The Retreat, and What Survived It
Chapter Thirty
Syllabus topic 2, "State: Need for widening the definition in the wake of Liberalisation".
Pages 139 to 143 of 304
In one line
Seven judges turned the six indicia from a checklist into evidence going to a single question, and added an exception for regulatory control that has decided every case since.
In the wording a student can write in an exam: in Pradeep Kumar Biswas v. Indian Institute of Chemical Biology a Bench of seven judges held that the tests formulated in Ajay Hasia are not a rigid set of principles, so that a body falling within any one of them must ex hypothesi be considered a State; that the question in each case is whether, in the light of the cumulative facts as established, the body is financially, functionally and administratively dominated by or under the control of the Government; that such control must be particular to the body in question and must be pervasive; and that where the control is merely regulatory, whether under statute or otherwise, it does not make the body a State. In Zee Telefilms Ltd v. Union of India a Bench of five judges applied that test and held that the Board of Control for Cricket in India is not State, while holding that an aggrieved party may nevertheless seek relief under article 226.
Why a correction was needed
The instrumentality test as stated in Ajay Hasia had six indicia and no rule for weighing them. Two consequences followed.
Any one indicium could be argued to be enough. A body receiving substantial government funding could be said to satisfy the test, whatever else was true of it. Since almost every institution of any size receives some government money, the boundary of article 12 became a matter of advocacy.
Inconsistent results accumulated. Bodies materially alike were held to be State in one case and not in another, and an earlier decision holding that the Council of Scientific and Industrial Research was not State sat uneasily with later decisions on comparable bodies, having been, as the Court later put it, distinguished and watered down in the subsequent decisions.
A Bench of seven was constituted to settle it.
The correction
Facts. Pradeep Kumar Biswas v. Indian Institute of Chemical Biology, decided 16 April 2002 by seven judges. Whether the Council of Scientific and Industrial Research, a society registered under the Societies Registration Act, is "State" within article 12, so that its employees may enforce articles 14 and 16 against it.
Held. CSIR is "State". But the Court restated the test, and the restatement is the important part:
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, ex hypothesi, be considered to be a State within the meaning of Article 12. The question in each case would be whether in the light 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 the 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.
The Retreat, and What Survived It
Why it matters. Four changes in one paragraph. The indicia become evidence, not tests, so satisfying one is not enough. The question becomes cumulative: the facts are weighed together. The domination must be financial, functional and administrative, which is conjunctive in form and has been treated as requiring an overall picture rather than each separately. And regulatory control is expressly excluded, which is the new element and the one that decides cases.
The regulatory control exception
This is the part to understand rather than memorise, because it is where the modern cases turn.
Pervasive control is control over how the body conducts itself: who runs it, what it may spend, what rules it makes, whether it may dispose of its property, what directions it must obey. It is the control an owner exercises.
Regulatory control is control of the kind the State exercises over an entire field of activity, applying to everyone in that field alike. Licensing, inspection, safety standards, reporting requirements and approval of tariffs are regulatory. A bank is heavily regulated and is not thereby an instrumentality of the Reserve Bank.
The distinction is one of kind and of particularity, not of degree. The Court said the control must be "particular to the body in question". A body subject to intense regulation shared with all its competitors is regulated; a body subject to direction that applies to it alone is controlled.
The test applied, with the opposite result
Facts. Zee Telefilms Ltd v. Union of India, decided 2 February 2005 by five judges. Zee challenged the termination of its telecast rights by the Board of Control for Cricket in India, and the preliminary question was whether the Board is "State" so that article 32 lies against it.
Held. The Board is not "State". Applying Pradeep Kumar Biswas, the established facts were that the Board is not created by a statute; no part of its share capital is held by government; practically no government financial assistance is given towards its expenditure; it enjoys a monopoly in cricket but that status is not State conferred or State protected; there is no deep and pervasive State control, and such control as exists is only regulatory in nature, of the kind applicable to other similar bodies and not exercised under any special statute; not all its functions are public functions or closely related to governmental functions; and it was not created by transferring a government owned corporation.
The Retreat, and What Survived It
But the Court added the qualification that matters. The Board does discharge duties, such as selecting the Indian team and controlling the activities of players, which are akin to public duties or State functions. Although a remedy under article 32 is not available against it, that does not mean the violator of a right goes free: an aggrieved party may seek a remedy in the ordinary course of law, or by a writ petition under article 226, which is much wider than article 32.
Why it matters. It shows what the narrowed test does in practice, and it supplies the answer to the objection that the narrowing leaves people unprotected. The protection moves from article 32 to article 226, from the fundamental rights to the public function jurisdiction, and that is [Private Bodies and Public Functions].
What survived
Three things from the earlier line are untouched, and an answer should say so rather than presenting the retreat as a reversal.
Legal form is still irrelevant. Ajay Hasia's central proposition, that the tests apply equally to a statutory corporation, a government company and a registered society, was not doubted. CSIR itself is a registered society and was held to be State.
The indicia are still the evidence. The six considerations from R.D. Shetty remain the facts a court looks for. What changed is that they are weighed rather than counted.
Deep and pervasive control still makes a body State. The formula in Ajay Hasia, that a body so controlled is a projection of government and the voice is that of the government, remains good.
What went is the possibility of establishing that a body is State by pointing to one indicium alone, and the treatment of ordinary sectoral regulation as if it were control.
The criticism
Two lines, and an LL.M. answer should engage with both.
For the retreat. A definition that reaches every body receiving public money or subject to regulation would make Part III apply to most of organised life, which is not what article 12 says and not what the drafters intended. The Court restored a boundary that had become unfindable.
Against it. The narrowing arrived exactly when the State was withdrawing from direct provision, so the test contracted at the moment when the functions were moving out of government hands. The combination is that neither the departing State nor the arriving private body is caught: the function is performed, the power is exercised, and Part III reaches neither. That is MU's own topic, and it is [Liberalisation, Privatisation and the Case for Widening Article 12].
The Retreat, and What Survived It
A worked example
A national sporting federation selects the country's team, frames the rules of the sport, disciplines players, and is the only body through which anyone can play the sport at national level. It is a registered society. It receives no government funding, no share capital is held by government, and the Ministry's involvement is limited to clearances for foreign tours of the kind every sporting body needs. A player suspended without a hearing petitions the Supreme Court under article 32.
Apply Pradeep Kumar Biswas, not Ajay Hasia's list. The question is whether, on the CUMULATIVE facts, the federation is financially, functionally and administratively dominated by or under the control of the Government, that control being particular to it and pervasive.
Financially: no. Administratively: no; the Ministry's clearances are the kind required of every similar body. Functionally: it performs functions of public importance, but that alone is one indicium and, since Pradeep Kumar Biswas, no single indicium is enough.
The monopoly point. The federation does enjoy a monopoly, but the question under R.D. Shetty was always whether the monopoly is State conferred or State protected. A monopoly a body achieved for itself does not count.
Is the control regulatory or pervasive? Clearances applying to the whole field, not exercised under any special statute directed at this body, are regulatory. Pradeep Kumar Biswas holds expressly that merely regulatory control does not make a body a State.
Answer on article 32. The petition fails at the threshold. This is Zee Telefilms.
But the player is not without a remedy. Selecting a national team and disciplining players are akin to public duties, and article 226 reaches any person or authority and extends for any other purpose. The High Court is the forum.
Quick revision
- Pradeep Kumar Biswas, seven judges: the Ajay Hasia tests are not rigid; the question is whether the cumulative facts show the body is financially, functionally and administratively dominated by or under the control of government; that control must be particular and pervasive; merely regulatory control does not suffice.
- Regulatory control is control over a whole field applying to everyone alike; pervasive control is particular to the body and is the control of an owner.
- Zee Telefilms: the BCCI is not State, because its monopoly is not State conferred and its control is only regulatory. But its functions are akin to public duties, and article 226 is available even though article 32 is not.
- What survived: legal form is irrelevant, the indicia remain the evidence, and deep and pervasive control still makes a body State.
- The criticism: the test narrowed at the moment the State began withdrawing, so the two movements together leave a gap.
The Retreat, and What Survived It
Test yourself
1. Why was a Bench of seven constituted, and what two problems had the Ajay Hasia formulation produced?
2. Quote the test in Pradeep Kumar Biswas and identify the four changes it made.
3. Distinguish pervasive control from regulatory control, and say why the distinction is one of kind and particularity rather than degree.
4. On what facts did Zee Telefilms hold the BCCI not to be State, and what did the Court add about the remedy?
5. What survived the retreat? Name three things.
6. State the criticism that the retreat came at the wrong moment.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.