Satish Kumar v. Punjab State Co-Operative Bank Ltd., And Others

1. The Punjab State Co-operative Bank, Ltd. (respondent 1), invited applications, vide advertisement (annexure P1), dated 25 November 1978, (or filling some posts of junior clerks in the State/General Co-operative Banks. In the State of Punjab. The posts of clerks were included in the common cadre when the advertisement (annexure P1) was made. Later on, the board of directors of the Punjab State Cooperative Bank, in its meeting held on 16 August 1979, decided to exclude the posts of clerks in the Central Co-operative Backs from common cadre. The applications received in response to the advertisement (annexure P1) were consequently sent by the Punjab State Co-operative Bank to the Central Co-operative Banks in various districts after taking the options of the applicants regarding the districts they wished to be considered for appointment. The applications of such applicants who opted for appointment in Ludhiana District were sent to the Central Co-operative Bank, Ludhiana, respondent 2 (hereinafter, the bank). The petitioner was one of 788 applicants whose applications were sent to the bank on 20 November 1979, by the Punjab State Co-operative Bank (respondent 1). On 12 January 1980, the petitioner was issued appointment letter (annexure P2) appointing him as a clerk in the bank. This appointment letter is signed by the chairman, managing director and manager of the bank. It was specifically provided therein that the appointment was purely on temporary basis unless the petitioner cleared his probation period of one year successfully. The petitioner joined the bank as a clerk. The establishment officer of the bank terminated the services of the petitioner by giving him one month's notice with effect from 10 September 1980, vide letter, annexure P3, of the same date. This letter reads:

“Your appointment having been declared as illegal and void, the board of directors of the bank, in their meeting held on 9 September 1980, have unanimously resolved to terminate your services.

Accordingly, therefore, one month's notice of termination of your services, effective from 10 September 1980, is hereby given to you. You will cease to be an employee of this bank on the afternoon of 10 September 1980.

You will also be paid a compensation equivalent to fifteen days of your salary before you are relieved.”

The petitioner has filed the present writ petition praying that the letter (annexure P3), terminating his services, may be quashed.

2. The writ has been contested by the bank (respondent 1). A preliminary objection has been raised that the writ is liable to be dismissed in view of a Full Bench decision of this Court in Ajmer Singh v. Registrar of Co-operaiite Societies, Punjab [1980 P.L.J 589], that a society registered under the Punjab Co-operative Societies Act, 1961 (hereafter the Act), is not amenable to the writ jurisdiction under Art. 226 of the Constitution of India. On merits, the case of the bank is that the selection committee consisting of five directors, deputy registrar and the assistant registrar interviewed the candidates on 22 and 24 December 1979. On 25 December 1979, only three out of five directors were present but, later on, the proceedings were interpolated and the names of other two directors who were absent were also included and shown to be present. No record of the performance (merit list) of the candidates in the interview was maintained. After the Interviews were over, the selection committee did not meet to select the candidates. The deputy registrar and the assistant registrar who were the Government nominees on the selection committee were not associated for the finalization of the list of the selected candidates. On 14 January 1980, the deputy registrar wrote to the manager of the bank not to make appointments as no selection had been made. No appointment had been made till 14 January 1980. On the receipt of the letter, the appointments of clerks, including that of the petitioner, were made by issuing letters with back date showing 12 January 1980, as the date of the issue of the appointment letters. Some persons who had not been interviewed by the committee were issued appointment letters. The appointment of the petitioner was thus illegal. The petitioner's appointment was temporary for a period of one year as per terms contained in the appointment letter issued to him. The petitioner was issued appointment letter on 12 January 1980, and his services were terminated, vide letter, dated 10 September 1980, by the board of directors on the ground that his appointment was illegal.

3. The Punjab State Co-operative Bank and the Ludhiana Central Co-operative Bank are admittedly registered under the Act. The provisions of the Act are thus applicable to both. The services of the petitioner have been terminated by the bank, vide letter, annexure P3. It has been held by a Full Bench of this Court in Ajmer Singh case [1910 P.L.J 589] (vide supra), that a writ petition under Art. 226 of the Constitution against a co-operative society registered under the Act is not maintainable as it is not an “authority” within the meaning of Art. 12 of the Constitution. The preliminary objection raised by the contesting respondents is, therefore, of paramount importance.

4. The learned counsel for the petitioner has argued that a society registered under the Act is an authority within the meaning of Art. 12 of the Constitution and in view of the decision of their Lordships of the Supreme Court in Ajay Hasia v. Khalid Mujib Sehravardi [(1981) 1 SCC 722 : A.I.R 1981 S.C 487], the Full Bench view expressed in Ajmer Singh case [1980 P.L.J 589] (vide supra), is not a good law. Reliance has been placed on Madan Mohan Sen Gupta v. State of West Bengal [A.I.R 1966 Cal. 23], and Dhukhooram Gupta Hari Prasad Gupta v. Co-operative Agricultural Association, Ltd., Kawardha [A.I.R 1961 M.P 289], as well.

5. The contention of the learned counsel for the respondent is that only such a society will be an authority within the meaning of Art. 12 of the Constitution in terms of the rule laid down in Ajay Hasia case [1980 P.L.J 589] (vide supra), which is an instrumentality or agency of the State and the bank is not such a society with the result that it is not an authority under Art. 12 of the Constitution. It is, therefore, not amenable to writ jurisdiction under Art. 226 of the Constitution.

6. In Madan Mohan Sen Gupta case [A.I.R 1966 Cal. 23] (vide supra), the learned single Judge held that a co-operative society registered under the Bengal Co-operative Societies Act, 1940, or its managing committee is amenable to the writ jurisdiction of High Court. It was further held that the management of the affairs of the activities of such societies are entirely controlled by the Registrar of Co-operative Societies who is a public authority. Such affairs cannot be private affairs. It is not necessary that a body, in order to be a public body, must always be constituted by a statute though its powers and duties are created by an Act or the rules. The control which the State Government and the Registrar have over such co-operative societies is one of the main distinguishable features for the maintainability of an application under Art. 226 of the Constitution. In Dukhooram Gupta Hari Prasad Gupta case [A.I.R 1961 M.P 289] (vide supra), a Division Bench held that a co-operative society registered under the Co-operative Societies Act, 1912, being an authority or body of persons having the power of framing bye laws would fall within the definition of “State” in Art. 12 of the Constitution and as such was amenable to the writ jurisdiction under Art. 226 of the Constitution. As observed above, a Full Bench of this Court has taken a different view in Aimer Singh case [1980 P.L.J 589] (vide supra). The matter has, however, been settled by their Lordships of the Supreme Court in Ajay Hasia case [(1981) 1 SCC 722 : A.I.R 1981 S.C 487] (vide supra), wherein it has been held that where a corporation is an instrumentality or agency of the Government, it must be held to be an authority within the meaning of Art. 12 and hence subject to the same basic obligation to obey the fundamental rights as the Government. In this context, it is immaterial whether the corporation is created by a statute or under a statute. The test is whether it is an instrumentality or agency of 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 or it may be a society registered under the Societies Registration Act or any other similar statute. Whatever may be its genetical origin, it would be an “authority” within the meaning of Art. 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 Art. 12 of the Constitution.

7. The contention of the learned counsel for the petitioner is that the rule laid down in Ajay Hasia case [(1981) 1 SCC 722 : A.I.R 1981 S.C 487] (vide supra), has impliedly upheld the view expressed in Madan Mohan Sen Gupta case [A.I.R 1966 Cal. 23] (vide supra) and Dhukhooram Gupta Hari Prasad Gupta case [A.I.R 1961 M.P 289] (vide supra), that a society registered under the Act per se is an authority within the meaning of Art, 12 of the Constitution and is amenable to the writ jurisdiction under Art. 226. I am not impressed by this contention. In Ajay Hasia case (vide supra), the definition of “authority” in terms of Art. 12 of the Constitution has been extended to such societies which are instrumentalities or agencies of the Government and not those which are not instrumentalities or agencies of the Government. In this view of the matter, a society registered under the Act per se cannot be treated as an authority within the meaning of Art. 12 of the Constitution.

8. The next important point which needs consideration is if the bank is an instrumentality or agency of the Government, if it is so understood, it would be amenable to the writ jurisdiction under Art. 226 of the Constitution, otherwise not. The question as to when a corporation can be regarded as an authority within the meaning of Art. 12, arose for consideration before the Supreme Court in Ramana Dayaram Shetty v. Interna-tional Airport Authority of India [1981 — I L.L.N 270]. The rule laid down by their Lordships in that case was approved by them in Ajay Ham case (vide supra) and has been summarized as under in (1981) 1 SCC 722 : A.I.R 1981 S.C 487, at page 490:

“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 International Airport Authority case [1981 — I L.L.N 270]. 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 realized 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 summarize the relevant tests gathered from the decisions in International Airport Authority case (vide supra), 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 such 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 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 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.

(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 International Airport Authority case [1981—1 L.L.N 270] (vide supra), be an ‘authority’ and, therefore, a ‘State’ within the meaning of the expression in Art. 12.”

Applying the tests to the case under discussion before their Lordships, it was further held:

“It is in the light of this discussion that we must now proceed to examine whether the society in the present case is an ‘authority’ falling within the definition of ‘State’ in Art. 12. Is it an instrumentality or agency of the Government? The answer must obviously be in affirmative if we have regard to the memorandum of association and the rules of the society. The composition of the society is dominated by the representatives appointed by the Central Government and the Governments of Jammu and Kashmir, Punjab, Rajasthan and Uttar (Pradesh with the approval of the Central Government. The monies required for running the college are provided entirely by the Central Government and the Government of Jammu and Kashmir and even if any other monies are to be received by the society it can be done only with the approval of the State and the Central Governments. The rules to be made by the society are also required to have the prior approval of the State and the Central Governments and the accounts of the society have also to be submitted to both the Governments for their scrutiny and satisfaction. The society is also to comply with all such directions as may be issued by the State Government with the approval of the Central Government in respect of any matters dealt with in the report of the reviewing committee. The control of the State and the Central Governments is indeed so deep and pervasive that no immovable property of the society can be disposed of in any manner without the approval of both the Governments. The State and the Central Governments have even the power to appoint any other person or persons to be members of the society and any member of the society other than a member representing State or Central Government can be removed from the membership of the society by the State Government with the approval of the Central Government. The board of governors, which is in charge of general superintendence, direction and control of the affairs of the society and of its income and property is also largely controlled by nominees of the State and the Central Governments. It will thus be seen that the State Government and by reason of the provision for approval, the Central Government also, have full control of the working of the society and and it would not be incorrect to say that the society is merely a projection of the State and the Central Governments and to use the words of Ray, C.J, in Sukhdev Singh case [1975 — I L.L.N 366] (vide supra), the voice is that of the State and the Central Governments and the hands are also of the State and the Central Governments. We must, therefore, hold that the society is an instrumentality or the agency of the State and the Central Governments and it is an ‘authority’ within the meaning of Art. 12.”

9. It is evident that if the bank is a projection of the State, it shall be an authority within the meaniag of Art. 12 amenable to writ jurisdiction under Art. 226 of the Constitution. The assessment in this regard is to be made keeping in view the various tests detailed in Ramana Dayaram Shetty case [1981 — I L.L.N 270] (vide supra) and summarized in Ajay Hasia case ((1981) 1 SCC 722 : A.I.R 1981 S.C 487) (vide supra), as also other relevant circumstances, if any and available.

10. The learned counsal for the bank has stated during arguments that its working capital is Rs. 2,342.91 lakhs. The total subscribed share capital is Rs. 264.05 lakhs out of which the Government subscription is Rs. 82.83 lakhs. The learned counsel has argued that the Government neither owns the entire nor major share capita] of the bank. Therefore, it cannot be treated as an instrumentality or agency of the Government on this ground. I agree with the learned counsel for the respondent.

11. The learned counsel for the respondent has contended that Government does not spend any money on the working of the bank. This contention has not been controverted by the learned counsel for the petitioner. The bank cannot be treated as an instrumentality or agency of the Government on this ground as well.

12. The next contention of the learned counsel for the respondent is that the bank is not enjoying State conferred or State protected monopoly status. The learned counsel for the petitioner has argued that the bank is enjoying State protected or State conferred monopoly status inasmuch as it Is incumbent for all the primary societies to make deposits with the bank. I do not agree with the learned counsel for the petitioner. Under the co-operative societies' scheme, there are three types of societies, namely, primary societies, central societies and apex society. The primary societies enroll members and it is obligatory for them to make deposits or to seek loans from the central societies (like the bank) and the central societies deal with the apex society (the Punjab State Co-operative Bank). The central banks or the apex bank do not have monopoly in the sphere of banking. There are many other banks in the State doing banking business. The fact that the primary societies are enjoined to have dealings with the central banks (like the bank) would not make the bank one enjoying State conferred monopoly status which in turn would make it an instrumentality or agency of the Government.

13. The argument of the learned counsel for the respondent is that the Government has no control on day-to-day working of the bank. The learned counsel for the petitioner has contended that the Registrar appointed under the Act has vast powers and he can interfere in the working of the bank at his discretion. The Registrar is an organ of the State. It is, therefore, fallacious to say that the Government has no control on the day-to-day working of the bank. Rather the State through the Registrar has deep pervasive control over the bank. 1 do not agree with the contention of the learned counsel for the petitioner. It is true that the Registrar has vast powers which he can exercise at his discretion. The Registrar is a functionary appointed under the statute to supervise and control the working of the societies including the bank. He cannot be treated as an organ of the State. The control by the Registrar cannot be treated as that of the State. Under bye law 36 of the bank, its control vests in the board of directors and under bye-law 30, the board is constituted in the following manner:

(i) Nine directors to be elected out of member societies.

(ii) Three directors to be nominated by the Government or the Punjab State Co-operative Bank whosoever is the shareholder.

(iii) One director for every fifty individual shareholders to be elected out of individual shareholders subject to a maximum of three so long as the shares of the individual members are not fully retired.

14. The nominees of the Government in the board are in minority and cannot possibly have the last word in the matter of control. It is thus obvious that the State does not exercise deep pervasive control over the bank;

15. The primary function of the bank is banking. The learned counsel for the respondent has argued that this function is neither of public importance nor closely related to governmental functions. The learned counsel for the petitioner has contended that it Is so and has relied on the objects of the bank, contained in bye-law 4 of the bank, which reads:

“The objects of the bank are to facilitate the operation of the affiliated co-operative societies. In pursuance of this object, the bank may undertake the following activities:

(i) To carry on banking and credit business;

(ii) to provide credit facilities to its members on convenient and easy terms as practicable;

(iii) to encourage thrift and savings amongst its members by offering suitable facilities;

(iv) to make arrangements for super-vision and inspection of its affiliated co-operative societies; and

(v) to undertake such measures as are conducive to the spread of co-operative education and training.”

The contention of the learned counsel for the petitioner has no force. Some of the objects of the bank may be of relative public importance but its primary function is banking which cannot be termed of public importance so as to make it an instrumentality or agency of the State. It is significant that a large number of scheduled and non-scheduled banks are admittedly performing the same function of banking in the State.

16. It is not disputed that no department of the Government or its working has been transferred to the bank since its inception.

17. No other relevant circumstance has been put forth by the learned counsel for the petitioner which can be helpful in concluding that the bank is an instrumentality or agency of Government.

18. In view of the discussion above, I hold that the bank (Ludhiana Central Co-operative Bank) is not an instrumentality or agency of the State nor is it its projection. It is, therefore, not an authority within the meaning of Art. 12 of the Constitution, amenable to writ jurisdiction under Art. 226 of the Constitution.

19. The writ, therefore, fails and is dismissed with no order as to costs.