Holding

The appellant does not satisfy any description of a public servant under clause twelfth of section 21 IPC, and a cooperative society is not a corporation established by or under an Act, so section 197 CrPC does not apply.

Summary

S.S. Dhanoa, an IAS officer, was deputed as General Manager of the Super Bazaars run by the Cooperative Store Ltd., a society registered under the Bombay Cooperative Societies Act. He was charged under the Prevention of Food Adulteration Act for selling adulterated honey and argued that he was a public servant under clause twelfth of section 21 of the Indian Penal Code, so that prosecution required prior sanction of the Central Government under section 197 of the Code of Criminal Procedure. The Metropolitan Magistrate and the Delhi High Court held that he did not qualify as a public servant because he was neither in the service or pay of the Government nor employed in a corporation established by or under a Central or State Act. The Supreme Court affirmed this view, holding that a cooperative society is not a "corporation" within the meaning of the statute and that the appellant therefore did not fall within the protection of section 197. The appeal was dismissed.

Issues considered

Whether an IAS officer deputed to a cooperative society is a 'public servant' within the meaning of clause twelfth of section 21 of the Indian Penal Code for the purposes of section 197 of the Code of Criminal Procedure.
Whether a cooperative society registered under the Bombay Cooperative Societies Act qualifies as a 'corporation established by or under a Central or State Act' within the same provision.

Legislation cited

Bombay Cooperative Societies Act, 1925s. 23
Code of Criminal Procedure, 1973s. 197
Companies Act, 1956s. 617
Indian Penal Code, 1860s. 21
Prevention of Food Adulteration Act, 1954s. 16, s. 7
Prevention of Food Adulteration Rules, 1955s. 12-A

Subjects

public servantclause 12 IPCsection 197 CrPCcooperative societycorporationdeputationIndian Administrative ServicePrevention of Food Adulteration Actjurisdictionsanction

Judgment

A
864

S.S. DHANOA
v.
MUNICIPAL CORPORATION, DELHI & ORS.
B
May 8, 1981

[ 0. CHINNAPPA REDDY, A.P. SEN AND
BAHARUL ISLAM, JJ. ]

G Public servant-Services of an Officer belonging to the !11dian Administrative
Service loa11ed to a Cooperative Society-Prior approval of Central Government
under section 197, Cr. P.C. if required for prosecution under Prevention of Food
Adulteration Act-Officer, whether a public servant withi11 the meaning of clause
Twelfth of sec/ton 21, /.P.C.

Penal Code-Clause Twelfth of section 21-Scope of-Services of a govern-
D ment servant loaned to a Cooperative Society-Governme11t servant, if continued to
be a public servant.

The services of the appellant, a Member of Indian Administrative Service,
were placed at the disposal of the Co-operative Store Ltd. for being appointed as
the General Manager of the Super Bazaars run by the Co-operative Store.
E On a complaint being filed against the appellant for commission of alleged
offence punishable under section 7 read with s. 16 of the Prevention of Food
Adulteration ·Act 1954 before the Metropolitan Magistrate Delhi the
appellant contended that he was a public servant within the meaning of
clause Twelfth of section 21 of the Penal Code, that the act complained of was
done by him in the discharge of his duties a~ a public servant and that since, as
required by section 197, Cr. P.C., previous sanction of the Central Government
F had not been obtained the court was not competent to take cognizance of the
offence.

The Magistrate rejected all these contentions. He held that the appellant
could not be regarded as a public servant within the meaning of clause Twelfth
of section 21 and that at the relevant time he was neither in the service or pay of
the Government nor was he employed "in connection with the affairs of the
G Union".

The High Court, on appeal, upheld the view of the Magistrate.

Before this Court it was contended that the term "corporation" used in
H clause Twelfth of section 21 is wide enough to include not merely a statutory
corporation but also a body corporate such as the Cooperative Stores
S.S. DHANOA V. M.C. DELHI 865

established under the State Act like the Bombay Cooperative Societies Act, 1925 A
and that as General Manager he was employed in connection with the affairs of
the Union by reason of the fact that the Central Government had advanced
a huge loan to the Society for carrying on commercial activities.

Dismissing the appeal,

HELD : The appellant does not answer any of the essential requirements of B
clause Twelfth of section 21 I.P.C. He was neither an officer in the service or pay
of the Government nor of a local authority, a corporation established by or under
an Act or a Government company. (869 DJ

Mere incorporation of a society under a Central or State Act does not make
a body a corporation within the meaning of clause Twelfth of section 21. The
expression "corporation" must, in the context, mean a corporation created by
the legislature and not a body or society brought into existence by an act of a
c
group of individuals. A cooperative society is, therefore, not a corporation
established by or under an Act of the Central or State legislature. (870 BJ

Corporation in its widest sense may mean any association of individuals
entitled to act as an individual. But that ·is not the sense in which it is used in
clause Twelfth of section 21. There is a well marked distinction between a body
created by a statute and a body which, after coming into existence, is govered in
D
accordance with the provisions of a statute. A corporation established by or
under an Act of legislature can only mean a body corporate which owes its exis-
tence, and not merely its corporate status to the Act. An association of persons
constituting themselves into a company under the Companies Act or a society
under Societies. Registration Act owes its existence not to the Act of legislature
but to acts of parties though it may owe its status as a body corporate to an
Act of the legislature. (871 C-G] E
In the instant case the Cooperative Society was a society registered under the
Bombay Cooperative Societies Act. It is not a body created by a statute but a
body created by an act of a group of individuals in accordance with the provi-
sions of the statute. [872 Fl

Nor did the fact that the Central Government had advanced a huge Joan to F
the Society and held major shares in the total shareholding of the Society make
the Super Bazaars run by the Society an instrumentality of the State and the
appellant "employed in connection with the affairs of the Union" within the
meaning of section 197, Cr. P.C. [872 H-873 B]

The ~clause in the agreement advancing the Joan to the Society which
provided that the General Manager and other important incumbents of key G
posts shall not be appointed or removed from their posts by the Society except
with the prior approval of the Government in writing was merely incorporated to
safeguard the interests of the Central Government. Legally the Super Bazaars
were owned and managed by the Society and not by the Central Government.
(873 E-F]
H
Explanation to rule 2 (a) of the All India Services (Conduct) Rules, 1968
which provides that a member of the services whose services were placed at the
866 SUPREME COURT REPORTS [1981] 3 s.c.R.

A disposal of any organisation by the Central Government shall, for the purposes of
these rules, be deemed to be a member of the service serving in connection with
the affairs of the Union notwithstanding that his salary is drawn from sources
other than the Consolidated Fund of India serves a limited purpos~, that is, "for
the purposes of these Rules". Similarly rule 2(c) of the All India Services (Disci-
pline and Appeal) Rules, 1969 is for the purposes of these Rules. These two Rules
could not be pressed into service for improving the language of clause Twelfth of
B section 21 of the Penal Code. [873 G, 874 DJ

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 520
of 1976.

Appeal by Special Leave from the judgment and order dated
the I 7th September, 1975 of the Delhi High Court in Criminal
c Misc. (M) 212 of 1974.

D. Mukhe1jee, and O.P. Sharma for the Appellant.

P.R. Mridul, B.P. Mridul, B.P. Maheshwari and Suresh Sethi
D for the Respondents.

The Judgment of the Court was delivered by

SEN, J. This appeal by special leave from a judgment of the Delhi
High Court upholding an order of the Metropolitan Magistrate, Delhi,
raises a question of some public importance. The question is as to
E
whether the appellant, who is a member of the Indian Administra-
tive Service, and whose services were placed at the disposal of the
Cooperative Store Ltd., a society registered under the Bombay
Cooperative Societies Act, )925 (hereinafter called the Society), was
a public servant within the meaning of cl. Twelfth of s. 21 of
the Indian Penal Code, 1860, for purposes of s. 197 of the Code
F
of Criminal Procedure, 1973. The question arises in this way.

The appellant is a member of the Indian Administrative Service.
By notification No. 27-942-Estt. I, dated 23rd April, 1972, issued by
the Government of India in the Ministry of Agriculture (Department
Agriculture), the services of the appellant, who was a Joint Commis-
G
sioner (State Liaison) in that Ministry, were placed at the disposal
of the Department for his appointment as the General Manager,
Super Bazaar, Connaught Place, New Delhi with effect from April 7,
1972, on which date he took over charge as General Manager. At
H the request of the Managing Committee of the Society, the Govern-
ment of India extended the period of his deputation for a further
period of one year with effect from April 7, 1973. On completion
S.S. DHANOA v. M.C. DELHI (Sen, J.) 867

of his period of deputation, the appellant reverted as Joint Secretary A
in the Ministry of Agriculture.

On October IO, 1973, the Food Inspector purchased a sealed
bottle of honey from the Super Bazaar at the INA Market. The
Public Analyst's report showed the honey to be adulerated. On
April 5, 1974, the Municipal Corporation, Delhi, filed a complaint B
against the appellant and other officials of the Super Bazaar as also
against the manufacturer of honey for having committed an offence
punishable under s. 7 read withs. 16 of Prevention of Food Adul-
teration Act, 1954. On being summoned by the Metropolitan
Magistrate, Delhi, to appear before him as an accused, the appellant
raised a preliminary objection that the taking of cognizance of the c
alleged offence by the Magistrate was barred under s. 197 of the
Code of Criminal Procedure, 1973, for want of sanction of the
Central Government, since the act complained of was nothing but
an act done by him in the discharge of his duties as a public
servant.
D
The Metropolitan Magistrate, Delhi, by his order dated Octo-
ber 9, 1974, rejected the objection, holding that the appellant, at the
time of commission of the alleged offence, was not a public servant
within the meaning of cl. Twelfth of s. 21 of the Indian Penal Code
and, therefore, he was competent to take cognizance of the alleged
offence. In coming to that conclusion, the learned Magistrate held E
that the services of the appellant having been placed at the disposal
of the Society, he was in foreign service under FR 9 (7) and, there-
fore, could not be regarded as a public servant within the meaning
of cl. Twelfth of s. 21 of the Indian Penal Code for two reasons,
namely: (a) as the General Manager,- he was not an officer in the ser-
vice or pay of the Government, and (b) while· functioning as General F
Manager, he was not employed in connection with the affairs of the
Union. On appeal, the High Court confirmed the view of the
learned Magistrate.

The short question that falls for our determination in this
G
appeal is whether a member of the Indian Administrative service,
whose services are placed at the disposal of an organisation which
is neither a local authority, nor a corporation established by or
under·a Central, Provincial or State Act, nor a Government Com-
pany, by the Central Government or the Government of a State, H·
can be treated to be a 'public servant' within the meaning of cl.
Twelfth of s. 21 of the Indian Penal Code for purposes of s. 197 of
868 SUPREME COURT REPORTS [1981] 3 S.C.R.
A the Code of Criminal Procedure, 1973. The answer to the question
turns on the construction of cl. Twelfth of s. 21 of the Indian Penal·
Code, 1860 ands. 197 of the Code of Criminal Procedure, 1973,
which, so far as they are relevant, are as follows :

21. The words 'p!!blic servant' denote a person
B falling under any of the descriptions hereinafter following,
namely:-

Twelfth .' Every person-
c (a) in the service or pay of the Government or remu·
nerated by fees or commission for the performance of
any public duty by the Government ;

(b) in the service or pay of a local authority, a corporation
established by or under a Central, Provincial or State
D
Act or a Government company as defined in section
617 of the Companies Act, 1956.

S. 197. Prosecution of Judges and public servants.

{I) When any person who is or was a Judge or Magistrate
E or a public servant not removable from his office save
by or with the sanction of the Government is accused
of any offence alleged to have been committed by him
while acting or purporting to act in the discharge of
his official duty, no Court shall take cognizance of such
offence except with the previous sanction :-
F
(a) in the case of a person who is employed or, as the
case may be, was at the time of commission of the
alleged offence employed, in connection with the affairs
of the Union, of the Central Government;

G
In support of the appeal, learned counsel for the appellant "
has urged two grounds. The first is that the chain of Departmental
Stores known as Super Bazaar at Connaught Place, New Delhi,
together with 12 other super bazaars in the metropolitan city of
H Delhi, including the one at the INA market, is nothing but a com-
S.S. DHANOA v. M.C. DELHI (Sen, J.) 869

mercial activity of the Central Government and, therefore, the A
appellant was, at the time of the commission of the alleged offence,
employed in connection with the affairs of the Union. That being
so, the prosecution could not be launched without sanction from the
Central Government under s. 197 of the Code of Criminal Proce•
dure, 1973. The second is that the Cooperative Store Limited
which runs the super bazaars, having been registered under s. IO of B
the Bombay Cooperative Societies Act, 1925, was a body corporate
by virtue of s. 23 of that Act and, therefore, the appellant was a
public servant within the meaning of cl. Twelfth of s. 21 of the
Indian Penal Code. It is said that although the appellant may not
be covered by sub-cl. (a), he falls within the ambit of sub-cl. (b) of
cl. Twelfth. We find it difficult to accept these submissions. c
Clause Twelfth of s. 21 of the Indian Penal Code protects two
classes of public servants, viz., (a) every person in the service or pay
of the Government or remunerated by fees or commission for the
performance of any public duty by the Government, and (b) every
person in the service or pay of a local authority, a corporation D
established by or under a Central, Provincial or State Act or a
Government company as defined in section 617 of the Companies
Act, 1956. The appellant does not answer any of these descriptions.
During his period of deputation, he was not an officer in the service
or pay of the Government, nor was he in the service of a local
authority, a corporation established by or under an Act or a Govern- E
ment company. It is, however, urged that the expression 'corpora-
tion' appearing in sub-cl. (b) of cl. Twelfth of s. 21 of the Indian
Penal Code is wide enough to include not only a corporation establi-
shed by or under a Central, Provincial or State Act, but also a body
corporate. The submission proceeds on the basis of s. 23 of the
Bombay Cooperative Societies Act, 1925, which reads : F

23. The registration of a society shall render it a body
corporate by the name under which it is registered, with
perpetual succession and a common seal, and with power
to hold property, to enter into contracts, to institute and G
defend suits and other legal proceedings and to do all things
necessary for the purposes of its constitution. '

Clause Twelfth does not use the words "body corporate", and the
question is whether the expression "corporation" contained therein, ·H
taken in collocation of the words '!established by or under a Central,
Provincial or State Act" would bring within its sweep a cooperative
870 SUPREME COURT REPORTS [1981] 3 S.C.R.

A society. Indubitably, the Cooperative Store Limited is not a cor-
poration established by a Central or State Act. The crux of the
matter is whether the word 'under' occurring in cl. Twelfth of s. 21
of the Indian Penal Code makes a difference. Does the mere act of
incorporation of a body or society under a Central or a State Act
make it a corporation within the meaning ·of cl. Twelfth of s. 21?
B In our opinion, the expression 'corporation' must, in the context,
mean a corporation created by the Legislature and not a body or
society brought into existence by an act of a group of individuals.
A cooperative society is, therefore, not a corporation established
by or under an Act of the Central or State Legislature.

c A corporation is an artificial being created by law having a
legal entity entirely separate and distinct from the individuals who
compose it with the capacity of continuous existence and succession,
notwithstanding changes in its membership. In addition, it possesses
the capacity as such legal entity of taking, holding and conveying
property, entering into contracts, suing and being sued, and exerdsing
D such other powers and privileges as may be conferred on it by the
Jaw of its creation just as a natural person may. (1) The following
definition of corporation was given by Chief Justice Marshall in the
celebrated Dartmouth College case (2) :

A corporation is an artificial being, invisibe, intangible,
E and existing only in contemplation of law. Being the mere
creature of law, it possesses only these properties which the
charter of its creation confers upon it, either expressly
or as incidental to its very existence. These are such as
are supposed best calculated to effect the object for which
it was created. Among the most important are immortality,
F and, if the expression may be allowed, individuality; proper-
ties, by which a perpetual succession of many persons are
considered as the same, and may act as a single individual.
They enable a corporation to manage its own affairs, and
to hold property, without the perplexing intricacies, the
hazardous and endless necessity, of perpetual conveyances
G for the purpose of transmitting it from hand to hand. It

(I) Corpus Juris Secundum, Vol, 18, p. 136, para 1 : Words and Phrases,
Permanent Edition, Vol. 9A, p. 420: Halsbury's Laws of England, 4th
Edn, Vol. 9, p. 716 (para 1201) and p. 749 (para l245); Jowitt's Dictio-
nary of English Law, 2nd Edn, Vol. 1, p. 474 and Black's Law Dictio-
H nary, 5th Edn. p. 307.
(2) Dartmouth College v. Woodward, N.H. 4 Wheat. .518, 636, 4 L. Edo 629•.
S.S. DHANOA v. M.c. DELHI (Sen, J.) 871

is chiefly for the purpose of clothing bodies of men, in A
succession, with these qualities and capacities, that corpora-
tions were invented, and are in use. By these means, a
perpetual succession of individuals are capable of acting for
the promotion of the particular object, like one immortal
being.
B
The term 'corporation' is, therefore, wide enough to include private
corporations. But, in the context of cl. Twelfth of s. 21 of the
Indian Penal Code, the expression 'corporation' must be given a
narrow legal eonnotation.

Corporation, in its widest sense, may mean any association of c
individuals entitled to act as an ·individual. But that certainly is
not the sense in which it is used here. Corporation established by
or under an Act of Legislature can only mean a body corporate
which owes its existence, and not merely its corporate status, to the
Act. For example, a Municipality, a Zilla Parishad or a Gram
Panchayat owes its existence and status to an Act of Legislature. D
On the other hand, an association of persons constituting themselves
into a Company under the Companies Act or a Society under the
Societies Registration Act owes its existence not to the Act of
Legislature but to acts of parties though, it may owe its status as
a body corporate to an Act of Legislature.
E
There is a distinction between a corporation established by or
under an Act and a body incorporated under an Act. The distinc-
tion was brought out by this Court in Sukhdev Singh & Ors. v.
Bhagatram Sardar Singh Raghuvanshi & Ors. (1) It was observed :

A company incorporated under the Companies Act is F
not created by the Companies Act but comes into existence
in accordance with the provisions of the Act.

There is thus a well-marked distinction between a body created by a
statute and a body which, after coming into existence, is governed
in accordance with the provisions of a statute. In Sabhajit Tewary
G
v. Union of India and Ors ( 2) the question arose whether the Council
of Scientific and Industrial Research which was a society registered
under the Societies Registration Act, was a statutory body. · It was

(!) [1975] 3 SCR 619.
(2) [1975] 3 SCR 616. H
872 SUPREME COURT REPORTS [1981] 3 S.C.R.

A urged that because the Council of Scientific and Industrial Research
had government nominees as the President of the body and derived
guidance and financial aid from the Government, it was a statutory
body. Repelling the contention, the Court observed :

The Society does not have a statutory character like
B the Oil and Natural Gas Commission, or the Life Insurance
Corporation or ;Industrial Finance Corporation. It is a
society incorporated in accordance with the provisions of
the Societies Registration Act. The fact that the Prime
Minister is the President or that the Government appoints
nominees to the Governing Body or that the Government
c may terminate the membership will not establish anything
more than the fact that the Government takes special care
that the promotion, guidance and co-operation of scientific
and industrial research, the institution and financing of
specific researches, establishment or development and
assistance to special institutions or departments of the
D existing institutions for scientific study of problems affecting
particular industry in a trade, the utilisation of the result
of the researches conducted under the auspices of the
Council towards the development of industries in the
country are carried out in a responsible manner.
E Whatever has been said with regard to the Council of Scientific and
Industrial Research, which was a society registered under the ..
_

Societies Registration Act, equally applies to the Cooperative Store
Limited, which is a society registered under the Bombay Cooperative
Societies Act, 1925. It is not a statutory body because it is not
created by a statute. It is a body created by an act of a group
F of individuals in accordance with the provisions of a statute. The
Super Bazaar at Connaught Place together with its 12 branches in
Delhi, is not an instrumentality of the State. In a welfare State like
ours, there is greater participation by Government in various com"
mercial activities. Some times the Government directly engages
itself in such commercial.activities by acquiring a monopoly in trade
G in the public interest. Or, it may, by an Act of Legislature, establish
statutory corporations like the State Trading Corporation, Life
Insurance Corporation of India, the Industrial Finance Corporation,
the Oil and Natural Gas Commission etc., or it may set up Govern-
ment companies under s. 617 of the Companies Act, 1956, like the
H Hindustan Steel Limited etc. By no stretch of imagination, could
it be said that the appellant was employed in connection with the
S.S. DHANOA v. M.C. DELHI (Sen, J;) 873

affairs of the Union within the meaning of s. 197 of the Code of A
Criminal Procedure, 1973. The Super Bazaars are not owned by
the Central Government. They are owned and managed by the
Cooperative Store Limited. Pursuant to an agreement executed
between the Cooperative Store Limited and the Union of India, the
Central Government has advanced a loan of Rs. 40,00,000/- to the
Society for establishment and management of the Super Bazaars,
B
and the Central Government also holds ·more than 97% shares in
the total share-holding of the Society. Clause 6 of the Agreement
provides:
·-"T .

That the incumbents of supervisory and other key C
posts including those of General Manager, Deputy General
Manager, Finance Manager, Asst. General Manager, Pur-
chase Manager, Sales Manager and Accounts Manager, by
whatever other designation they may be known shall not be
appointed or removed from their posts by the Debtor except
with the prior approval of the Creditor in writing. D
The Super Bazaar at Connaught Place and at various other places
are run by the Cooperative Store Limited under the control of the
Ministry of Agriculture (Department of Cooperation). The incum-
bents of supervisory and other key posts including that of the
General Manager cannot be appointed or removed without the E
prior approval of the Central Government. The whole purpose of
cl. 6 of the Agreement in the matter of appointment of General
Manager and other incumbents holding key posts is to safeguard
interests of the Central Govarnment. Legally speaking, the Super
~---
Bazaars are owned and managed by the Society and not by the V
Central Government and, therefore, the appellant was not employed F
in connection with the affairs of the Union within the meaning of
s. 197 of the Code of Criminal Procedure, 1973.

Explanation to r. 2 (a) of the All India Services (Conduct)
Rules, 1968 and r. 2 (c) of the All India Services (Discipline and
Appeal) Rules, 1969, on which reliance was placed, can be of no G
avail. Explanation tor. 2 (a) enlarges the meaning of the expres-
sion "serving in connection with the affairs of the Union or in con-
nection with the affairs of the State". · It provides that a member
of the Service whose services are placed at the disposal of a com-
pany, corporation or other organisation or a local authority by the H
Central Government or the Government of a State, shall, for the
874 SUPREME COURT REPORTS [1981] 3 S.C.R.

A purpose of those rules, be deemed to be a member of the Service
serving in connection with the affairs of the Union or in connection
with the affairs of the State, as the case may be, notwithstanding
that his salary is drawn from the sources other than the Consoli-
dated Fund of India or the Consolidated Fund of that State. The
legal fiction contained in Explanation to r. 2 (a), is for a limited
B purpose. This is evident by the use of the words "for purposes of
these rules". Rule 2 (c) of the All India Services (Discipline and
Appeal) Rules, 1969 defines Government to mean (i) in the case
of a member of the Service serving in connection with the affairs
of a State, or who is deputed for service in any company, associa-
c tion or body of individuals whether incorporated or not, which is
wholly or substantially owned or controlled by the Government of
a State, or in a local authority set up by an Act of Legislature of a
State, the Governinent of that State; and (ii) in any other case, the
Central Government-. That again is for purposes of these rules.
These provisions cannot be pressed into service for improving upon
the language of cl. Twelfth of s. 21 of the Indian Penal Code,
D 1860.

Before parting with the case, we would like to advert to one
aspect. It is common ground that the honey in question was sold
in a.sealed container bearing the manufacture's warranty as to
quality as required under r. 12-A of the Prevention of Adulteration
E Rules, 1955. That being so, the learned Magistrate shall first deter-
mine whether or not the appellant was protected under s. 19 (2)
of the Prevention of Food Adulteration Act, 1954.

Subject to this observation, the appeal fails and is dismissed.
There shall be no order as to costs.
F P.B.R. Appeal dismissed.