G.S Singhvi, J.:— The substantial question of law which arises for determination in this reference made by the Division Bench is whether Punjab State Cooperative Supplies and Marketing Federation Limited, Chandigarh (hereinafter described as ‘the Markfed’) is an instrumentality/agency of the State?
2. For deciding the aforementioned question, we may briefly notice the background facts and the developments leading to the reference of this case to five-Judges Bench. Appellant-Chiman Lal Gupta was employed as a Field Inspector in the services of the Markfed. His service was terminated with effect from 7.1.1981 He filed a civil suit in the Court of Sub Judge Ist Class, Fazilka for declaring the termination of his service as nullity and for reinstatement with consequential benefits. In the written statement filed on behalf of the Markfed an objection was taken to the maintainability of the suit by asserting that a decree for reinstatement cannot be passed against it. The trial Court held that the discharge of the appellant from service was illegal, but refused to give relief to him on the ground that the Markfed neither falls within the ambit of the term ‘State’ under Article 12 of the Constitution nor it can be treated as a statutory body. The appeal filed by the appellant having been dismissed by Additional District Judge, Ferozepur, he has come up in this Second Appeal.
3. When the Regular Second Appeal filed by the appellant was taken up for hearing, learned counsel appearing on his behalf relied on order dated 26.8.1986 passed by a learned Single Judge in C.W.P No. 3969 of 1984, K.N Chopra v. State of Punjab, 1986 (3) S.L.R 468 and argued that a suit for declaration was maintainable against the Markfed. Learned counsel for the respondents controverted his submission and relied on the judgments of Single Benches in Shri Krishan Lal Pahwa v. The State of Haryana, 1974 S.L.W.R 298 and S. Anup Singh v. The State of Punjab, 1975 S.L.W.R 27 and of the Division Bench in P.S Saini v. The State of Punjab, C.W.P No. 4410 of 1979, decided on 23.2.1980 in which it was held that the Markfed is not a State within the meaning of Article 12 of the Constitution of India. He also relied on two Full Bench judgments in Ajmer Singh v. The Registrar, Cooperative Societies, AIR 1981 P & H. 107 : [1981 (2) SLR 368 (Pb. & Hry.)] and Pritam Singh Gill v. Sate of Punjab, I.L.R 1982 (2) P. & H. 41 and argued that the Markfed which is a cooperative society registered under tne Punjab Cooperative Societies Act, 1961 (for short, ‘the 1961 Act’) cannot be treated as an agency/instrumentality of the State for the purpose of Article 12 of the Constitution of India.
4. The learned Single Judge felt that the divergent view expressed in different cases is likely to create difficulty for the subordinate Courts and, therefore he directed that the matter be placed before Hon'ble the Chief Justice for constituting a larger Bench.
5. After hearing the learned counsel for the parties, the Division Bench opined that the issue deserves to be considered by a Bench of five or more Judges. Accordingly, the case was placed before five-Judges Bench.
6. The expression “other authorities” appearing in Article 12 of the Constitution has become subject-matter of interpretation in several cases. We may notice some of them.
7. In Rajasthan State Electricity Board, Jaipur v. Mohan Lal, AIR 1967 S.C 1857 : [1967 SLR 573 (SC)], the majority of the Constitution Bench of the Supreme Court held that the expression “other authorities” in Article 12 will include all constitutional and other authorities upon whom powers are conferred by law. Their Lordships further held that if any body of persons is invested with the authority to issue directions, disobedience of which is punishable as a criminal offence, that would be an indication that the said authority is State.
8. In Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, (1975) 1 SCC 421 : AIR 1975 S.C 1331 : [1975 (1) SLR 605 (SC)], another Constitution Bench of the Supreme Court approved the ratio of Rajashtan State Electricity Board v. Mohan Lal (supra) and held that bodies like Oil and Natural Gas Commission, Life Insurance Corporation and Industrial Finance Corporation which are agencies/instrumentalities of the State fall within the expression “other authorities”. In his concurring judgment, Mathew, J. indicated the following four indicas for identifying whether a particular body or organisation can be treated as an agency or instrumentality of the State:—
“(1)A finding of the state financial support plus an unusual degree of control over the management and policies might lead one to characterize an operation as state action.
(2) Another factor which might be considered is whether the operation is an important public function.
(3) The combination of state aid and the furnishing of an important public service may result in a conclusion that the operation should be classified as a state agency. If a given function is of such public importance and so closely related to a governmental function as to be classified as a government agency, then even the presence or absence of state financial aid might be irrelevant in making a finding of state action. If the function does not fall within such a description then mere addition of state money would not influence the conclusion.
(4) The ultimate question which is relevant for our purpose is whether such a corporation is an agency or instrumentality of the government for carrying on a business for the benefit of the Public. In other words, the question is, for whose benefit was the corporation carrying on the business?”
9. However, on the same day, the same Bench rendered another judgment in Sabhajit Tewary v. Union of India, (1975) 1 SCC 485 : AIR 1975 S.C 1329 : [1975 (1) SLR 422 (SC)] and held that the Council of Scientific and Industrial Research, which is registered under the Societies Registration Act, 1860 (for short, ‘the 1860 Act’), is not an authority within the meaning of Article 12 of the Constitution.
10. In Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489 : AIR 1979 S.C 1628, the Supreme Court gave a wider meaning to the concept of ‘agencies and instrumentalities of the State’. Their Lordships held that even though, a corporation may be created by way of registration under the Companies Act, 1956 or the 1860 Act, it would be an instrumentality or agency of the government if it is wholly controlled by the government not only in its policy making, but also in carrying out the functions entrusted to it. Their Lordships also referred to the concept of the State's action as developed in the United States and observed:—
“So also a finding of extensive and unusual financial assistance plus an unusual degree of control over the management and policies might lead one to characterise an operation as State action. Moreover, 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 for 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. Again 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. But 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. 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. It will thus be seen that there are several factors which may have to be considered in determining whether a corporation is an agency or instrumentality of Government.
11. This particularisation of relevant factors is however not exhaustive and by its very nature it cannot be, because with increasing assumption of new tasks, growing complexities of management and administration and the necessity of continuing adjustment in relations between the corporation and Government calling for flexibility, adaptability and innovative skills, it is not possible to make an exhaustive enumeration of the tests which would invariably and in all cases provide an unfailing answer to the question whether a corporation is governmental instrumentality or agency. The Court will have to consider the cumulative effect of these various factors and arrive at its decision on the basis of a particularised inquiry into the facts and circumstances of each case. It is not enough to examine seriatim each of the factors upon which a corporation is claimed to be an instrumentality or agency of Government and to dismiss each individually as being insufficient to support a finding to that effect. It is the aggregate or cumulative effect of all the relevant factors that is controlling.”
12. In Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722 : AIR 1981 S.C 487 : [1980 (3) SLR 467 (SC)], the Supreme Court, while examining the legality of admissions made in a Medical College established and administered by a society registered under J. & K. Registration of Societies Act, 1898, observed that even though, it cannot be equated with the Government of India or of any state, the same would fall within the scope of the expression “other authorities”. After noticing the proposition laid down in Ramana Dayaram Shetty's case (supra), the Supreme Court culled out and summarized the following tests for determining as to when a corporation can be said to be an instrumentality or agency of the government:—
“(1) One thing is clear that if the entire share capital of the corporation is held by government, it would go a long way towards indicating that the corporation is an instrumentality or agency of government.
(2) Where the financial assistance of the state is so much as to meet almost entire expenditure of the corporation, it would afford some indication of the corporation being impregnated with governmental character.
(3) It may also be a relevant factor… … whether the corporation enjoys monopoly status which is 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 strong factor supportive of this inference of the corporation being an instrumentality or agency of government.”
13. In Som Parkash Rekhi v. Union of India, (1981) 1 SCC 449 : AIR 1981 S.C 212 : [1981 (1) SLR 154 (SC)], the Supreme Court held that Bharat Petroleum Corporation falls within the enlarged meaning of State under Article 12 of the Constitution.
14. In Tekraj Vasandi alias K.L Basandhi v. Union of India, (1988) 1 SCC 236 : AIR 1988 S.C 469 and Chander Mohan Khanna v. National Council of Educational Research and Training, (1991) 4 SCC 578 : [1991 (6) SLR 68 (SC)], their Lordships gave a restricted meaning to the expression “other authorities”. In Basandhi's case (supra), the Supreme Court held that the Institute of Constitutional and Parliamentary Studies which is a society registered under the Societies Registration Act is neither any agency nor instrumentality of the State so as to come within the purview of ‘other authorities’ under Article 12 of the Constitution. Similarly, in Chander Mohan Khanna's case (supra), the Supreme Court held that National Council of Education Research and Training which was registered as society, was largely an autonomous body, its activities were not related to the governmental functions and that the government's control was confined only to the proper utilisation of the grant and, therefore, it was not covered by the definition of the State.
15. However, in the recent past, the Supreme Court has reiterated and re-affirmed the broader meaning given to the expression “other authorities” in Sukhdev Singh's case (supra), Ramana Dayaram Shetty's case (supra) and Ajay Hasia's case (supra). In Mysore Papers Mills Ltd. v. The Mysore Paper Mills Officers Association, JT 2002 (1) S.C 61 : 2002 (2) SLR 170 (SC)], it was held that a company which was substantially financed and controlled by the government and managed by the Board of Directors nominated and removed at the instance of the government is an authority within the meaning of Article 12 of the Constitution.
16. The decision of Sabhajit Tewary's case (supra) was distinguished in Ramana Dayaram Shetty's case (supra) in the following words:—
“The Court no doubt took the view on the basis of facts relevant to the constitution and functioning of the council that it was not an authority, but we do not find any discussion in this case as to what are the features which must be present before a cooperation can be regarded as an authority within the meaning of Article 12. This decision does not lay down any principle of test for the purpose of determining when a corporation can be said to be an ‘authority’. If at all any test can be gleaned from the decision, it is whether the corporation is really an agency of the government. The Court seemed to hold on the facts that the council was not an agency of the government and was, therefore, not an authority.”
17. In Som Parkash Rekhi's case (supra), the Supreme Court referred to Sabhajit Tewari's case (supra) and observed:—
“The ruling relied on are, unfortunately, in the province of Article 311 and it is clear that a body may be ‘state’ under part-Ill but not under part-XIV. Ray, C.J, rejected the argument that merely because the prime minister was the president or that the other members were appointed or removed by government did not make the society a ‘state’. With great respect, we agree that in the absence of the other features elaborated in Air Port Authority case (1979) 3 SCC 489 : AIR 1979 SC 1628 the composition of the government body alone may not be decisive. The laconic discussion and the limited ratio in Tewary 1975 (3) SCR 616 hardly help either side here.”
18. The correctness of the ratio of Sabhajit Tewary's case (supra) was directly considered by seven-Judges Bench of the Supreme Court in Pradeep Kumar Biswas v. Indian Institute of Chemical Biology, 2002 (3) R.S.J 265 : [2002 (3) SLR 433 (SC)]. By majority judgment, the Supreme Court ruled that even though, a body may be registered under the Societies Registration Act, it would fall within the definition of the ‘State’ if the government has sufficient financial and administrative control over its functioning and it may be discharging governmental function. Paragraph 40 of the majority judgment, which contains a synthesis of various judicial precedents on the subject, read as under:—
“The picture that ultimately emerges is that the tests formulated in Ajay Hasia are not a rigid set of principles so that if a body falls within any one of them it must, exhypothesi, be considered to be a state within the meaning of Article 12. The question in each case would be-whether in the right of the cumulative facts as established, the body is financially, functionally and administratively dominated by or under the control of the government. Such control must be particular to be body in question and must be pervasive. If this is found then the body is a state within article 12. On the other hand, when the control is merely regulatory whether. under statute or otherwise, it would not serve to make the body a state.”
19. The majority over-ruled the judgment of Sabhajit Tewary's case (supra) and held that the main object of the society, namely, to foster planned industrial development in the country was fundamental to the governance of the country and keeping in view the control exercised by the government, the same was liable to be treated as an instrumentality of the State for the purposes of the expression “other authorities” appearing in Article 12 of the Constitution of India.
20. We now revert to the case before us.
21. The Markfed was set up in 1954 to produce and procure agricultural inputs and market agricultural commodities of the farmers of Punjab. Later on, it was registered as a cooperative society under the 1961 Act. The main objects of the Markfed are as under:
“(i) to make arrangements for procuring, marketing/trading, processing/manufacturing of agricultural products as well as by-products of its affiliated members and their members to their best advantage within the country or outside the country.
(ii) to find out and adopt latest technology and supply of goods on co-operative basis and to act as agent to its constituents and other persons and institutions approved by the Registrar, Cooperative Societies, Punjab.
(iii)to raise funds for its own business.
(iv)to make arrangements for procurement in bulk the requirements of its members in respect of both producers and consumers goods.
(vi)to make arrangements for distribution of agricultural inputs in retail to members and non members.
(vii) to undertake processing, manufacturing, grading and packing activities and establish industrial units.
(viii) to arrange for construction of buildings necessary for business of the Federation and its members and also to take up the construction work of other government/institutional agencies.
(ix) to guide, assist and supervise the working of its member societies.
(x) to carry out publicity and propaganda in respect of cooperative marketing and supply by publication of suitable literature, arrangements of demonstration by organising marketing, processing and supply societies conferences, participation in exhibitions and otherwise.
(xi) to run wherehouses.
(xii) to undertake, interstate trade, import and export of agricultural produce, farm equipments and consumer goods.
(xiv) to enter into collaboration with the Co-operative and others in India or in Foreign Countries in fulfilment of any of its objects, subject to the approval of the Government under Section 77 of the Act wherever required.
(xv) to act as an insurance agent and to guide and assist its member societies and other etc. regarding all insurance matters.
(xvi) to guarantee the loans advanced or credit granted to any member society of the federation by the Government, State Bank of India or any other agency within such limits and such terms as may be fixed and charge commission thereon.
(xvii) to do all things that may be incidental or conducive to the attainment of any or all the aforesaid objects or for the advancement of the Co-operative movement in general.”
22. Initially, the State Government held share capital to the tune of Rs. 935.92 lacs out of Rs. 996.17 lacs. The Managing Director of the Markfed is invariably a member of the Indian Administrative Service (Punjab Cadre). He is the Chief Executive Officer of the Markfed and exercises superintendence and control over all its employees and generally administer its affairs. The government is empowered to nominate three persons on the Board of Directors of the Markfed. The Registrar, Cooperative Societies, Punjab and the Managing Director are also members of the Board of Directors. Section 26 of the 1961 Act provides that if there is a difference between the government nominee and other members of the Board of Directors, the matter shall be referred to the State Government for its decision and the decision of the government shall be final. The service conditions of the employees of the Markfed are governed by the Common Cadre Rules framed by the Registrar, Cooperative Societies, Punjab in exercise of its power under Rule 28 of the Punjab Cooperative Societies Rules, 1963. This shows that the State Government exercises deep and pervasive financial as well as administrative control over the Markfed and its functions are essentially governmental functions.
23. In so far as the judgment of the Full Bench in P.S Gill's case (supra) is concerned, it is sufficient to observe that the same has already been over-ruled by a five-Judges Bench in Ms. Ravneet Kaur v. Christian Medical College, Ludhiana, 1997 (4) S.L.R 221. Consequently, the judgment of the Full Bench in Ajmer Singh's case (supra) which was relied on in P.S Gill's case (supra) cannot be treated as a good law.
24. Even otherwise, the judgment of the Full Benches in P.S Gill's case (supra) and Ajmer Singh's case (supra) can no longer be treated as good law because the same were mainly based on the judgment of the Supreme Court in Sabhajit Tewary's case (supra) which, as mentioned above has been over-ruled by a larger Bench in Pradeep Kumar Biswas's case (supra).
25. In view of the above, we hold that the Markfed is an agency and instrumentality of the State and falls within the ambit of the expression “other authorities” appearing in Article 12 of the Constitution of India. As a corollary to this, we approve the view taken by the learned Single judge in K.N Chopra's case (supra) and hold that the contrary judgments of the Single Benches in Krishan Lal Pahwa's case (supra), S. Anup Singh's case (supra) and of the Division Bench in P.S Saini's case (supra) do not lay down correct law. The Second Appeal may now be placed before the Single Bench for decision on other substantial questions of law.
26. Order accordingly.