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KESHAV DATT vs SOUTH ASIAN UNIVERSITY

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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Pronounced on: 23rd January, 2024

+ W.P.(C) 12084/2023 & CM APPL. 47452/2023
KESHAV DATT ….. Petitioner
Through: Mr. Abhik Chimni, Mr. Saharsh Saxena, Mr. Anant Khajuria and Ms. Riya Pahuja, Advocates
versus

SOUTH ASIAN UNIVERSITY ….. Respondent
Through: Mr. Sandeep Kumar Mahapatra, Ms. Mrinmayee Sahu and Ms. Kritika Sharma, Advocates
CORAM:
HON’BLE MR. JUSTICE CHANDRA DHARI SINGH
J U D G M E N T
CHANDRA DHARI SINGH, J.
FACTUAL MATRIX
1. The petitioner in the present matter is working as Director (Finance) in the respondent University. The respondent University is an Intergovernmental University established by the agreement entered between the members of the South Asian Association for Regional Cooperation (‘SAARC’ hereinafter) in the year 2007 and in pursuance of the same, the Parliament of India had enacted the South Asian University Act, 2008 (‘SAU Act’ hereinafter). The SAARC was established in 1985 and have 8 South Asian member nations as part of the organization.
2. The management of the respondent University is entrusted to a governing body consisting of two members each from the respective Member States of the SAARC members having financial, functional and administrative control over the respondent University.
3. In the year 2023, there were allegations of financial misappropriations against the petitioner thereby leading to his suspension. The relevant extract of the suspension order dated 4th August, 2023 is as under:[[
“OFFICE ORDER
Whereas disciplinary proceeding is contemplated against Mr. Keshav Datt, Director Finance.
Now, therefore, the Competent Authority, in the exercise of his powers, places Mr. Keshav Datt under
suspension with immediate effect.
This issues with the approval of the Competent Authority.”

4. Pursuant to the issuance of the suspension letter, the petitioner made a representation to the Acting President (competent authority), and also met him to raise his grievance against the said suspension order, however, no action has been taken on the same by the authority.
5. Aggrieved by the same, the petitioner has approached this Court under Article 226 of the Constitution of India seeking the following reliefs:
“It is therefore most respectfully prayed that this Hon’ble Court may be pleased to:
a) Issue a Writ/ Direction/Order quashing the Office Order bearing No. SAU/3-2/2019/PF-060/1579 dated 04.08.2023 passed by the Respondent University; and
b) Issue a Writ/ Direction/Order quashing the Office Order bearing No. SAU/3-2/2019/PF-060/1580 dated 04.08.2023 passed by the Respondent University; and
c) Grant the litigation costs in favour of the Petitioner; and/or
And for this act of kindness, the Petitioner, as in duty bound, shall ever pray.”
6. During the proceedings of the present writ and other connected matters, the learned counsel appearing on behalf of the respondent University has raised the issue of maintainability of the said writ and referred to numerous clauses and the charter of the respondent University to supplement her arguments.
7. Therefore, the limited question, at this instance, is whether the present petitions are maintainable, and considering the statements on behalf of the learned counsel for the petitioner, whether this Court has the jurisdiction to entertain the reliefs as sought by the petitioner.
SUBMISSIONS
(on behalf of the respondents)
8. The learned counsel for the respondents, at the outset, objected to the instant petition on the ground of maintainability and submitted that this Court lacks the jurisdiction to entertain and adjudicate upon the present writ petition as the respondent University is an intergovernmental University established by the 2007 Agreement of the Governments of the SAARC Countries and the said agreement is the highest law of the University, followed by the intergovernmental Rules, Regulations and bye-laws and the preamble of the said Rules provides for precedence of the legal instruments of the respondent University over national legislations of the various countries associated with it.
9. It is submitted that while signing the intergovernmental agreement in 2007, the members of the respondent University, i.e. the SAARC countries had agreed that the University shall be a non-State, non-profit, self-governing international educational institution with main campus at New Delhi and in pursuance of the same, the Parliament of India had enacted the South Asian University Act, 2008 (‘SAU Act’ hereinafter).
10. It is submitted that the respondent University does not meet the criteria laid down for state instrumentality governed under the Article 12 of the Constitution of India as it is not financially, functionally or under the pervasive control of the Government of India. Furthermore, even though it is true that 50% of the funding to the respondent University comes from the Government of India, the absence of pervasive control over administration and functioning of the respondent University makes it clear that the respondent University is does not fall within the ambit of the said Article of the Constitution of India hence, it is amenable to writ jurisdiction.
11. It is submitted that Section 6 of the SAU Act empowers the Governing body to be responsible for the management of the University and the member nations of the SAARC have equal representation in the said body.
12. It is submitted that the respondent University does not receive any grant from the University Grants Commission (‘UGC’ hereinafter) and does not conform to the rules and regulations laid down by the UGC and therefore, cannot be held as a central university like any other universities controlled by the UGC in the Country.
13. It is submitted that Section 14 of the SAU Act provides for immunity to the officials of the respondent University and the same were notified by the Ministry of External Affairs, Union of India by way of a Gazette notification dated 15th January, 2009, whereby, the immunity provided under Section 3 of the United Nations (Privileges and Immunities) Act, 1947 (‘UN Act’ hereinafter) was accorded to the project office and officials of the respondent University under certain terms. The said terms are as follows:
“2 And whereas, in pursuance of the decision of the Inter-governmental Steering Committee of the SAARC, it is expedient to accord the Project Office and officials thereof, and the South Asian University, its President, Registrar and Faculty members the privileges and immunities in India similar to those contained in Articles I, III, IV, V, VI and VII of the Schedule to the United Nations Privileges and Immunities) Act, 1947. Now therefore, the Central Government in exercise of the powers conferred by Section 3 of the said Act, hereby declare that the provisions of Articles II, III, IV, V, VI and VII of the Schedule to the said Act shall apply mutatis mutandis to the Project Office and officials thereof, and the South Asian University, its President, Registrar and Faculty Members for giving effect to the said Headquarters’ Agreement”.”

14. It is submitted that the respondent University is well within their powers to instill discipline in employees and the said powers stems from Section 8 of the SAU Act, whereby the University has been conferred the said powers to exercise as and when required.
15. It is also submitted that the University has placed a system for redressal of the grievances of the employees where referral to an Arbitral Tribunal can be made for resolving a dispute, however, the petitioner in the instant case chose to directly approach this Court by way of filing the instant petitions thereby surpassing the procedure established for redressal of grievance where the petitioner has an option to approach the Arbitral Tribunal.
16. In view of the foregoing submissions, the learned counsel for the respondent University submitted that the respondent University, being an international organization is not subject to the writ jurisdiction conferred to this Court under Article 226 of the Constitution of India, therefore, the instant petitions are not maintainable.
(on behalf of the petitioner)
17. Per Contra, the learned counsel appearing on behalf of the petitioner vehemently opposed the said contentions advanced by the learned counsel for the respondents and submitted that the SAU Act provides for the respondent University to be tried in the Court of law of the Country and the said intent of the legislation is evident from Section 29 of the SAU Act.
18. It is submitted that Section 29 of the SAU clearly makes the respondent University liable to be tried in the Court of law if the University does not act in good faith and does not conform to the provisions of the SAU Act.
19. It is submitted that Section 3 of the UN Act confers immunity and privileges to the international organizations which is limited only to individual/official but not to the institution, therefore, the immunity conferred to the officials of the respondent University is only with regard to personal liability and not to the respondent University in entirety.
20. It is submitted that the procedure prescribed for dispute resolution under the UN Act has not been made applicable to the respondent University, and the University was established by an Act of the Parliament, pursuant to the intergovernmental agreement between the SAARC nations so as to provide for all legal recourse including the right to approach the Constitutional Courts of the country in which the University is established.
21. It is submitted that if this Court holds the University is not amenable to writ jurisdiction of the Constitutional Courts, the respondent University would virtually become an institution against which there is no remedy in law while the respondent University, being situated in territory of India and the benefitting from the public funds of the country.
22. It is submitted that the funds for infrastructure and lands for the campus of the respondent University has been completely funded by the Government of India and the University operates within the constitutional setup and framework of India where the writ Courts are meant to protect the constitutional rights of the people if there is any violation by any instrumentality of the State, therefore, the respondent University being an instrumentality of the State, is liable to fall within the ambit of Article 12 of the Constitution of India.
23. It is submitted that since Section 2(f) of the UGC Act, 1985 defines ‘University’ and meaning thereby, a University incorporated under a Central Act, a Provincial Act or a State Act and Entry 15 of the list of 56 Central Universities, as notified by the UGC, mentions the name of the South Asian University, the respondent University is well within the bounds of the Article 12 of the Constitution of India.
24. It is also submitted that even if it is assumed that the respondent University is not within the definition of an authority under Article 12, it is engaged in imparting higher education and thus discharging public function, therefore, satisfying the test laid down in Dr. Janet Jeyapaul v. SRM University, (2015) 16 SCC 530, and is thus amenable to Article 226 of the Constitution of India.
25. The learned counsel for the petitioner further contended that the respondent University has not been provided any immunity from the legal proceedings, rather has been given protection from specific laws such as taxation, customs etc. and therefore, the said protection cannot be termed as an institutional immunity provided to the respondent University under the UN Act.
26. It is submitted that the Articles III and VI of the UN Act give an exhaustive list of the immunities and privileges available to the SAU and a reading of the same would show that the respondent University does not have a blanket protection, rather is only exempted from paying taxes, customs duties etc.
27. It is further contended that even though Article VI of the UN Act provides for immunities from personal arrest and prosecution, the same is limited to the President and faculty members and are not applicable to the respondent University.
28. It is submitted that the Gazette notification dated 15th January, 2009 chose not to make applicable Article VIII of the UN Act which provides jurisdiction to the International Court of Justice (‘ICJ’ hereinafter) and therefore, the legislative intent was to keep intact the writ jurisdiction of the Courts against the respondent University.
29. In view of the foregoing submissions, the learned counsel appearing on behalf of the petitioner submitted that this Court is well within its powers to issue any writ as conferred under Article 226 of the Constitution of India and therefore, prays that the present writ may be heard on merits and decided accordingly.
(On behalf of respondents-rejoinder)
30. During the course of proceedings, the learned counsel appearing on behalf of the respondent University as rejoinder vehemently opposed the said submissions made by the counsel for the petitioner and rebutted the arguments as mentioned in the succeeding paragraphs.
31. The learned counsel submitted that the argument regarding immunities provided only to the President and faculty members of the respondent University is not legally sound as the Notification dated 15th January, 2009 clearly accorded immunity to the respondent University ‘from every form of legal process’.
32. It is submitted that the immunity granted to the respondent University as an intergovernmental organization is no different than the immunities provided to the intergovernmental organizations in other countries, and the purpose for the same is rooted in the need to protect international organizations from unilateral control by a member nation over activities of the international organizations within its territory.
33. It is submitted that Section 26 of the SAU Act and Rule 25.2 as drafted by the Standing Committee of the respondent University provides for an Arbitral Tribunal to have sole jurisdiction over the disputes arising out of the contracts of employment between the respondent University and the petitioner.
34. It is submitted that the petitioner herein has not availed the said remedy available to them and therefore, without exhausting the alternative remedy the writ petition cannot be made maintainable.
35. It is submitted that the petitioner’s contention regarding the responsibility of the respondent University to act in good faith cannot be admitted as Section 8 (xix) and (xviii) of the SAU Act provides for assumption of jurisdiction to consider the matter on merits, and the said jurisdiction is conferred with the Arbitral Tribunal and not the Constitutional Courts.
36. It is also submitted that the petitioner was suspended from the said post for serious financial irregularities in the University and therefore, a strong prima facie case has been established against him.
37. It is therefore submitted that the present batch of petitions is liable to be dismissed both on maintainability as well as on merits.
ANALYSIS AND FINDINGS
38. Heard the learned counsel for the parties at length and perused the records relied upon by the counsel for substantiating their respective claims.
39. During the course of proceedings, the learned counsel for the respondent University made a preliminary objection to the maintainability of the present writs, and in furtherance of the same, both the counsel of the parties had restricted their submissions to the said aspect. Therefore, in this judgment, this Court is adjudicating the issue of maintainability only.
40. The crux of the contentions made by the learned counsel for the petitioner is that the present writ is maintainable because the immunity provided by the Ministry of External Affairs vide notification dated 15th January, 2009 only extends to the President and staff (faculty members) of the University, and the same does not confer any immunity on the University in itself. The counsel has further argued that the respondent University was established by an Act of the Parliament and the infrastructure has been developed with the help of land and funds provided by the Government of India for discharging public functions, therefore, making the respondent University well within the ambit of Article 12 of the Constitution of India. At last, the learned counsel contended that even if the University is held to be not a state under Article 12 of the Constitution, it can still be subjected to the jurisdiction of this Court by virtue of it discharging public functions i.e., imparting higher education.
41. In rival submissions, the learned counsel for the respondent University denies the said submissions made by the petitioner and countered the same by stating that the respondent University was established by the Charter of the SAU signed and adopted by the SAARC countries having equal role in the administration and functioning of the respondent University. The learned counsel for the respondent further argued that the Preamble of respondent university itself clarifies the position of law regarding the maintainability of the present writ where the bye-laws governing the respondent University shall be given precedence over any other law of any member country including the Republic of India.
42. In furtherance of the said contentions, reliance has been placed upon various provisions of the SAU Act, UN Act, and other authorities dealing with the issue of international organizations situated in various jurisdictions across the world.
43. In light of the same, this Court deems it appropriate to frame the following issues to determine the question of maintainability of the present writ:

a) Whether the respondent University is an International Organization where the Republic of India, like any other member country is merely a member and does not exert any special role in controlling the functioning of the University despite the existence of the University in Delhi?
b) Whether the immunity granted under the UN Act under Article 3 of the Act and extended to the officials of the University vide notification dated 15th January, 2009 extends to the University as well and therefore, exempts it from any form of litigation or whether the respondent University can be held under the ambit of Article 226 of the Constitution of India? If no, can it be said that the referral to Arbitral Tribunal for solving of disputes between the University and the petitioner is the only remedy available to the petitioner for redressal of his grievance against the impugned suspension orders.

Issue I
44. Before delving into this issue, it is apposite for this Court to briefly discuss the history of the respondent University and the intent for establishment of such an institution.
45. The respondent University is an institution established with an aim to foster regional cooperation and academic excellence among South Asian nations and the idea for establishment of the respondent University as conceived in the year 2005 during the 13th SAARC summit held in Dhaka, Bangladesh.
46. In the 2007 a Summit was held in New Delhi, the SAU Headquarter agreement was signed between the member countries leading to establishment of the respondent University. The relevant parts of the Headquarter agreement dated 4th April, 2007 are as under:
“Article 1
Establishment of the South Asian University
1. There is hereby established an institution to be known as the South Asian University (hereinafter referred to as the “University”), which shall be a non-state, non-profit self governing international educational institution with a regional focus for the purposes set forth in this agreement and shall have full academic freedom for the attainment of its objectives.
2. The main campus of the University shall be located in India.

3. The University shall have full legal Personality.
4. The legal capacity of the University shall, inter alia, include:
(a) The power to confer degrees, diplomas and certificates
(b) The capacity to contract;
(c) To sue and be sued in its name;
(d) To acquire, hold and dispose of properties;
(e) To establish campuses and centres in the region; and
(f) To make rules, regulations and bye laws for the operation of the University.

Article 2
Objectives & Functions of the South Asian University
The objectives and functions of the University shall, inter alia, include:
1. To create a world class institution of learning that will bring together the brightest and the most dedicated students from all countries of South Asia-irrespective of gender, caste, creed, disability, ethnicity or socio-economic background – to impart to them liberal and humane education and to give them the analytical tools needed for the pursuit of profession and inculcate in them the qualities of leadership.
2. To build a South Asian community of learning where every student will be able to develop her/his fullest intellectual potential and to create a South Asian community by strengthening regional consciousness;
3. To impart education towards capacity building of the South Asian nations in the domain of science, technology and other areas of higher learning vital for improving their quality of life;
4.To contribute to the promotion of regional peace and security by bringing together the future leaders of South Asia, and enhancing their understanding of each others’ perspectives.
5. To foster in the students sound civic sense and to train them to become useful citizens of democratic societies;”

47. Upon perusal of the Article 1 of the said agreement, it is made out that the member countries intended to give the respondent University an identity of its own where the respondent University can sue or be sued under its own name having an identity independent of the SAARC member countries.
48. In light of the same, it is fair to deduce that the University has its own legal entity like any organization where legal liability can be drawn upon the University as and when required, however, the question is whether the Constitutional Courts situated in the Country can subject the respondent University to litigation under the writ jurisdiction conferred to them by the Constitution.
49. Pursuant to the said agreement signed between the member countries of the SAARC, the Government of India drafted an Act namely South Asian Act, 2008 (‘SAU Act’) whereby the Headquarters’ Agreement was given effect to establish the respondent University.
50. For adjudication of the issue I, it is pertinent for this Court to look into the various provisions of the Act which has been discussed herein below.
51. It is well settled that for an entity to come within the ambit of writ jurisdiction, it is important to satisfy the test laid down for its inclusion as a ‘State’ under Article 12 of the Constitution of India. The said provision reads as under:
“12. Definition.—In this Part, unless the context otherwise requires, “the State” includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India.”

52. On a perusal of the above provision, it is apparent that the term ‘State’ and ‘Law’ are considered of utmost importance where the term ‘State’ includes the following:
(i) the Government and Parliament of India:
(ii) the Government and the Legislature of a State;
(iii) all local authorities; and
(iv) other authorities within the territory of India, or under the control of the Central Government.

53. In the said provision, apart from the term other authority, the other terms are self-explanatory where the term local authority has also been defined under General Clauses Act, 1897.
54. The question with regard to interpretation of the term “other authority” came up before the Hon’ble Supreme Court and it has time and again, whereby the landmark judgments delivered by the Hon’ble Court more or less settled the position regarding inclusion of the authorities under the term other authority.
55. In several cases, the question of statutory body being an authority under Article 12 came up before the Hon’ble Supreme Court where the Hon’ble Court held that if a corporation is an instrumentality or agency of the government, it would be subject to the same constitutional or public law limitation as on the government itself.
56. The interpretation of the term other authority has been done by Justice Mathew in the case of Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, (1975) 1 SCC 421, whereby and his concurring opinion in the case has been interpreted/relied upon in stricto senso by various Courts of the Country. The relevant portion of the said judgment is reproduced herein:
“76. In Rajasthan Electricity Board v. Mohan Lal [AIR 1967 SC 1857 : (1967) 3 SCR 377 : (1968) 1 Lab LJ 257] this Court had occasion to consider the question whether the Rajasthan Electricity Board was an authority within the meaning of the expression “other authorities” in Article 12 of the Constitution. Bhargava, J. delivering the judgment for the majority pointed out that the expression “other authorities” in Article 12 would include all constitutional and statutory authorities on whom powers are conferred by law. The learned Judge also said that if any body of persons has authority to issue directions, the disobedience of which would be punishable as a criminal offence, that would be an indication that that authority is “State”. Justice Shah who delivered a separate judgment agreeing with the conclusion reached by the majority preferred to adopt a slightly different meaning to the words “other authorities”. He said that authorities, constitutional or statutory, would fall within the expression “state” as defined in Article 12 only if they are invested with sovereign power of the State, namely, the power to make rules or regulations which have the force of law.
77. The test propounded by the majority is satisfied so far as the Oil and Natural Gas Commission (hereinafter referred to as “the Commission”) is concerned as Section 25 of the Oil and Natural Gas Commission Act (hereinafter referred to as “the Act”) provides for issuing binding directions to owners of land and premises not to prevent employees of the Commission from entering upon their property if the Commission so directs. In other words, as Section 25 authorises the Commission to issue binding directions to third parties not to prevent the employees of the Commission from entering into their land and as disobedience of such directions is punishable under the relevant provision of the Penal Code, 1860 since those employees are deemed to be public servants under Section 21 of the Penal Code, 1860 by virtue of Section 27 of the Act, the Commission is an “authority” within the meaning of the expression “other authorities” in Article 12.
78. Though this would be sufficient to make the Commission a “State” according to the decision of this Court in the Rajasthan Electricity Board case [AIR 1967 SC 1857 : (1967) 3 SCR 377 : (1968) 1 Lab LJ 257] , there is a larger question which has a direct bearing so far as the other two corporations are concerned viz. whether, despite the fact that there are no provisions for issuing binding directions to third parties the disobedience of which would entail penal consequence, the corporations set up under statutes to carry on business of public importance or which is fundamental to the life of the people can be considered as “State” within the meaning of Article 12. That article reads:
“In this Part, unless the context otherwise requires, ‘the State’ includes the Government and Parliament of India and the Government and the legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India.”
It is relevant to note that the Article does not define the word “State”. It only provides that “State” includes the authorities specified therein. The question whether a corporation set up under a statute to carry on a business of public importance is a “State” despite the fact that it has no power to issue binding directions has to be decided on other considerations.
79. One of the greatest sources of our strength in Constitutional Law is that we adjudge only concrete cases and do not pronounce principles in the abstract. But there comes a moment when the process of empiric adjudication calls for more rational and realistic disposition than that the immediate case is not different from preceding cases.
80. The concept of State has undergone drastic changes in recent years. Today State cannot be conceived of simply as a coercive machinery wielding the thunderbolt of authority. It has to be viewed mainly as a service corporation:
“If we clearly grasp the character of the State as a social agent, understanding it rationally as a form of service and not mystically as an ultimate power, we shall differ only in respect of the limits of its ability torender service.” (See Mac Iver, The Modern State, p. 183).
81. To some people State is essentially a class-structure, “an organization of one class dominating over the other classes”; others regard it as an organisation that transcends all classes and stands for the whole community. They regard it as a power-system. Some view it entirely as a legal structure, either in the old Austinian sense which made it a relationship of governors and governed, or, in the language of modern jurisprudence, as a community “organised for action under legal rules”. Some regard it as no more than a mutual insurance society, others as the very texture of all our life. Some class the State as a great “corporation” and others consider it as indistinguishable from society itself [ See Mac Iver, The Modern State, pp. 3-4].”

57. Upon perusal of the above cited paragraphs, it is clear that Mathew J propelled the discussion regarding interpretation of other authority by presenting two conceptions of the State, one being a ‘coercive machinery wielding the thunderbolt of authority’, and the other, a ‘service corporation’ and held an authority to be within the bounds of Article 12 if it satisfies the said ingredients.
58. Therefore, it is imperative for the Courts to look into the structural features of an authority to determine as to whether the said authority can come within the ambit of Article 12 of the Constitution of India or not.
59. The issue regarding interpretation of the term other authority again came up before the Hon’ble Supreme Court in Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722, where the Hon’ble Court dealt with the aspect related to the inclusion of a corporation as an authority under Article 12 and held as under:
“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 framework 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 controllorate 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 fortiorari 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 override 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. The fundamental rights would then be reduced to little more than an idle dream or a promise of unreality. It must be remembered that the Fundamental rights are constitutional guarantees given to the people of India and are not merely paper hopes or fleeting promises and so long as they find a place in the Constitution, they should not be allowed to be emasculated in their application by a narrow and constricted judicial interpretation. The courts should be anxious to enlarge the scope and width of the fundamental rights by bringing within their sweep every authority which is an instrumentality or agency of the Government or through the corporate personality of which the Government is acting, so as to subject the Government in all its myriad activities, whether through natural persons or through corporate entities, to the basic obligation of the fundamental rights. The constitutional philosophy of a democratic socialist republic requires the Government to undertake a multitude of socio-economic operations and the Government, having regard to the practical advantages of functioning through the legal device of a corporation, embarks on myriad commercial and economic activities by resorting to the instrumentality or agency of a corporation, but this contrivance of carrying on such activities through a corporation cannot exonerate the Government from implicit obedience to the Fundamental rights. To use the corporate methodology is not to liberate the Government from its basic obligation to respect the Fundamental rights and not to override them. The mantle of a corporation may be adopted in order to free the Government from the inevitable constraints of red tapism and slow motion but by doing so, the Government cannot be allowed to play truant with the basic human rights. Otherwise it would be the easiest thing for the Government to assign to a plurality of corporations almost every State business such as post and telegraph, TV and radio, rail road and telephones — in short every economic activity — and thereby cheat the people of India out of the fundamental rights guaranteed to them. That would be a mockery of the Constitution and nothing short of treachery and breach of faith with the people of India, because, though apparently the corporation will be carrying out these functions, it will in truth and reality be the Government which will be controlling the corporation and carrying out these functions through the instrumentality or agency of the corporation. We cannot by a process of judicial construction allow the Fundamental rights to be rendered futile and meaningless and thereby wipe out Chapter III from the Constitution. That would be contrary to the constitutional faith of the post-Maneka Gandhi [Maneka Gandhi v. Union of India, (1978) 1 SCC 248 : (1978) 2 SCR 621] era. It is the fundamental rights which along with the directive principles constitute the life force of the Constitution and they must be quickened into effective action by meaningful and purposive interpretation. If a corporation is found to be a mere agency or surrogate of the Government, “in fact owned by the Government, in truth controlled by the Government and in effect an incarnation of the Government”, the court, must not allow the enforcement of fundamental rights to be frustrated by taking the view that it is not the Government and therefore not subject to the constitutional limitations. We are clearly of the view that where a corporation is an instrumentality or agency of the Government, it must be held to be an “authority” within the meaning of Article 12 and hence subject to the same basic obligation to obey the Fundamental rights as the Government.
8. We may point out that this very question as to when a corporation can be regarded as an “authority” within the meaning of Article 12 arose for consideration before this Court in R.D. Shetty v. International Airport Authority of India [(1979) 3 SCC 489] . There, in a unanimous judgment of three Judges delivered by one of us (Bhagwati, J.) this Court pointed out: (SCC pp. 506-07, para 13)
“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 April 6, 1948 where it was stated inter alia that “management of State enterprise 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.”
The court then addressed itself to the question as to how to determine whether a corporation is acting as an instrumentality or agency of the Government and dealing with that question, observed: (SCC p. 507, para 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 committees 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.”
The court then proceeded to indicate the different tests, apart from ownership of the entire share capital: (SCC pp. 508 & 509, paras 15 & 16)
“… 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…. 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 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 [(1975) 1 SCC 421, 454 : 1975 SCC (L&S) 101, 134 : (1975) 3 SCR 619, 658] . 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….”
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 Stanford Law Review 620, 664] …. 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 [(1975) 1 SCC 421, 454 : 1975 SCC (L&S) 101, 134 : (1975) 3 SCR 619, 658] where the learned Judge said that ‘institutions engaged in matters of high public interest of 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’.”
The court however proceeded to point out with reference to the last functional test: (SCC p. 510, para 18)
“… the decisions show that even this test of public or Governmental character of the function is not easy of application and does not invariably lead to the correct inference because the range of Governmental activity is broad and varied and merely because an activity may be such as may legitimately be carried on by Government, it does not mean that a corporation, which is otherwise a private entity, would be an instrumentality or agency of Government by reason of carrying on such activity. In fact, it is difficult to distinguish between Governmental functions and non-Governmental functions. Perhaps the distinction between Governmental and non-Governmental functions is not valid any more in a social welfare State where the laissez faire is an outmoded concept and Herbert Spencer’s social statics has no place. The contrast is rather between Governmental activities which are private and private activities which are Governmental. (Mathew, J., Sukhdev v. Bhagatram [ Supra foot-note 4, SCC p 452 : SCC (L&S) p. 132 : SCR p. 652] ). But 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. Specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive of this inference.”
These observations of the court in the International Airport Authority case [(1979) 3 SCC 489] have our full approval.
9. The tests for determining as to when a corporation can be said to be an instrumentality or agency of Government may now be culled out from the judgment in the International Airport Authority case [(1979) 3 SCC 489] . 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 case [(1979) 3 SCC 489] 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. (SCC p. 507, para 14)
(2) Where the financial assistance of the State is so much as to meet almost entire expenditure of the corporation, it would afford some indication of the corporation being impregnated with Governmental character. (SCC p. 508, para 15)
(3) It may also be a relevant factor … whether the corporation enjoys monopoly status which is State conferred or State protected. (SCC p. 508, para 15)
(4) Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality. (SCC p. 508, para 15)
(5) If the functions of the corporation are of public importance and closely related to Governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government. (SCC p. 509, para 16)
(6) ‘Specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive of this inference’ of the corporation being an instrumentality or agency of Government.” (SCC p. 510, para 18)
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 case [(1979) 3 SCC 489] , be an “authority” and, therefore, ‘State’ within the meaning of the expression in Article 12
10. We find that the same view has been taken by Chinnappa Reddy, J. in a subsequent decision of this Court in the U.P. Warehousing Corporation v. Vijay Narayan [(1980) 3 SCC 459 : 1980 SCC (L&S) 453] and the observations made by the learned Judge in that case strongly reinforced the view we are taking particularly in the matrix of our constitutional system.
11. We may point out that it is immaterial for this purpose whether the corporation is created by a statute or under a statute. The test is whether it is an instrumentality or agency of the Government and not as to how it is created. The inquiry has to be not as to how the juristic person is born but why it has been brought into existence. The corporation may be a statutory corporation created by a statute or it may be a government Company or a Company formed under the Companies Act, 1956 or it may be a society registered under the Societies. Registration Act, 1860 or any other similar statute. Whatever be its genetical origin, it would be an “authority” within the meaning of Article 12 if it is an instrumentality or agency of the Government and that would have to be decided on a proper assessment of the facts in the light of the relevant factors. The concept of instrumentality or agency of the Government is not limited to a corporation created by a statute but is equally applicable to a Company or society and in a given case it would have to be decided, on a consideration of the relevant factors, whether the Company or society is an instrumentality or agency of the Government so as to come within the meaning of the expression “authority” in Article 12.
12. It is also necessary to add that merely because a juristic entity may be an “authority” and therefore “State” within the meaning of Article 12, it may not be elevated to the position of “State” for the purpose of Articles 309, 310 and 311 which find a place in Part XIV. The definition of “State” in Article 12 which includes an “authority” within the territory of India or under the control of the Government of India is limited in its application only to Part III and by virtue of Article 36, to Part IV: it does not extend to the other provisions of the Constitution and hence a juristic entity which may be “State” for the purpose of Parts III and IV would not be so for the purpose of Part XIV or any other provision of the Constitution. That is why the decisions of this Court in S.L. Aggarwal v. Hindustan Steel Ltd. [(1970) 1 SCC 177 : (1970) 3 SCR 363] and other cases involving the applicability of Article 311 have no relevance to the issue before us.”

60. The above cited paragraphs of the aforementioned case clarify the position of law which answers the question regarding inclusion of the entities in the definition of the other authorities as mentioned in Article 12 of the Constitution of India.
61. In the above cited paragraphs, it is clear that an entity cannot be characterized as a State merely because it was established by a statute, rather is it also necessary to determine the intent for creation of such an entity by the Legislation.
62. The foregoing paragraphs also clarify that an entity can be construed as an authority if the Government of India has majority financial control which might lead to inference of the Government’s entire control in the functioning of the said entity. Therefore, the structural features of an entity play a vital role in determining its inclusion under the term other authority under Article 12 of the Constitution of India.
63. Before applying the principles discussed in the above said cases to the case at hand, this Court deems it important to discuss another landmark judgment delivered by the Hon’ble Supreme Court in Pradeep Kumar Biswas v. Indian Institute of Chemical Biology, (2002) 5 SCC 111.
64. In the aforesaid case, the Hon’ble Court expounded the conditions needed to be met for considering an organization as a State under Article 12. The relevant portions of the judgment are reproduced herein:
“What is “authority” and when includible in “other authorities”, re : Article 12
93. We have, in the earlier part of this judgment, referred to the dictionary meaning of “authority”, often used as plural, as in Article 12 viz. “other authorities”. Now is the time to find out the meaning to be assigned to the term as used in Article 12 of the Constitution.
94. A reference to Article 13(2) of the Constitution is apposite. It provides—
“13. (2) The State shall not make any law which takes away or abridges the rights conferred by this Part and any law made in contravention of this clause shall, to the extent of the contravention, be void.”
Clause (3) of Article 13 defines “law” as including any ordinance, order, bye-law, rule, regulation, notification, custom or usage having in the territory of India the force of law. We have also referred to the speech of Dr B.R. Ambedkar in the Constituent Assembly explaining the purpose sought to be achieved by Article 12. In Ramana Dayaram Shetty case [(1979) 3 SCC 489 : AIR 1979 SC 1628] Bhagwati, J. (as he then was) stated that in RSEB case [AIR 1967 SC 1857 : (1967) 3 SCR 377] , the majority adopted the test that a statutory authority
“would be within the meaning of the expression ‘other authorities’, if it has been invested with statutory power to issue binding directions to third parties, the disobedience of which would entail penal consequence or it has the sovereign power to make rules and regulations having the force of law”.
In Sukhdev Singh case [(1975) 1 SCC 421 : 1975 SCC (L&S) 101 : (1975) 3 SCR 619] the principal reason which prevailed with A.N. Ray, C.J. for holding ONGC, LIC and IFC as authorities and hence “the State” was that rules and regulations framed by them have the force of law. In Sukhdev Singh case [(1975) 1 SCC 421 : 1975 SCC (L&S) 101 : (1975) 3 SCR 619] , Mathew, J. held that the test laid down in RSEB case [AIR 1967 SC 1857 : (1967) 3 SCR 377] was satisfied so far as ONGC is concerned but the same was not satisfied in the case of LIC and IFC and, therefore, he added to the list of tests laid down in RSEB case [AIR 1967 SC 1857 : (1967) 3 SCR 377] by observing that though there are no statutory provisions, so far as LIC and IFC are concerned, for issuing binding directions to third parties, the disobedience of which would entail penal consequences, yet these corporations (i) set up under statutes, (ii) to carry on business of public importance or which is fundamental to the life of the people — can be considered as the State within the meaning of Article 12. Thus, it is the functional test which was devised and utilized by Mathew, J. and there he said,
“the question for consideration is whether a public corporation set up under a special statute to carry on a business or service which Parliament thinks necessary to be carried on in the interest of the nation is an agency or instrumentality of the State and would be subject to the limitations expressed in Article 13(2) of the Constitution. A State is an abstract entity. It can only act through the instrumentality or agency of natural or juridical persons. Therefore, there is nothing strange in the notion of the State acting through a corporation and making it an agency or instrumentality of the State”. (SCC p. 449, para 82)
It is pertinent to note that functional tests became necessary because of the State having chosen to entrust its own functions to an instrumentality or agency in the absence whereof that function would have been a State activity on account of its public importance and being fundamental to the life of the people.
95. The philosophy underlying the expansion of Article 12 of the Constitution so as to embrace within its ken such entities which would not otherwise be the State within the meaning of Article 12 of the Constitution has been pointed out by the eminent jurist H.M. Seervai in Constitutional Law of India (Silver Jubilee Edition, Vol. 1).
“The Constitution should be so interpreted that the governing power, wherever located, must be subjected to fundamental constitutional limitations. … Under Article 13(2) it is State action of a particular kind that is prohibited. Individual invasion of individual rights is not, generally speaking, covered by Article 13(2). For, although Articles 17, 23 and 24 show that fundamental rights can be violated by private individuals and relief against them would be available under Article 32, still, by and large, Article 13(2) is directed against State action. A public corporation being the creation of the State, is subject to the same constitutional limitations as the State itself. Two conditions are necessary, namely, that the Corporation must be created by the State and it must invade the constitutional rights of individuals.” (para 7.54) “The line of reasoning developed by Mathew, J. prevents a large-scale evasion of fundamental rights by transferring work done in government departments to statutory corporations, whilst retaining government control. Company legislation in India permits tearing of the corporate veil in certain cases and to look behind the real legal personality. But Mathew, J. achieved the same result by a different route, namely, by drawing out the implications of Article 13(2).”

96. The terms instrumentality or agency of the State are not to be found mentioned in Article 12 of the Constitution. Nevertheless they fall within the ken of Article 12 of the Constitution for the simple reason that if the State chooses to set up an instrumentality or agency and entrusts it with the same power, function or action which would otherwise have been exercised or undertaken by itself, there is no reason why such instrumentality or agency should not be subject to the same constitutional and public law limitations as the State would have been. In different judicial pronouncements, some of which we have reviewed, any company, corporation, society or any other entity having a juridical existence if it has been held to be an instrumentality or agency of the State, it has been so held only on having been found to be an alter ego, a double or a proxy or a limb or an offspring or a mini-incarnation or a vicarious creature or a surrogate and so on — by whatever name called — of the State. In short, the material available must justify holding of the entity wearing a mask or a veil worn only legally and outwardly which on piercing fails to obliterate the true character of the State in disguise. Then it is an instrumentality or agency of the State.
97. It is this basic and essential distinction between an “instrumentality or agency” of the State and “other authorities” which has to be borne in mind. An authority must be an authority sui juris to fall within the meaning of the expression “other authorities” under Article 12. A juridical entity, though an authority, may also satisfy the test of being an instrumentality or agency of the State in which event such authority may be held to be an instrumentality or agency of the State but not vice versa.
98. We sum up our conclusions as under:
(1) Simply by holding a legal entity to be an instrumentality or agency of the State it does not necessarily become an authority within the meaning of “other authorities” in Article 12. To be an authority, the entity should have been created by a statute or under a statute and functioning with liability and obligations to the 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. If created under a statute, then there must exist some other statute conferring on the entity such powers. In either case, it should have been entrusted with such functions as are governmental or closely associated therewith by being of public importance or being fundamental to the life of the people and hence governmental. Such authority would be the State, for, one who enjoys the powers or privileges of the State must also be subjected to limitations and obligations of the State. It is this strong statutory flavour and clear indicia of power — constitutional or statutory, and its potential or capability to act to the detriment of fundamental rights of the people, which makes it an authority; though in a given case, depending on the facts and circumstances, an authority may also be found to be an instrumentality or agency of the State and to that extent they may overlap. Tests 1, 2 and 4 in Ajay Hasia [Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722 : 1981 SCC (L&S) 258] enable determination of governmental ownership or control. Tests 3, 5 and 6 are “functional” tests. The propounder of the tests himself has used the words suggesting relevancy of those tests for finding out if an entity was instrumentality or agency of the State. Unfortunately thereafter the tests were considered relevant for testing if an authority is the State and this fallacy has occurred because of difference between “instrumentality and agency” of the State and an “authority” having been lost sight of sub silentio, unconsciously and undeliberated. In our opinion, and keeping in view the meaning which “authority” carries, the question whether an entity is an “authority” cannot be answered by applying Ajay Hasia [Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722 : 1981 SCC (L&S) 258] tests.
(2) The tests laid down in Ajay Hasia case [Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722 : 1981 SCC (L&S) 258] are relevant for the purpose of determining whether an entity is an instrumentality or agency of the State. Neither a