Holding

The Uttar Pradesh Ganna Kishan Sansthan is a 'State' within the meaning of Article 12 of the Constitution of India.

Summary

The respondent, Radhey Shyam Rai, was dismissed from his post as Computer Officer in the Uttar Pradesh Ganna Kishan Sansthan, a society registered under the Societies Registration Act, and challenged the dismissal before the High Court, raising the question of whether the Sansthan is a 'State' within the meaning of Article 12 of the Constitution. The High Court Full Bench held that the Sansthan is a State because it performs a public function previously carried out by the Government, receives 80‑90% of its funding from the State, and is controlled by government officials who dominate its governing council and can issue directives. The State of Uttar Pradesh appealed this finding before the Supreme Court. The Supreme Court applied the tests laid down in Ajay Hasia, Pradeep Kumar Biswas and related precedents, examining the formation, function, financial aid, and pervasive governmental control over the Sansthan. It concluded that the cumulative facts demonstrate that the Sansthan is an instrumentality of the State and therefore falls within Article 12. Consequently, the appeal was dismissed, upholding the High Court's decision.

Issues considered

Whether the Uttar Pradesh Ganna Kishan Sansthan, a society registered under the Societies Registration Act, qualifies as a 'State' within the meaning of Article 12 of the Constitution of India.

Legislation cited

Constitution of Indias. Article 12
Societies Registration Act, 1860

Subjects

Article 12StateSocieties Registration Actpublic functiongovernment controlfinancial assistanceconstitutional lawpublic authoritycivil servicedismissal

Judgment

[2009] 4 S.C.R. 143

STATE OF U.P. & ANR. A
V.
RADHEY SHYAM RAI
Civil Appeal No. 1572 of 2009
MARCH 6, 2009
B
[S.B. SINHA AND CYRIAC JOSEPH, JJ.]
Constitution of India, 1950 -Art. 12 - State - Meaning of
- Uttar Pradesh Ganna Kishan Sansthan, a society registered
under the Societies Registration Act - Dispute raised whether
it was a 'State' within meaning of Art.12 - On facts, held: The C
State established the 'Sansthan' so as to take over its own
functions - 80 to 90% of the expenditure of 'Sansthan' was
met out of funds made available to it by the Government -
Composition and constitution of 'Sansthan' and its Governing
Council was nothing but a show of the Government - Majority o
of office bearers of the Governing Council were holders of
various offices of the Government - The State exercised deep
and pervasive control over the affairs of the 'Sansthan', the
Cane Commissioner being at the helm of the affairs - Hence,
the 'Sansthan'was a 'State' within meaning ofArt.12- Societies E
Registration Act.
The question which arose for consideration in the
present appeal was whether the Uttar Pradesh Ganna
Kishan Sansthan, a society registered under the Societies
Registration Act is a 'State' within the meaning of Article F
12 of the Constitution.
Dismissing the appeal, the Court
HELD:1.1. For the purpose of determining the
question as to whether a society registered under the G
Societies Registration Act would be a 'State' within the
meaning of Article 12 of the Constitution or not, the history
of its constitution plays an important role. The functions
which are being performed by the Sansthan were used
143 H
144 SUPREME COURT REPORTS [2009] 4 S.C.R.

A to be performed by the Government directly. The main
purpose and object for which the training institutes were
established at different places in the State of Uttar Pradesh
was to provide scientific ways of sugarcane cultivation
and management so as to improve the production of cane
B with a view to achieve better production of sugar. Such a
function indisputably is a State function. The State
established the 'Sansthan' so as to take over its own
functions. It even transferred the entire management
relating to imparting of training in various institutes in its
c favour. All the assets held by it for the aforementioned
purpose including the infrastructural facilities stood
transferred in favour of the Sansthan. It was created under
a Government charter contained in the Government Order
dated 4.08.1975 issued in the name of the Governor of
Uttar Pradesh. [Para 12] (153-A-E]
0
1.2. The documents produced reveal that 80 to 90%
of the expenditure of Sansthan was met out of the funds
made available to it by the Government. The majority of
the office bearers of the Governing Council were holders
E of various offices of the Government. It had, thus, a
dominance of the holders of the office in the Government
of Uttar Pradesh; the Minister-lncharge of Cane
Department being its ex-officio Chairman of the Governing
Council. He is the Chief Executive Authority. The Director
F and Accounts Officer are also the government servants
and the Sansthan is not free to appoint anybody on those
posts who is not a government servant. This itself clearly
shows that the composition and constitution of Sansthan
and its Governing Council was nothing but a show of the
G Government and only a cover of the Society was given.
Rule 41 of the Rules of Sansthan provides that the
Governor shall have power to issue any directives to the
Sansthan concerning any matter of public importance and
the Sansthan shcill give immediate effect to the directives
H so issued. [Para 14] (155-G-H; 156-A-C]
STATE OF U.P. & ANR. V. RADHEY SHYAM RAI 145

• 1.3. The functions of the Sansthan are public A
; ~
functions. From the materials placed before the court there
cannot be any doubt whatsoever that the State exercises
a deep and pervasive control over the affairs of the
Sansthan, the Cane Commissioner being at the helm of
the affairs. The Accounts Officer is the officer of the State B
Government and, is also sent on deputation. The Majority
of members of the Governing Council are holders of
different offices of the State Government. They play a vital
role in carrying out the affairs of the Sansthan. They alone
• have power to appoint anybody of their choice on the post.
It is required to obey all the directions issued by the State
c
Government from time to time. Therefore, the High Court
has rightly held the Sansthan a 'State' within the meaning
of Article 12 of the Constitution. [Para 15] [156-D-G]
Rajasthan State Electricity Board v. Mohan Lal (1967) 3 D
SCR 377; Ajay Hasia v. Khalid Mujib Sehravardi (1981) 1 SCC
722; Pradeep Kumar Biswas v. Indian Institute of Chemical
Biology [(2002) 5 SCC 111; P. K. Ramachandra Iyer and Others
v. Union of India and Others (1984) 2 SCC 141; Chander
Mohan Khanna v. National Council of Educational Research E
.. ~

and Training (1991) 4 SCC 578; Sabhajit Tewary v. Union of
India (1975) 1 SCC 485; Mysore Paper Mills Ltd. v. Mysore
Paper Mills Officers' Association and Another (2002) 2 SCC
167; Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi
(1975) 1 SCC 421; Ramana Dayaram Shetty v. International F
Airport Authority of India (1979) 3 SCC 489; Virendra Kumar
Srivastava v. U.P. Rajya Karmachari Kalyan Nigam and
Another (2005) 1 SCC 149 and Zee Telefilms Ltd. and Another
v. Union of India and Others (2005) 4 SCC 649 - referred to.
Case Law Reference G

(1967) 3 SCR 377 referred to Para 7
(1981) 1 sec 122 referred to Para 7
[(2002) 5 sec 111 referred to Para 7
H
146 SUPREME COURT REPORTS [2009] 4 S. C.R.

A (1984) 2 sec 141 referred to Para 8
!----
(1991) 4 sec 578 referred to Para 8

(1975) 1 sec 485 referred to Para 8

(2002) 2 sec 167 referred to Para 8
B
(1975) 1 sec 421 referred to Para 9

(1979) 3 sec 489 referred to Para 9

(2005) 1 sec 149 referred to Para 10
c (2005) 4 sec 649 referred to Para 11

CIVILAPPELLATE JURISDICTION: Civil Appeal No. 1572
of 2009
From the Judgement and Order dated 26.07.2005 of the
D Hon'ble High Court of Judicature at Allahabad in W.P. No. (SB)
of 1998.
Ravi Prakash Mehrotra, Garvesh Kabra, for the Appellant.
The Judgement of the Court was delivered by
E
S.B. SINHA, J :

1. Leave granted.
2. The short question which arises for consideration herein
is as to whether the Uttar Pradesh Ganna Kishan Sansthan (for
F short "the Sansthan"), a society registered under the Societies
Registration Act is a 'State' within the meaning of Article 12 of
the Constitution of India.
3. Indisputably, before constituting the Sansthan, its
G functions, viz., imparting of knowledge and training to the cane-
growers and connected persons so as to effect increase in the
production of sugar in the State was being performed by the
Cane Development Department. The Sansthan was established •
by a Government Order dated 4.08.1975. The State had
established training centers at Shahjahanpur, Muzaffarnagar and
H
STATE OF U.P. & ANR. V. 147
RADHEY SHYAM RAI [ S.B. SINHA, J.]

Gorakhpur. These training centers, as noticed hereinbefore, A
' were being run by the Cane Development Department of the
Government of Uttar Pradesh. Management of the said training
centers was transferred to the Sansthan. The expenses thereof
were to be met from U.P. Sahkari Ganna Samiti Sangh and
Sakkar Vishesh Nidhi. B
4. Respondent was appointed in the post of Computer
Officer/ Data Processing Officer. The Governing Council of the
Sansthan in its meeting held on 28.04.1997 resolved to abolish
, ~
the posts created and to cancel the appointments made,
pursuant whereto the services of the respondent were c
dispensed with by an order dated 17 .05.1997.
Feeling aggrieved by the said order dated 17.05.1997,
he filed a writ petition before the Lucknow Bench of the High
Court of Judicature at Allahabad being Writ Petition No. 869 of
D
1998 wherein one of the issues raised was whether the
Sansthan is a 'State' within the meaning of Article 12 of the
Constitution of India.
5. The writ petition filed by the respondent came up for
consideration before a Division Bench of the High Court. It E
noticed an earlier decision of another Division Bench of the said
Court wherein it was opined that the appellant No. 2 is not a
'State' within the meaning of Article 12 of the Constitution of
India. However, a different view was taken.
The question as to whether the Sansthan would answer F
the description of a 'State' within the meaning of Article 12 of
the Constitution of India was, therefore, referred to a Full Bench
of the High Court.
The Full Bench held that the Sansthan being an authority
G
would come within the purview of definition of 'State' within the
;
meaning of Article 12 of the Constitution of India.
6. Article 12 of the Constitution of India reads as under:
"12. Definition.-ln this part, unless the context otherwise
H
148 SUPREME COURT REPORTS [2009] 4 S.C.R.

A requires, 'the State' includes the Government and
Parliament of India and the Government and the legislature
of each of the States and all local or other authorities
within the territory of India or under the control of the
Government of India."
B 7. Law in this behalf has developed a lot. With the changing
societal conditions, a large number of bodies exercising public
functions have been brought within the purview of the definition
of 'State'. We need not dilate on the development of law in this
regard in view of the decisions rendered by this Court beginning
C from Rajasthan State Electricity Board v. Mohan Lal [(1967) 3
SCR 377], Ajay Hasia v. Khalid Mujib Sehravardi [(1981) 1
SCC 722] and other decisions including a Seven - Judge Bench
decision of this Court in Pradeep Kumar Biswas v. Indian
Institute of Chemical Biology [(2002) 5 SCC 111].
D
8. We may also notice that PK. Ramachandra Iyer and
Others v. Union oflndia and Others [(1984) 2 SCC 141] wherein
Indian Council for Agricultural Research (ICAR) was held to be
a 'State' within the meaning of Article 12 of the Constitution of
E India, was distinguished in Chander Mohan Khanna v. National
Council of Educational Research and Training [(1991) 4 SCC
578]. However, Chander Mohan Khanna (supra) was overruled
in Pradeep Kumar Biswas (supra) to the extent it followed the
decision in Sabhajit Tewary v. Union of India [(1975) 1 SCC
485].
F
In Mysore Paper Mills Ltd. v. Mysore Paper Mills Officers'
Association and Another [(2002) 2 SCC 167] Mysore Paper
Mills Ltd. was held to be a 'State' within the meaning of Article
12 of the Constitution of India as it was substantially financed
G and controlled by the Government, managed by the Board of
Directors nominated and removable at the instance of the
Government and carrying on functions of public interest under
its control.
9. In Pradeep Kumar Biswas (supra), the following tests
H forthe purpose of determining the nature of activities which would
f

STATE OF U.P. & ANR. V. 149
RADHEY SHYAM RAI [ S.B. SINHA, J.]

make the body come within the definition of 'State' have been A
'·
laid down by a Seven-Judge Bench of this Court:

(i) Formation of the body

(ii) Objects and functions

(iii) Management and control B

(iv) Financial aid, etC.

<
The dicta of Mathew, J. in Sukhdev Singh v. Bhagatram
Sardar Singh Raghuvanshi [(1975) 1 SCC 42j] was quoted
with approval in Pradeep Kumar Biswas (supra), which is in the c
following terms:

"17. For identifying such an agency or instrumentality he
propounded four indicia:

(1) "A finding of the State financial support plus an unusual D
degree of control over the management and policies might
lead one to characterize an operation a~ State action."
(SCC p. 454, para 96)
(2) "Another factor which might be considered is whether
E
the operation is an important public function." (SCC p. 454,
~
para 97)

(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 F
given function is of such public importance and so closely
related to governmental functions as to be classified as a
governmental 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 G
description, then mere addition of State money would not
influence the conclusion." (SCC p. 454, para 97)
(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 H
'
•

150 SUPREME COURT REPORTS [2009] 4 S.C.R.

A business for the benefit of the public. In other words, the
question is, for whose benefit was the corporation carrying
on the business?" (SCC p. 458, para 111 )"
This Court referred to Ajay Hasia (supra) wherein the tests
gathered from the decision of this Court in Ramana Dayaram
B Sheffy v. International Airport Authority of India [(1979) 3 SCC
489) were stated in the following terms:
"( 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
.,...
c
or agency of Government. (SCC p. 507, para 14)
(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
D impregnated with Governmental character. (SCC p. 508,
para 15)
(3) It may also be a relevant factor ... whether the corporation
enjoys monopoly status which is State conferred or State
protected. (SCC p. 508, para 15)
E
(4) Existence of deep and pervasive State control may
afford an indication that the corporation is a State agency >
or instrumentality. (SCC p. 508, para 15)
(5) If the functions of the corporation are of public
F importance and closely related to Governmental functions,
it would be a relevant factor in classifying the corporation
as an instrumentality or agency of Government. (SCC p.
509, para 16)

G (6) 'Specifically, if a department of Government is
transferred to a corporation, it would be a strong factor •
· supportive of this inference' of the corporation being an
instrumentality or agency of Government." (SCC p. 510,
para 18)"
H It was held in Pradeep Kumar Biswas (supra):
STATE OF U.P. & ANR. V. 151
RADHEY SHYAM RAI [S.S. SINHA, J.]

"40. The picture that ultimately emerges is that the tests A
,_
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, B
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 c
merely regulatory whether under statute or otherwise, it
would not serve to make the body a State."

10. In Virendra Kumar Srivastava v. U.P. Rajya
Karmachari Kalyan Nigam and Another [(2005) 1 SCC 149],
this Court held the respondent therein to be a 'State' within the D
meaning of Article 12 of the Constitution of India, applying the
tests of administrative control, financial control and functional
control.
11. The question as to whether the Board of Control for
Cricket in India (BCCI) which is a private body but had a control E
over the sport of cricket in India is a 'State' within the meaning
of Article 12 of the Constitution of India came up for consideration
before a Constitution Bench of this Court in Zee Telefilms Ltd.
1
and Another v. Union of India and Others [(2005) 4 SCC 649]
wherein the majority felt itself bound by the dicta laid down in F
Pradeep Kumar Biswas (supra} to opine that it was not a 'State'
within the meaning of Article 12 of the Constitution of India.
However, the minority view was as under:
"70. Broadly, there are three different concepts which exist G
for determining the questions which fall within the
expression "other authorities":
(i) The corporations and the societies created by the State
for carrying on its trading activities in terms of Article 298
H
,.
152 SUPREME COURT REPORTS · [2009] 4 S.C.R.

A • of the Constitution whereforthe capital, infrastructure, initial
investment and financial aid, etc. are provided by the State
and it also exercises regulation and control thereover. ·
(ii) Bodies created for research and other developmental
· works which are otherwise governmental functions but may
B or may not be a part of the sovereign function.
(iii) A private body is allowed to discharge public duty or
positive obligation of public nature and furthermore is
allowed to perform regulatory and controlling functions and
c activities which were otherwise the job of the Government.
· 71. There cannot be same standard or yardstick for judging
different bodies for the purpose of ascertaining as to
. whether any of them fulfils the requirements of law therefor
or not.
D
80. The cqncept that all public sector undertakings .
incorporated under the Companies Act or the· Societies f
Registration Act or any other Act for answering the
description of State must be financed by the Central ·
. Government and be under its deep and pervasive control
E has in the past three decades undergone a sea change.
The thrust now is not upon the composition of the body but
the duties and functions performed by it. The primary
question which is required to be posed is whether the
- body in question exercises public function.
F
· 110. Tests evolved by the courtS have, thus, been expanded
from time to time and applied having regard to the factual
matrix obtaining in each case. Development in this branch ·
of law as in others has always found differences.
G Development of law had never been an easy task and
p'robably would never be."
The majority despite holding that BCCI is not a 'State' within
the meaning of Article 12 of the Constitution of India opined that
a writ petition under Article 226 of the Constitution of India against
H · it would be maintainable. · ·
STATE OF U.P. & ANR. V. 153
RADHEY SHYAM RAI [ S.B. 'SINHA, J.]

12. Keeping in view the aforementioned principles, we may A
•. consider the fact of the present matter.
For the purpose of determining the question as to whether
a society registered under the Societies Registration Act would
be a 'State' within the meaning of Article 12 of the Constitution
of India or not, the history of its constitution plays an important 8
role. [PK. Ramachandra Iyer (supra)] The functions which are
being performed by the Sansthan were used to be performed
by the Government directly. The main purpose and object for
which the training institutes were established at different places
' in the State of Uttar Pradesh admittedly was to provide scientific c
ways of sugarcane cultivation and management so as to
improve the production of cane with a view to achieve better
production of sugar. Such a function indisputably is a State
function. The State established the 'Sansthan' so as to take over
its own functions. It even transferred the entire management D
relating to imparting of training in various institutes in its favour.
" All the assets held by it for the aforementioned purpose including
the infrastructural facilities stood transferred in favour of the
Sansthan. It was created under a Government charter contained
in the Government Order dated 4.08.1975 issued in the name
of the Governor of Uttar Pradesh. A budget of Rs. 6.00 lakhs E
was sanctioned in the year 1975-76, 50% of which was made
by the Government and the remaining 50% by the Mills run by
, the State Sugar Corporation, Indian Mill Association, U.P.
• Sugarcane Cooperative Federation and Cane Development
Societies. A sum of Rs. 2 lakhs was released immediately from F
the Contingent Fund of the State and the remaining amount was
released on acceptance of supplementary demands and
passing of Appropriation Bill by the Legislature. Some of the
objectives stated in the Memorandum of Association are:
(i) To establish, run and maintain training institute for G
the benefit of cane growers and the personnel in the
Cane Development Department;
(ii) To purchase land or building, etc. for establishing the
institute, auditorium, etc. H
154 SUPREME COURT REPORTS [2009) 4 S.C.R.

A (iii) To diffuse practical and scientific ways of sugar cane
cultivation and management through sugar cane
research workers.
It started with eight members of the Governing Council; all
of whom were public servants including the Cane
B Commissioner, Uttar Pradesh or were nominated by the State.

The Sansthan framed rules called the Rules of Association
of Sansathan, some of which are as under:
(I) Co-opted Members not exceeding two (Rule-4) r-
c
(II) Donors Members with right to elect two of them to be
members of Sansthan.
(Ill) The Governing Council (having 12 members) headed
by Minister, In charge of the Cane Department of the
D Government of U.P., with majority of the members,
by virtue of their respective offices under the State
Government (Rule-9)
(IV) Chairman of the Governing Council, to be the Chief
Executive Authority of Sansthan (Rule -25)
E
(V) Vice-Chairman who shall be pramukh Sachiv, Sugar
industry and Cane Development of the Government
and will preside the meetings in absence of Chairman
(Rule - 26).
F (VI) The affairs of Sansthan shall be carried on and
managed by the Governing Council, which shall have
also power to appoint officers, employees of
Sansthan and to fix their pay scales and remuneration
(Rule-29).
G
(VII) The Director of Sansthan, to be the ex-officio
Secretary of the Governing Council and he shall be
officers, of the Government of U.P., on deputation
(Rule -30).
H (VIII) Account Officer of Sansthan, to be taken on
STATE OF U.P. & ANR. V. 155
RADHEY SHYAM RAI [ S.B. SINHA, J.]

/. deputation from amongst, servants of the State A
Government. He shall be responsible for maintenance
of the accounts etc. (Rule - 32).

(IX) The Governor of Uttar Pradesh may from time to
issue directives to the society as to the exercise and
performance of its functions in matters involving the 8
security of the State or substantial public interest and
such other directives as he considers necessary in
regard to the finances and conduct of business and
.. affairs of the society and in the like manner may vary
and annual any such directives and the society shall c
give immediate effect to the directives so issued
(Rule -41 (a)).

(X) The Governor of Uttar Pradesh may call for such
returns, accounts and other information with respect
to the properties and activities of the society as may D
be required by him from time to time (Rule -41 (b)).
13. The Government had constituted and re-constituted a
Committee consisting of officers of the Government and other
holders of the public office with the Cane Commissioner to
streamline curriculum of training courses to be undertaken by it. E
The provisions of the Uttar Pradesh Sugar Cane (Purchase Tax)
Act, 1961 provided for appropriation of 50% of the amount of
tax from the Consolidated Fund of the State and credited to
and vested in 'Sakkar Vishesh Nidhi' which was to be
administered by a Committee headed by the Secretary to the F
Government in the sugar industry. The Government withdrew a
huge amount from the said fund for making it available to the
Sansthan in the financial year 1988-89.
14. The documents produced before the High Court reveal
that 80 to 90% of the expenditure of Sansthan was met out of G
the funds made available to it by the Government. The majority
of the office bearers of the Governing Council were holders of
various offices of the Government. It had, thus, a dominance of
the holders of the office in the Government of Uttar Pradesh; the
Minister-lncharge of Cane Department being its ex-officio H
156 SUPREME COURT REPORTS (2009] 4 S.C.R.

A Chairman of the Governing Council. He is the Chief Executive
Authority. The Director and Accounts Officer are also the
government servants and the Sansthan is not free to appoint
anybody on those posts who is not a government servant. This
itself clearly shows that the composition and constitution of
B Sansthan and its Governing Council was nothing but a show of
the Government and only a cover of the Society was given. Rule
41 of the Rules of Sansthan provides that the Governor shall
have power to issue any directives to the Sansthan concerning
any matter of public importance and the Sansthan shall give
C immediate effect to the directives so issued. Furthermore, Rule
41(b) of the Rules of Sansthan reads as under:
"The Governor of Uttar Pradesh may call for such returns,
accounts and other information with respect to the
properties and activities of the society as may be required
D by him from time to time."
The functions of the Sansthan are public functions.
15. From the materials placed before the court there cannot
be any doubt whatsoever that the State exercises a deep and
E pervasive control over the affairs of the Sansthan, the Cane
Commissioner being at the helm of the affairs. The Accounts
Officer is the officer of the State Government and, is also sent
on deputation. The Majority of members of the Governing
Council, as noticed hereinbefore, are holders of different offices
F of the State Government. They play a vital role in carrying out
the affairs of the Sansthan. They alone have power to appoint
anybody of their choice on the post. It is required to obey all the
directions issued by the State Government from time to time.
We, therefore, are of the opinion that the Full Bench of the High
G Court has rightly held the Sansthan a 'State' within the meaning
of Article 12 of the Constitution of India.
16. For the reasons aforementioned, the appeal is
dismissed with costs. Counsel's fee assessed at Rs. 50,000/-.

B.B.B. Appeal dismissed.