How Should Courts Determine If An Authority Is A State Under Article 12? Delhi High Court Answers

The Delhi High Court has discussed in detail the guidelines that must be borne in mind by the courts while adjudicating the question as to whether an authority can be termed as a "State" within the meaning of Article 12 of the Constitution of India.

A division bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad said that the control exercised by the State over an authority should be pervasive in nature to the extent that the authority should have limited autonomy.

"It must not be lost sight of that in the modern concept of Welfare State, independent institution, corporation and agency are generally subject to State control. The State control does not render such bodies as 'State' under Article 12. The State control, however vast and pervasive, is not determinative. The financial contribution by the State is also not conclusive," the court held.

It also observed the combination of State aid along with an "unusual degree of control" over an authority's management and policies thereby rendering of an important public service, may also reflect that the said body is a State.

"If the government operates behind a corporate veil, carrying out governmental activity and governmental functions of vital public importance, there may be little difficulty in identifying the body as "State" within the meaning of Article 12 of the Constitution," the court said.

Emphasising that there is no clear-cut formula for deciding if an authority is a State or not, the court said that the powers, functions, finances and control of the government are some of the indicating factors to answer the question.

"With regard to this, each case must be handled with care and caution. Where the financial assistance from the State is so much as to meet almost entire expenditure of the institution, or the share capital of the corporation is completely held by the government, then one could agree with an entity being bestowed with government character. It may be a relevant factor if the institution or the corporation enjoys monopoly status which is State conferred or State protected," the court said.

The bench also said that other factors to adjudicate if an authority is a State may include the existence of a deep and pervasive State control and if the functions of the institution are of public importance, relating to governmental functions.

These are merely indicative indicia and are by no means conclusive or clinching in any case, the bench added while relying on various Supreme Court rulings.

The bench made the observations while dismissing an appeal challenging the order of the single judge which had ruled thar Gems & Jewellery Export Promotion Council (GJEPC) does not fall within the ambit of State under Article 12 of the Constitution of India.

Upholding the impugned order, the division bench said that the function performed by the GJEPC cannot be termed as a public duty.

Taking note of the Articles of Association and Memorandum of Association of GJEPC, the court observed that the council's primary function is to support, protect, maintain and promote the export of gems and jewellery and to act as a Nodal Agency between the exporters and the Government.

"The Council being a collective body of the exporters places the interests/problems faced by the exporters before the Government so that the Government can take such decisions which would promote the export of gems and jewellery. The Council, therefore, does not carry out the policy decisions of the Government or is in any way relevant to the decision-making process of the Government regarding exports of these articles," the court said.

The court also observed that the funds provided by the Centre to GJEPC are solely for execution of specific schemes and projects, adding that it is the Central Government's prerogative to ensure that the said funds are not misused.

It added that merely because the Central Government may also inspect the books and accounts of GJPEC does not establish that it controls the council's financial aspects.

"In view of the above observations, this Court is of the opinion that the learned Single Judge vide the impugned Judgement dated 09.07.2021 in W.P.(C) No. 4733/2021, wherein it held that the writ petition would not be maintainable as the GJEPC, i.e. Respondent No.2 does not fall within the ambit of "State" and "other authorities" under Article 12 of the Constitution of India, is legally firm and does not require any interference on the part of this Court," the court said.

Title: DR JITARANI UDGATA v. UNION OF INDIA & ANR.

Citation: 2022 LiveLaw (Del) 997

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