Delhi High Court: Chandra Dhari Singh, J.*, opined that in the present case, the role of the Government was not only limited to the extent of funding, rather the same was extended to the control over the other regimes such as decision making, day to day functions, appointments/recruitments, etc. Thus, the Court opined that the test laid down by the Supreme Court with regard to inclusion of an entity as a State was duly met in the case of respondent, Manohar Parrikar Institute for Defence Studies and Analyses, where it was apparent that the Ministry of Defence, i.e., the Government had control over the functioning, finance, and administration of respondent, which made the same an instrumentality of State under Article 12 and thus, amenable to writ jurisdiction of this Court.
Background
Petitioners were employed in various capacities as administrative and technical staff with respondent between 1998 to 2010 and had completed at least 10 years of service. Respondent was a body established in 1965 and was registered as a society under the Societies Registration Act, 1860. Respondent was dedicated to objective research and policy relevant studies on all aspects of defense and security with a mission to promote national and international security through generation and dissemination of knowledge on defense and security related issues. In 2021, petitioners collectively served a legal notice dated 9-3-2021 to respondent seeking regularization of their services as they had worked for almost 10 years, however, respondent did not reply to the same. Thereafter, petitioners filed the present petitions seeking regularization of their services.
Counsel for respondent submitted that respondent was not an instrumentality of ‘State’ as defined in Article 12 of the Constitution, therefore, the present writs were not maintainable qua respondent. Counsel for petitioners submitted that the Ministry of Defence had deep and pervasive control over the functioning, administrative, and financial affairs of respondent and the same could be proven by the fact that respondent was conceived as an inter-services organization under the Ministry. It was further submitted that the President of India issued a notification regarding inclusion of respondent under the extraordinary classification delineated in the Gazette of India dated 30-12-2019 and therefore, the same showed that respondent was an instrumentality of ‘State’.
Analysis, Law, and Decision
The issue for consideration was “whether respondent meets the tests enunciated and expounded by the Supreme Court for the purpose of declaring an entity as ‘State’ under the ambit of Article 12 of the Constitution?”.
The Court opined that the term ‘State’ under Article 12 of the Constitution constituted the following authorities, (a) the Government and Parliament of India; (b) the Government and the Legislature of a State; (c) all local authorities; and (d) other authorities within the territory of India, or under the control of the Central Government.
The Court relied on Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722 (‘Ajay Hasia Case’), wherein the Supreme Court dealt with the issue of inclusion of various authorities within the ambit of Article 12 of the Constitution and it stated that “an entity can be construed as an authority if the Government of India has majority financial control which establishes the interference 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”. The Court observed that in Ajay Hasia Case (supra), the following criteria to ascertain whether an entity could be termed as an instrumentality of a State, was laid down, (a) ownership of entire share capital by the Government; (b) Extensive financial assistance from the state; (c) Monopoly status conferred or protected by the state; (d) Deep and pervasive control by the state; (e) Performance of functions closely related to governmental functions; and (f) Transfer of a government department to the corporation.
The Court relied on Pradeep Kumar Biswas v. Indian Institute of Chemical Biology, (2002) 5 SCC 111, whereby the Supreme Court laid down the conditions for terming an entity as a State under Article 12 of the Constitution. The Supreme Court held that an entity was required to be tested on three parameters namely, (a) financial, (b) functional, and (c) administration for its inclusion as ‘other authority’ in Article 12 of the Constitution. The Court thus opined that the test was “whether the Government of India through its Ministry of Defence had control over financial, functional, and administration of respondent or not?”.
(1) Financial Control
The Court noted that respondent was fully funded by the Central Government, thus, the only aspect for determination was whether the Government enjoyed any control even after the disbursement of funds or not. The Court further noted respondent’s employees were being paid based on the recommendations made by the 7th Pay Commission vide MoD, PIC/PO (Def) letter dated 6-4-2016 and were also duly paid the salaries as per the latest recommendations of the pay commission adopted by the Government. Further, the Gazette dated 30-12-2019 puts respondent in the Government of India (Allocation of Business Rules 1961) under the Ministry of Defence, therefore, treating the same at par with any other government entity as the same was only applicable to the instrumentalities of the State.
The Court also noted that the disbursement of funds, i.e., decision regarding pay and allowances, appointment of Finance Officer and allocation of corpus funds etc., was also taken in compliance with the directions issued by the Ministry of Finance and the Ministry of Defence vide letter No. 6/62020-PO(Def) dated 13-8-2021 and 21-9-2021 whereby, respondent was directed to comply with the guidelines issued by the Ministry of Finance. Further, pursuant to directions from the Ministry, the amount earned from its operation by respondent gets deposited with the consolidated funds of India, therefore, hinting towards direct say of the Government over management of funds. Thus, the Court opined that the Ministry of Defence enjoyed full control over the finances of respondent. Further, the auditing of the funds of respondent by the CAG made it clear that respondent was considered as part of the Government itself.
(2) Administrative Control
The Court noted that the Executive Council (‘EC’) of respondent was the highest decision-making body, and the EC was entrusted with most of the decision-making power of respondent. The Court noted that the information available in public domain depicted that the majority of the members and invitees were part of the Ministry, therefore, exerting complete control over the decision making of respondent. Thus, the Court was satisfied that most of the members of the EC were from the Government i.e., the Ministry of Defence and were part of the EC by virtue of them holding a significant position in the Ministry of Defence. Therefore, the presence of most of the members in the EC from the Government made the control of the Government evident in the administration of respondent.
The Court opined that the ACC was one of the high-power committees of the Government entrusted to recommend names for the officials to head important Government Organizations, therefore, the appointment of the DG for respondent by the said committee could not be termed as a mere convention, rather the same should be construed as an important administrative function vested with the Government. Further, the decisions regarding appointments, promotion, and deputation of the services of the Government officials in respondent also happened through the official Gazettes of the Ministry of Defence, therefore, this Court is of the view that the Government has deep and pervasive control over the administration as well.
(3) Functional Control
The Court noted that the Ministry of Defence had issued various letters directing respondent to comply with the guidelines of the Ministry of Finance. Further, for creation of additional posts in respondent, the EC of respondent had to seek prior permission from the Ministry and apart from this, the deep and pervasive control of respondent was also evident from the fact that the researchers and the other employees of respondent were sent on deputation to various similar government organizations and vice versa. The Court opined that separate functioning from the Ministry did not mean that respondent was independent of the control of the Government, rather the same could only be tested based on actual control exerted by the Government. The Court noted that the material available on record clearly suggested that respondent was conforming to all the regulations mandated by the Ministry. Further, the renaming of respondent was done immediately after the issuance of the press note by the Government.
The Court opined that in the present case, the role of the Government was not only limited to the extent of funding, rather the same was extended to the control over the other regimes such as decision making, day to day functions, appointments/recruitments, etc. Thus, the Court opined that the test laid down by the Supreme Court with regard to inclusion of an entity as a State was duly met in the case of respondent, where it was apparent that the Ministry of Defence, i.e., the Government had control over functioning, finance, and administration of respondent which made the same an instrumentality of State under Article 12 and thus, amenable to writ jurisdiction of this Court.
The matter would next be listed on 3-9-2024. During the pendency of the proceedings, this Court vide order dated 4-6-2021 had directed interim stay on the termination of the services of petitioners, therefore, the Court held that the same shall continue.
[Mukesh Kumar Jha v. Manohar Parrikar Institute for Defence Studies and Analyses, 2024 SCC OnLine Del 2814, decided on 16-4-2024]
*Judgment authored by: Justice Chandra Dhari Singh
Advocates who appeared in this case :
For the Petitioners: Sanjoy Ghosh, Senior Advocate; Fidel Sebastian, Rohan, Advocates
For the Respondent: Raj Shekhar Rao, Senior Advocate; Gauri Puri, Advocate
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