TaxTMI 
TaxTMI 
1992 (8) TMI 291
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....decide was whether the appellant Bank was "State" within the meaning of Article 12 of the Constitution and whether the writ petition was maintainable against the appellants. The learned single Judge, by his above judgment and order, held that the appellants Bank was "State" within the meaning of Article 12 of the Constitution and hence a writ was maintainable against the appellants. 3. The appeal came up for hearing before a Division Bench of this Court consisting of Pendse and Kapadia, JJ. The Division Bench, in its judgment and order dated 26th February 1992, referred to a decision of a Division Bench of this Court at Nagpur in the case of Narayan Balaji Bhanage v. Maharashtra State Co-operative Land Development Bank Limited, . The Division Bench of this High Court at Nagpur had held that the Maharashtra State Co-operative Land Development Bank Limited is "State" within the meaning of Article 12 of the Constitution. It approved the judgment of the learned single Judge herein. The Division Bench at Bombay observed that it is difficult to share the view of the Division Bench at Nagpur in view of certain decisions of the Supreme Court. But it would not....
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....his particularisation of relevant factors is however not exhaustive and by its very nature it cannot be. Because with increasing assumption of new lacks, growing complexities of management and administration and the necessity of continuing adjustment in relations between the corporation and the Government calling for flexibility, adaptability and innovative skills, it is not possible to make an exhaustive enumeration of the tests which would invariably and in all cases prove an unfailing answer to the question whether a corporation is governmental instrumentality or agency. Moreover even amongst these factors which we have described, no one single factor will yield a satisfactory answer to the question and the Court will have to consider the cumulative effect of these various factors and arrive at its decision on the basis of a particularised inquiry into the facts and circumstances of each case." 6. In the case of Ajay Hasia v. Khalid Mujib Sehravardi the Supreme Court reiterated the test land down in the case of Ramana Davaram Shetty v. The International Airport Authority of India (supra) with a note of caution. It said (in paragraph 9 at page 496) "...while stressing ....
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....servations to the same effect in the case of Chandra Mohan Khanna v. The National Council of Educational Research and Training . 9. We have to examine the constitution and functioning of the appellant Bank, which is a multi-State co-operative society in the light of these tests in order to decide whether it falls within the definition of a "State" under Article 12. The first aspect that we propose to examine is the aspect of State's control over the appellants Bank. There are three important pieces of legislation which regulate the functioning of the appellant-Bank. These are the Maharashtra Co-operative Societies Act, 1960, the Multi-State Co-operative Societies Act, 1984, and the Banking Regulation Act, 1949. The Report of the Expert Committee on Multi-State Co-operative Societies Legislation, which -was submitted as far back as February 1972, enunciates in Paragraph 3.9 the co-operative principles which have been since enacted in the Multi-State Co-operative Societies Act, 1984 as well as earlier in the Maharashtra Co-operative Societies Act, 1960. The principles which have come to be recognised as fundamental to co-operative organisations were initially enunciate....
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....State Co-operative Societies Act, 1984. For example, S. 19 provides for membership, S. 22 provides for one vote for one member. S. 29 provides that subject to the rules and bye-law the ultimate authority of a multi-State Co-operative Society shall vest in the general body of its members. S. 30 provides for an annual general meeting of the general body, inter alia, to elect members of the Board. S. 32 provides for a Board of Directors of such a society and S. 42 defines the powers and functions of such a Board, This includes, inter alia, the power to appoint a Chief Executive and such other employees of the society in whom, under S. 45 of the Act, the day to day management of the business of the multi-State Co-operative Society is entrusted. These provisions clearly indicate that the ultimate control and management of a multi-State Co-operative Society vests in the general body of its members subject, of course, to the provisions of the Act. 11. Section 47. of the Multi-State Cooperative Societies Act does provide to the Central Government power to give directions in the public interest. It states that if the Central Government is satisfied that in the public interest or for the pu....
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....ank within the meaning of S. 2(10) of the Maharashtra Co-operative Societies Act, 1960. It is a society which is doing the business of banking under S. 5(1)(b) of the Banking Companies Act, 1949. It is deemed to be registered under the Multi-State Cooperative Societies Act, 1984 with effect from 18th August, 1984. The bye-laws of the said bank set out the objects of the bank in Chapter III. The objects of the said Bank are to encourage thrift and promote co-operation among its members and to carry on in Bombay and at such other places as may from time to time be decided, with the approval of the Reserve Bank of India and the Registrar where necessary, the business of banking including borrowing, raising or receiving money from members, non-members, societies, companies, trusts or associations. Under Chapter IV dealing with funds of the said Bank, the Bank is required to raise funds in the following ways : (i) by issue of shares; (ii) by receiving deposits; (iii) by raising loans; (iv) by donations; etc. Under clause 5(b) of Chapter IV of the Bye-laws, as amended after Multi State Co-operative Societies Act, 1984 came into force, it is provided that the authorised share capital ....
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....ments of managing directors, etc., are subject to the previous approval of the Reserve Bank, do riot apply (o a co-operative bank. Even if we assume broadly that under the Banking Regulation Act the Reserve Bank has regulatory powers over all kinds of banks including co-operative banks, that, in our view, is not sufficient to make such organisations, agencies or instrumentalities of the State. We have a large number of such regulatory kinds of organisations. For example, the Companies Act regulates the working of public and private limited companies in the country. This Act lays down detailed provisions, for example, regarding the manner of holding annual general meetings, the manner of holding meetings of the Board of Directors, how resolutions have to be passed by these bodies, how these companies have to be registered or wound up and so on. This does not make such companies, agencies or instrumentalities of the State simply because the State has enacted a law to regulate the working of such companies. The Indian Partnership Act regulates the functioning of partnership firms. Such regulatory laws cannot be construed ipso facto as providing full or substantial State control over t....
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....include within its scope all functions which are of public importance. Hence any organisation which performs a public function must be considered as State under Article 12. In our view, this is too broad a proposition. We have to bear in mind the note of caution sounded by the Supreme Court in the cases of Ajay Hasai (supra) and Tekraj Vasandi (re. the Institution of Constitutional and Parliamentary Studies supra). Every organisation which carries out a function which is of public importance does not necessarily become "State" under Article 12. Conferment of "Statehood" depends upon various other factors also, such as the nexus of such organisations with the State, the extent of State control, whether it is entirely financed by the State or by private individuals, whether, the same function was originally carried out by a Department of the State and so on. There may be many functions of public importance which can be performed by private organisation also. We have a large number of organisations doing important social work vital to the community. There are, for example, organisations which look after, educate and train handicapped persons or the blind, provide t....
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....ests. 21. In the case of Sri Kohaseema Cooperative Central Bank Ltd. v. N. Seetarama Raju, reported in AIR 1990 Andh Pra 171 (1990 Lab IC (NOC) 63), the Full Bench of the Andhra Pradesh High Court held that a cooperative bank did not perform functions of public importance which were closely related to governmental functions and hence declined to characterise a co-operative bank as "State" under Art. 12. 22. In the case of Pritamsingh Gill v. State of Punjab and Haryana, , the Full Bench of the Punjab and Haryana High Court held that the Punjab State Co-operative Land Mortgage Bank registered under the Punjab Co operative Societies Act was not instrumentality of the State and hence was not "other authority" within the meaning of Art. 12. 23. In the case of V. I. Khalifa v. Satubha Tanubhal Vaghela, reported in 1988 (1) Gujarat Law Reporter 679 a single Judge of the Gujarat High Court also held that a cooperative bank was not State under Art. 12 because there was nothing in the bye-laws of the society to suggest that there was any overriding control over the bank by the State in its management. Our attention was, however, drawn to a decision of the Division Ben....
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....High Court held that the Maharashtra State Co-operative Land Development Bank Limited was "State" or "other authority" under Art. 12. In doing so, the Nagpur Bench relied upon the judgment of the learned single Judge in the present case. The Nagpur Bench relied upon two factors only for the purpose of holding that the Maharashtra Slate Co-operative Land Development Bank was "State" within the meaning of Art. 12. It said (at page 474) that the Maharashtra State Co-operative Land Development Bank Limited is a creature of the statute and it is discharging public functions which the State could have discharged through its agency. Hence it held that the Bank was a State. In our opinion, the Division Bench, over emphasised the fact that the Bank was a creature of the statute. As the Supreme Court has repeatedly said, the manner in which an organisation is created is not of any direct relevance. What is required to be seen is whether there is pervasive State control over its management and functioning. Moreover, merely because an organisation performs functions of public importance, one cannot hold that the organisation is "State" under Article 12. ....