TaxTMI 
TaxTMI 
2022 (10) TMI 1272
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....risen before the learned Single Judge when the writ petition had been listed for the first time on 16.04.2021 was whether the same was maintainable. It had been argued on behalf of Respondent No.2 that it was not a statutory body, but was a company incorporated under Section 25 of the Companies Act, 1956 and, therefore, fell outside the parameters essential for Respondent No.2 to be declared as an entity within the meaning of "State" under Article 12. The Appellant had, however, argued vehemently that as GJEPC functioned under the sponsorship of the Ministry of Commerce and Industry (hereinafter referred to as "MOCI"), it could be deemed to be an instrumentality of the State within Article 12 due to the extent of the regulation, control and supervision that MOCI exercised over it. 3. Vide impugned Judgement dated 09.07.2021, the learned Single Judge held that the writ petition was not maintainable and stated the following: "49. It must be held that GJEPC is not discharging any public/ state functions and as such not an "other Authority" within the meaning of Article 12 of the Constitution of India and as such, the present petition under Article 226 of the Constitution o....
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....from the Reply dated 09.02.2021 of the Department of Commerce to an RTI application filed by the Appellant herein which demonstrates that MOCI exerts a substantial degree of control over the activities and the finances of Respondent No.1. He submits that the response to the information sought states that GJEPC had participated in the Kimberley Process Certification Scheme (KPCS) in the capacity of a designated Importing and Exporting Authority within the meaning of Section IV(b) of the KPCS Core Document. The learned Senior Counsel brings to the attention of this Court the website of MOCI to showcase that GJEPC is mentioned under the category of Export Promotion Council and that it performs an important function of promoting exports of Gems and Jewellery (G&J) products as well as appraisal of imports of commodities relating to this sector. Furthermore, the Office Memorandum dated 10.11.1997 issued by the Government of India states that Export Promotion Councils, FIEO, IIP, etc. may create new posts and recruit staff without taking prior approval of the Government, but only within 10% of their overall approved budget and on the explicit understanding that no compensation/grant would....
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....or inspection by an officer duly authorised by the Central Government for ascertaining or verifying the income and expenditure of Respondent No.2 or for such other purposes as may, by agreement between Respondent No.2 and the Central Government, be specified in this regard. 9. The learned Senior Counsel also refers to Clause 44.1 to submit that the funds of Respondent No.2 which are not required for current expenditure may be placed in a fixed deposit with any scheduled bank or may be invested in any security, but this investment shall be subject to instructions that may be issued from time to time by the Government of India, in the Department of Public Enterprise. Thereafter, citing Clause 47, Mr. Chaudhuri delineates the wide-ranging powers of the Central Government to give directions to Respondent No.2 in public interest, or interest of national security or national economy. He submits that the Central Government, when it deems necessary, also has the power to call for such reports, returns and other information with respect to the property and affairs of Respondent No.2, the conduct of its business and other matters connected with the performance of its functions, and that R....
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.... India and that the function of Respondent No.2 involves a strong element of national and public interest. Relying upon Commissioner of Income Tax, Bombay City - IV v. Gem and Jewellery Export Promotion Council, (1983) 34 CTR (Bom) 57, the learned Senior Counsel argues that it has already been recorded that Respondent No.2 is a company established for the purposes of advancing an object of general public utility. Moreover, Mr. Chaudhuri cites Sunirmal Kumar Roy v. Union of India and Ors., 2009 (1) CHN 702, to state that the Calcutta High Court therein had held that CAPEXIL, which is also an Export Council, was a State body and cannot function in a manner contrary to the policy of the Government. Similar reliance has been placed on All India Garment Exporters Common Cause Guild and Ors. v. Union of India and Anr., 2011 SCC OnLine Del 265, to submit that therein a Single-Judge Bench of this Court had held that Apparels Export Promotion Council (APEC), another Export Promotion Council, discharged a public function and, thus, was amenable to writ jurisdiction. Further reliance is placed on Anandi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust and Ors. v....
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....controlled by GJEPC itself and that Respondent No.1 has no bearing on the same. 15. With regard to the control exercised by Respondent No.1 over the functioning of Respondent No.2, Mr. Mehta submits that GJEPC is managed by a CoA which is controlled by members who are neither appointed nor nominated by Respondent No.1. Further, Respondent No.1 does not have a say in the appointment of the Chairman of the CoA, and the AoA indicates that there are 24 elected members and only 3 members are nominated by the Central Government. These 3 members have no voting rights, merely play an advisory role and do not partake in the decision-making process of the Committee. 16. Mr. Mehta submits that the Reply dated 09.02.2021 of the Department of Commerce to the RTI application is of no consequence and does not indicate whether or not Respondent No.2 is an instrumentality of the State. He states that the Reply only notes that the Appellant can go up in appeal under Section 19 of the RTI Act, however, this does not render Respondent No.2 a State. He states that the fact that Appellant has applied to the Government seeking information about a private entity would not make GJEPC a public entity.....
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....ions within the ambit of "State" and that one function assigned to GJEPC, which is not primary and forms a small fraction of their activities should not matter. He submits the impugned Judgement is not erroneous as the writ petition only reveals a private dispute having no public character, and thus, the instant appeal should be dismissed. 19. Heard Mr. Anoop Chaudhuri, learned Senior Counsel appearing for the Appellant, Mr. Jayant Mehta, learned Senior Counsel appearing for Respondent No.2, and perused the material on record. 20. The short question which arises for consideration before this Court at this juncture is whether Respondent No.2, i.e. Gems and Jewellery Export Promotion Council, will fall within the ambit of "State and other authorities" under Article 12 of the Constitution. 21. "State" as defined under Article 12 is meant to include, inter alia, the Government of India, the Government 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. The Supreme Court, over the years, has examined what constitutes a "State" or "other authorities" as contemplated in Article 12. The rationale f....
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....unctions which were of traditional vintage. But as the tasks of the Government multiplied with the advent of the welfare State, it began to be increasingly felt that the framework of civil service was not sufficient to handle the new tasks which were often specialised and highly technical in character and which called for flexibility of approach and quick decision making. The inadequacy of the civil service to deal with these new problems came to be realised and it became necessary to forge a new instrumentality or administrative device for handling these new problems It was in these circumstances and with a view to supplying this administrative need that the corporation came into being as the third arm of the Government and over the years it has been increasingly utilised by the Government for setting up and running public enterprises and carrying out other public functions. Today with increasing assumption by the Government of commercial ventures and economic projects, the corporation has become an effective legal contrivance in the hands of the Government for carrying out its activities, for it is found that this legal facility of corporate instrument provides considerable flexi....
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....corporation, while retaining control over it. The fundamental rights would then be reduced to little more than an idle dream or a promise of unreality. It must be remembered that the Fundamental rights are constitutional guarantees given to the people of India and are not merely paper hopes or fleeting promises and so long as they find a place in the Constitution, they should not be allowed to be emasculated in their application by a narrow and constricted judicial interpretation. The courts should be anxious to enlarge the scope and width of the fundamental rights by bringing within their sweep every authority which is an instrumentality or agency of the Government or through the corporate personality of which the Government is acting, so as to subject the Government in all its myriad activities, whether through natural persons or through corporate entities, to the basic obligation of the fundamental rights. The constitutional philosophy of a democratic socialist republic requires the Government to undertake a multitude of socio-economic operations and the Government, having regard to the practical advantages of functioning through the legal device of a corporation, embarks on myr....
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....uthority" within the meaning of Article 12 and hence subject to the same basic obligation to obey the Fundamental rights as the Government." 23. Relying upon Ramana Dayaram Shetty v. International Airport Authority of India and Ors., (1979) 3 SCC 489, the Supreme Court in Ajay Hasia and Ors. (supra) had proceeded to document the relevant tests to determine as to when a corporation or an authority could be said to be an instrumentality or agency of the State. The paragraphs of the said Judgement delineating the same are as under: "9. The tests for determining as to when a corporation can be said to be an instrumentality or agency of Government may now be culled out from the judgment in the International Airport Authority case [(1979) 3 SCC 489] . These tests are not conclusive or clinching, but they are merely indicative indicia which have to be used with care and caution, because while stressing the necessity of a wide meaning to be placed on the expression "other authorities", it must be realised that it should not be stretched so far as to bring in every autonomous body which has some nexus with the Government within the sweep of the expression. A wide enlargement of ....
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....ion Act, 1860 or any other similar statute. Whatever be its genetical origin, it would be an "authority" within the meaning of Article 12 if it is an instrumentality or agency of the Government and that would have to be decided on a proper assessment of the facts in the light of the relevant factors. The concept of instrumentality or agency of the Government is not limited to a corporation created by a statute but is equally applicable to a Company or society and in a given case it would have to be decided, on a consideration of the relevant factors, whether the Company or society is an instrumentality or agency of the Government so as to come within the meaning of the expression "authority" in Article 12." 24. As can be discerned from the above, the Supreme Court added the caveat that encompassing an authority within the ambit of a "State" under Article 12 had to be done with abundant caution and that it should not be stretched to such an extent so as to bring in every autonomous body which has some nexus with the Government within the sweep of the expression. It was observed that a wide enlargement of the meaning had to be tempered by a wise limitation. It is well settled that....
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....may largely point out that the body is "State". If the government operates behind a corporate veil, carrying out governmental activity and governmental functions of vital public importance, there may be little difficulty in identifying the body as "State" within the meaning of Article 12 of the Constitution [Refer toP.K. Ramachandra Iyer v. Union of India, (1984) 2 SCC 141, Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly, (1986) 3 SCC 156, and TekrajVasandi @ K.L. Basandhi v. Union of India, (1988) 1 SCC 236]. 27. A 7-Judge Bench of the Supreme Court in Pradeep Kumar Biswas v. Indian Institute of Chemical Biology and Ors., (2002) 5 SCC 111, while deliberating as to whether the Council of Scientific and Industrial Research (CSIR) was a State within the meaning of Article 12, rendered definitive observations with regard to the scope of Ajay Hasia and Ors. (supra) and held that the question that would arise would be whether the authority is financially, functionally and administratively dominated by or under the control of the Government. However, if the control exercised is not pervasive and is merely regulatory, whether under statute or otherwise, it would n....
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....ent of the welfare State, it began to be increasingly felt that the framework of civil service was not sufficient to handle the new tasks which were often of specialised and highly technical character. The inadequacy of the civil service to deal with these new problems came to be realised and it became necessary to forge a new instrumentality or administrative device for handling these new problems. It was in these circumstances and with a view to supplying this administrative need that the public corporation came into being as the third arm of the Government."" 29. In Zee Telefilms Ltd. and Anr. (supra), arguments had been advanced about the public function performed by BCCI as well as the extent of administrative and financial control of the State over BCCI. The Supreme Court repelled these contentions and observed as follows: "23. From this perspective, the logical sequitur is that it really does not matter what guise the State adopts for this purpose, whether by a corporation established by statute or incorporated under a law such as the Companies Act or formed under the Societies Registration Act, 1860. Neither the form of the corporation, nor its ostensible autono....
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....olation of Article 14, nevertheless Article 14 was not available to the petitioners because the Society was not a State within Article 12. 26. The Court recognised that : (SCC p. 731, para 6) "Obviously the Society cannot be equated with the Government of India or the Government of any State nor can it be said to be a local authority and therefore, it must come within the expression "other authorities" if it is to fall within the definition of "State"." But it said that : (SCC p. 733, para 7) "The courts should be anxious to enlarge the scope and width of the Fundamental Rights by bringing within their sweep every authority which is an instrumentality or agency of the Government or through the corporate personality of which the Government is acting, so as to subject the Government in all its myriad activities, whether through natural persons or through corporate entities, to the basic obligation of the Fundamental Rights." It was made clear that the genesis of the corporation was immaterial and that : (SCC pp. 737-38, para 11) "The concept of instrumentality or agency of the Government is not limited to a corporation created by ....
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.... over the authority should be pervasive in nature to the extent that the authority should have limited autonomy. These are the broad guidelines that must be borne in mind when venturing into the question as to whether or not a certain authorities can be termed to be a "State". In this context, it becomes pertinent to analyse the provisions of the MoA, AoA and other documents to discern whether GJEPC can be brought within the net of "other authorities" for the purpose of Article 12. 31. GJEPC is a company which has been incorporated under Section 25 of the Companies Act, 1956 (formerly Section 8 of the Companies Act, 2013). It is not a statutory body and was in fact constituted in 1966 by eight persons, all of whom were jewellers by occupation. Though the membership has increased to almost 7000 members, none of these members can be stated to be representatives of MOCI. Furthermore, the CoA, which controls and manages the GJEPC, consists of 27 members, out of which 24 are elected members and 3 are members who have been nominated by the Central Government. With this backdrop, it would be pertinent to reproduce the relevant Clauses of the MoA and the AoA as under: "MoA ....
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....y four(including the Regional Chairman, Chairman, Vice Chairman and the other members of the Committee elected from the Panels constituted under Article 23 of these articles). (b) Nominated members, not exceeding three in number. (c) Members nominated by the Committee due to vacancy arising due to non filing or withdrawal of nomination at the time of election subject to the maximum number of members as stipulated under Article 27.3 (1)(a). 2. ^Subject to the provisions of clause (1), the number of members of the Committee shall be laid down by Election Rules made by the Council." ***** "27.6 Certain further provisions as to nominated members (a) The term of office of members of the Committee who are nominated by the Central Government shall be co-terminus with the term of the committee. Provided that, if a member is nominated during the term of the Committee his term of office shall be such as the Central Government may specify. (b) The Central Government may, at any time, require such a nominee to relinquish his office and may appoint another person in his place. (c) The term of the office of the member nomina....
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....The Council shall be bound to comply with all directions issued by the Central Government under sub-article" (1) or (2) of this article and all provisions contained in the Export-Import Policy of the Central Government for the time being in force. 47.2 Foreign Collaboration All agreements between the Council and any foreign collaborator shall require prior approval of the Central Government. 48. ALTERATION IN ARTICLES No addition to, modification in, or deletion of, any of these articles shall be made without the prior approval of the Central Government. *49. REPUGNANCY TO COMPANIES ACT. Where, in relation to a Council to which the Companies Act, 2013 applies, there is are pugnancy between the provisions of these articles and the procedures of that Act, the procedures of the Act shall to the extent of the repugnancy overrule the provisions of these articles" ***** "51. GENERAL POWER TO MODIFY. The Central Government may at any time direct by an order in writing that the provisions of these articles shall stand modified in such manner as the Central Government may direct, as in relation to Councils gene....
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....ions of the GJEPC is not sustainable. The chart that has been presented by Respondent No.2 indicates that the funds provided by the Central Government are solely for the purpose of execution of specific schemes and projects, and it is definitely the Central Government"s prerogative to ensure that the said funds are not misused; this justifies the power of the Central Government to audit the accounts. However, the earnings of the GJEPC, which stems from subscriptions of its members, do not require prior consent or sanction from MOCI, as demonstrated by the EXIM Policy 1997-2002. The figures that have been shown to this Court reveal that with regard to the revenue generated by the GJEPC, at no point of time did the grant (revenue grants and capital grants) given by MOCI ever exceed 27%. The chart has been reproduced as under for ease of comprehension: Sl.No. Financial Year Grants Utilized (In Rs.) Total Revenue Generated by Respondent No.2 (In Rs.) Percentage Number Of Events 1. 1999-2000 1,31,10,000 9,48,07,901 14% 2 2000-2001 1,99,32,000 11,04,78,755 18% 3 2001-2002 2,56,10,797 9.8....
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....er the functioning of the GJEPC, and therefore, the submission of the Appellant does not hold water. In fact, it is the CoA which, under various Clauses of the AoA, lays down the conduct of elections, the duty of GJEPC in holding the same, and the mode of conducting elections. Furthermore, as per Clause 39 of the AoA, it is the CoA which determines how the books and accounts of the GJEPC must be kept and when they should be inspected. Merely because the Central Government may also inspect the books and accounts of the GJPEC does not establish that it controls the financial aspects of the GJEPC. 35. While it is evident that the Central Government does have wide powers to issue directions to the GJEPC under Clause 47 of the AoA, however, these directions may only be given if they are "a. in the interest of national security, or b. in the interests of national economy, or c. otherwise in the public interest", and they may also have the power to call for such reports, returns and other information with respect to the property, affairs, etc. of the GJEPC. Thus, what can be inferred from these provisions is that the control of the Central Government over the GJEPC is only to be exerci....