Supreme Court Revisited Definition of ‘State’ Under Article 12; Overruled 1975 Verdict, Declares CSIR as State Instrumentality

Seven-Judge Bench Establishes Comprehensive Tests to Determine ‘State’ Status, Extends Fundamental Rights Protections to CSIR Employees

In Pradeep Kumar Biswas v. Indian Institute of Chemical Biology judgment dated April 16, 2002, the Supreme Court of India, in a seven-judge Constitution Bench, has overruled its 1975 decision in Sabhajit Tewary v. Union of India and held that the Council of Scientific and Industrial Research (CSIR) is an instrumentality and agency of the State under Article 12 of the Constitution. This landmark ruling significantly expands the scope of entities that can be considered ‘State’ for the purposes of enforcing fundamental rights.

The case originated from a writ petition challenging the termination of services of employees working with a CSIR unit. The Calcutta High Court initially dismissed the writ on the premise that CSIR was not a ‘State’ under Article 12, relying on the 1975 Sabhajit Tewary judgment. However, the Supreme Court, recognizing the evolving nature of governmental functions and the role of quasi-governmental bodies, referred the matter to a Constitution Bench to reconsider the earlier precedent.

The Court undertook a detailed examination of the concept of ‘State’ under Article 12, emphasizing the significance of this definition in the context of Part III of the Constitution, which safeguards fundamental rights. It observed that the original definition of ‘State’ is inclusive but not exhaustive, and judicial interpretation has progressively widened its ambit to include various instrumentalities and agencies performing public functions.

A crucial part of the judgment involved setting out comprehensive tests to determine whether a body constitutes the ‘State’:

• 1. Extent of State financial aid: Whether the government provides substantial funding to the entity.
• 2. Public importance of its function: Whether the functions are of significant public interest or governmental in nature.
• 3. Extent of control and governance by the State: The degree of government control in management and policy decisions.
• 4. Nature of its function related to state duty: Whether the functions are closely related to governmental responsibilities.
• 5. Importance of function and utility for the State/Nation: The role played in national development or governance.
• 6. Monopoly status: Whether the agency has a monopoly status conferred or protected by the State.
• 7. Share capital of State: Whether the State holds the entire share capital or controlling interest.

Applying these tests, the Court found that CSIR satisfies all criteria. It was established that CSIR was formed by the Government of India through a registered society under the Societies Registration Act, 1860, to promote scientific and industrial research for national development. The Government appoints key officials, including the Prime Minister as ex-officio President of CSIR, exercises pervasive control over the society’s functioning, provides approximately 70% of its funding, and regulates its finances and policies. The Court held that such control and the public nature of CSIR’s functions make it an instrumentality of the State.

The Court further observed that the earlier reliance on CSIR’s status as a registered society and absence of statutory creation (as opposed to statutory corporations) to exclude it from being ‘State’ was misplaced. It clarified that the form or legal guise of the entity - whether a society, company, or statutory corporation - does not preclude it from being ‘State’ if it meets the functional and control criteria.

Additionally, the Court highlighted a 1986 notification under Section 14(2) of the Administrative Tribunals Act, 1985, wherein the Central Government declared CSIR as a ‘society owned and controlled by Government,’ allowing service disputes of its employees to be adjudicated by administrative tribunals. The Court held that this notification is conclusive proof of CSIR’s status as an instrumentality of the State.

The judgment extensively reviewed prior Supreme Court precedents, including Sukhdev Singh, Ramana, Ajay Hasia, and Som Prakash Rekhi, among others, to elucidate the parameters for determining State action and the applicability of fundamental rights protections.

By overruling Sabhajit Tewary, the Supreme Court has ensured that employees of CSIR and similar bodies are entitled to constitutional remedies under Articles 32 and 226, thereby reinforcing the protection of fundamental rights against arbitrary State action.

The matter has been remitted to the appropriate Bench for further proceedings consistent with this judgment. No order as to costs was made.

Statutory provisions: Articles 12, 14, 16, 32, 226, 311, 323A of the Constitution of India; Sections 14(2) and 14(3) of the Administrative Tribunals Act, 1985; Societies Registration Act, 1860

Pradeep Kumar Biswas v. Indian Institute of Chemical Biology, (SC) : Law Finder Doc Id # 4728