Non-Instrumentality of Co-operative Societies: Harender Narain Banker v. The State Of Bihar

Introduction

The case of Harender Narain Banker v. The State Of Bihar And Others, adjudicated by the Patna High Court on May 23, 1985, revolves around the pivotal question of whether the Bihar State Co-operative Marketing Union Ltd. (hereafter referred to as Biscomaun) qualifies as an instrumentality or agency of the State of Bihar. This determination is crucial as it dictates the amenability of Biscomaun to writ jurisdiction under Article 226 of the Constitution of India.

The petitioner, Harendra Narain Banker, an employee dismissed from Biscomaun amid allegations of defalcation, sought judicial intervention to quash his dismissal. Central to his petition was the argument that Biscomaun operates under such extensive state control that it constitutes a state instrumentality, thereby subjecting it to direct writ jurisdiction.

Summary of the Judgment

The Patna High Court meticulously analyzed whether Biscomaun meets the criteria to be considered an instrumentality or agency of the State, thereby falling within the ambit of Article 12 and being amenable to writ petitions under Article 226. Referring to the authoritative tests laid out in the landmark case Ajay Hasia v. Khalid Mujib Sehravardi, the court scrutinized various facets of state control over Biscomaun.

After a thorough evaluation, the court concluded that Biscomaun does not satisfy any of the six tests established in Ajay Hasia. Key findings included the absence of complete state shareholding, lack of financial dependence on the state, absence of state-conferred monopoly, and the democratic structure of Biscomaun’s governance which dilutes state influence. Consequently, the court held that Biscomaun is not an instrumentality or agency of the State and, therefore, not amenable to writ jurisdiction under Article 226. The writ petition was dismissed.

Analysis

Precedents Cited

The judgment heavily relied on the constitutional provisions and preceding judgments to establish the framework for determining state instrumentality. Key among these was Ajay Hasia v. Khalid Mujib Sehravardi (1981), which outlined six tests to ascertain whether a body is an instrumentality or agency of the state. The court also referenced several High Court and Supreme Court cases that dealt with similar issues, including:

• Praga Tool Corporation v. C.V Immanual (1969)
• Co-Operative Central Bank Ltd. v. Additional Industrial Tribunal, Andhra Pradesh (1969)
• Sabhajit Tewari v. Union of India (1975)
• The Nayagarh Co-operative Central Bank Ltd. v. Narayan Rath (1977)
• Ajmer Singh v. The Registrar, Co-operative Societies, Punjab (1981)

These cases collectively reinforced the criteria for state instrumentality, focusing on aspects such as state shareholding, financial dependence, monopoly status, and the nature of functions performed.

Legal Reasoning

The court employed a methodical approach, applying each of the six tests from Ajay Hasia to the facts of Biscomaun:

• State Shareholding: Though the State held 99% of Biscomaun’s share capital, the co-operative principles mandated that voting power was independent of shareholding, limiting the State’s influence.
• Financial Assistance: Biscomaun did not receive financial assistance from the State that met or exceeded its expenditures, demonstrating financial autonomy.
• Monopoly Status: Biscomaun did not enjoy any state-conferred or state-protected monopoly in its operations.
• Deep and Pervasive Control: Structural governance through democratic processes and a managing committee diluted any notion of deep state control.
• Functions of Public Importance: Biscomaun’s functions were aligned with co-operative principles focused on member economic interests, not directly related to governmental functions of public importance.
• Transfer of Government Department: There was no evidence of any government department being transferred to or embodied within Biscomaun.

By assessing Biscomaun against these benchmarks, the court found that Biscomaun maintained sufficient autonomy and democratic governance structures, thereby negating the petitioner’s claim of state instrumentality.

Impact

This judgment has significant implications for the classification of co-operative societies and their susceptibility to writ petitions. By delineating the boundary between state-controlled entities and autonomous co-operative bodies, the court provided clarity on:

• Enhancing the protection of co-operative societies from undue state intervention.
• Emphasizing the importance of democratic governance in maintaining autonomy.
• Setting a precedent for future cases involving similar entities and their relationship with the state.

Furthermore, the judgment underscores the necessity for petitioners to meticulously establish the extent and depth of state control using the established tests before invoking writ jurisdiction.

Complex Concepts Simplified

Conclusion

The judgment in Harender Narain Banker v. The State Of Bihar And Others decisively established that Biscomaun does not qualify as an instrumentality or agency of the State. By meticulously applying the Ajay Hasia framework, the Patna High Court delineated the boundaries of state control, emphasizing the autonomous and democratic governance structures inherent in co-operative societies.

This case serves as a critical reference point for distinguishing between state-controlled entities and autonomous organizations within the ambit of constitutional jurisprudence. It underscores the necessity for clear and substantial state control to invoke Article 12, thereby ensuring that only entities with profound state integration are subject to writ jurisdictions under Article 226.