to the maintenance of
human rights are at stake, functional realism and not facial cosmetics must be the diagnostic
tool, for constitutional law must seek the substance and not the form. Now it is obvious that
the Government may act through the instrumentality or agency of natural persons or it may
employ the instrumentality or agency of juridical persons to carry out its functions. In the
early days when the Government had limited functions, it could operate effectively through
natural persons constituting its civil service and they were found adequate to discharge
governmental functions which were of traditional vintage. But as the tasks of the Government
multiplied with the advent of the welfare State, it began to be increasingly felt that the frame
work of civil service was not sufficient to handle the new tasks which were often specialised
and highly technical in character and which called for flexibility of approach and quick
decision making. The inadequacy of the civil service to deal with these new problems came
to be realised and it became necessary to forge a new instrumentality or administrative device
for handling these new problems. It was in these circumstances and with a view to supplying
this administrative need that the corporation came into being as the third arm of the
Government and over the years it has been increasingly utilised by the Government for
setting up and running public enterprises and carrying out other public functions. Today with
increasing assumption by the Government of commercial ventures and economic projects, the
corporation has become an effective legal contrivance in the hands of the Government for
carrying out its activities, for it is found that this legal facility of corporate instrument
provides considerable flexibility and elasticity and facilitates proper and efficient
management with professional skills and on business principles and it is blissfully free from
"departmental rigidity, slow motion procedure and hierarchy of officers". The Government in
many of its commercial ventures and public enterprises is resorting to more and more
frequently to this resourceful legal contrivance of a corporation because it has many practical
advantages and at the same time does not involve the slightest diminution in its ownership
and control of the undertaking. In such cases "the true owner is the State, the real operator is
the State and the effective controllerate is the State and accountability for its actions to the
community and to Parliament is of the State." It is undoubtedly true that the corporation is a
distinct juristic entity with a corporate structure of its own and it carries on its functions on
business principles with a certain amount of autonomy which is necessary as well as useful
from the point of view of effective business management, but behind the formal ownership
which is cast in the corporate mould, the reality is very much the deeply pervasive presence
of the Government. It is really the Government which acts through the instrumentality or
agency of the corporation and the juristic veil of corporate personality worn for the purpose
of convenience of management and administration cannot be allowed to obliterate the true
nature of the reality behind which is the Government. Now it is obvious that if a corporation
is an instrumentality or agency of the Government, it must be subject to the same limitations

in the field of constitutional law as the Government itself, though in the eye of the law it
would be a distinct and independent legal entity. If the Government acting through its officers
is subject to certain constitutional limitations, it must follow a fortiori that the Government
acting through the instrumentality or agency of a corporation should equally be subject to the
same limitations.
If such a corporation were to be free from the basic obligation to obey the Fundamental
Rights, it would lead to considerable erosion of the efficiency of the Fundamental Rights, for
in that event the Government would be enabled to over-ride the Fundamental Rights by
adopting the stratagem of carrying out its functions through the instrumentality or agency of a
corporation, while retaining control over it.

These observations of the court in the International Airport Authority's case (supra) have our
full approval.
9. The tests for determining as to when a corporation can be said to be a instrumentality or
agency of Government may now be called out from the judgment in the International Airport
Authority's case. These tests are not conclusive or clinching, but they are merely indicative
indicia which have to be used with care and caution, because while stressing the necessity of
a wide meaning to be placed on the expression "other authorities", it must be realised that it
should not be stretched so far as to bring in every autonomous body which has some nexus
with the Government within the sweep of the expression. A wide enlargement of the meaning
must be tempered by a wise limitation. We may summarise the relevant tests gathered from
the decision in the International Airport Authority's case as follows :

(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.

(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.

(3) It may also be a relevant factor...

whether the corporation enjoys monopoly status which is the State conferred or State
protected.

(4) Existence of deep and pervasive State control may afford an indication that the
Corporation is a State agency or instrumentality.

(5) If the functions of the corporation 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.

(6) Specifically, if a department of Government is transferred to a corporation, it would be a

strong factor supportive of this inference of the corporation being an instrumentality or
agency of Government.

If on a consideration of these relevant factors it is found that the corporation is an

instrumentality or agency of government, it would, as pointed out in the International Airport
Authority's case, be an 'authority' and, therefore, 'State' within the meaning of the expression
in Article 12.