Society tag can’t shield govt-controlled bodies from constitutional scrutiny: Supreme Court

An organisation cannot escape constitutional scrutiny simply because the government has chosen to set it up as a society rather than a government department or statutory body, the Supreme Court has ruled, making it clear that what matters is how much control the government exercises over its functioning and decision-making, and not the legal form it adopts.The court said the government cannot sidestep its constitutional obligations by carrying out activities through separately registered entities. (HT_PRINT)The court said the government cannot sidestep its constitutional obligations by carrying out activities through separately registered entities, but clarified that merely receiving government grants, performing public functions or having some government involvement would not automatically make an organisation an arm of the State.The observations came as a bench of justices Prashant Kumar Mishra and Augustine George Masih upheld a Delhi high court ruling that declared the National Book Trust (NBT) an instrumentality of the government and therefore ‘State’ within the meaning of Article 12 of the Constitution.“Registration as a society does not place a body mandatorily beyond Article 12 of the Constitution,” said the bench in its November 6 judgment, adding that the constitutional inquiry must focus on the substance of the relationship between the body and the government, rather than the name or legal form under which it operates.The court explained that the test is whether the government exercises such “deep and pervasive control” over an organisation that its financial, functional and administrative autonomy is substantially circumscribed. This has to be assessed by looking at the overall relationship between the two, rather than treating any one factor as decisive, it added.Applying this test to the NBT, the bench found that the government was involved in virtually every important aspect of the trust’s functioning, beginning with its creation and extending to its management, finances and decision-making. Senior counsel Sanjay Jain assisted the court as amicus curiae.To be sure, the issue was not merely about the NBT’s institutional identity. Being recognised as ‘State’ under Article 12 would make the NBT amenable to writ jurisdiction and require it to comply with the fundamental rights guaranteed under Part III of the Constitution, including the obligation to ensure that its actions are not arbitrary or discriminatory. The trust contested this status, maintaining that it was an autonomous society and not a government department or statutory corporation.But the bench noted that the trust was established through a government resolution in 1957 and reorganised in 1962 to promote literature and make books available to the public at affordable prices. Its chairman is appointed by the government and holds office at its pleasure. Government representatives from the ministries of education, finance and information and broadcasting are part of its governing body and executive committee, which exercises control over its administration.Furthermore, the government’s influence also extends to the trust’s financial affairs. Its finance ministry representative functions as the financial adviser, its annual reports and audited accounts have to be submitted to the government, and its accounts are maintained in a form prescribed by the government in consultation with the Comptroller and Auditor General (CAG). The CAG, the court pointed out, is also empowered to audit its accounts while changes to specified aspects of the trust’s rules and objectives require government approval.“These provisions cannot, in our view, be characterised as isolated instances of ordinary regulatory supervision,” said the bench, pointing out that the government determines the trust’s governing composition, appoints its principal functionary, participates in its executive and financial administration and retains oversight over its accounts and institutional framework.The trust had argued that it could not be treated as a government instrumentality because it was registered as a society and generated a substantial part of its income independently through the sale of books. Rejecting this argument, the court said that the source of an organisation’s income cannot be examined in isolation from the larger structure governing its functioning.Financial assistance from the government is an important consideration, but not the only one, said the bench, adding, the fact that a body earns its own revenue does not establish that it functions independently of the government.The judgment also drew a distinction between performing a public function and being an instrumentality of the State. The publication and dissemination of books, by themselves, may not constitute an exclusively governmental function. Nor does every organisation engaged in an activity of public importance automatically become ‘State’. What matters, it held, is whether the nature of its work, its creation and the government’s control over it, taken together, satisfy the constitutional test.The bench also clarified that declaring an organisation ‘State’ under Article 12 does not turn it into a government department or automatically make its employees civil servants. Such a declaration attracts the constitutional discipline of Part III, which deals with fundamental rights, but does not confer the service protections available to government employees under the Constitution.Upholding the high court’s 2012 ruling, the bench dismissed the NBT’s appeal, holding that the government’s involvement in the trust was sufficiently deep and pervasive to bring it within the constitutional definition of ‘State’.