Sukhdev Singh v Bhagatram Sardar Singh Raghuvanshi (1975)

Article 12 defines "the State" against which fundamental rights can be enforced, and ends with the open words "other authorities". The question here was whether three great statutory corporations — the ONGC, the LIC and the Industrial Finance Corporation — are "other authorities", so that their employees can invoke Articles 14 and 16 against them.

The Court held that they are. It is a key link in the chain of Article 12 cases: it builds on Rajasthan Electricity Board v Mohan Lal, and it is gathered up with Ramana Shetty and Ajay Hasia in the later cumulative test of Pradeep Kumar Biswas. Mathew J's concurrence is the most important part for exam purposes, because it moves the test away from the power to issue binding directions and towards the idea of a corporation as an agency or instrumentality of the State.

Four appeals were heard together. Employees of the three corporations challenged their removal or treatment as contrary to the regulations framed under each corporation's statute. In one appeal (Civil Appeal No. 2137 of 1972), the High Court had declared that the order removing Bhagatram Sardarsingh Raghuvansi from service was null and void and that he continued in service. In another (Civil Appeal No. 115 of 1974), the High Court had held that an employees' association could not raise a plea of discrimination under Article 16 against the Industrial Finance Corporation.

The corporations argued that their regulations were binding only as contract, not as law, so a wrongly dismissed employee could claim damages at most, not a declaration that he continued in service.

The Chief Justice framed two questions at the outset:

1. Whether an order of removal contrary to the regulations would entitle the employee "to a declaration against the statutory corporation of continuance in service or would only give rise to a claim for damages" — which turns on whether the regulations have the force of law.
2. Whether an employee of a statutory corporation can claim the protection of Articles 14 and 16 against it: "In short the question is whether these statutory corporations are authorities within the meaning of Article 12."

By majority (Alagiriswami J dissenting), the three corporations are "authorities" under Article 12, and their regulations have the force of law.

The leading judgment (Ray CJ)

The Chief Justice examined each statute and found Government ownership, management and control throughout. Of the LIC he said: "Each and every provision shows in no uncertain terms that the voice is that of the Central Government and the hands are also of the Central Government." The Industrial Finance Corporation was "in effect managed and controlled by the Central Government."

Drawing on Rajasthan Electricity Board, he noted that "The power to make rules or regulations and to administer or enforce them would be one of the elements of authorities contemplated in Article 12." Liability to taxation did not matter: "The liability to taxation will not detract from the Corporation being an authority within the meaning of Article 12."

His conclusion: "For the foregoing reasons, we hold that rules and regulations framed by the Oil and Natural Gas Commission, Life Insurance Corporation and the Industrial Finance Corporation have the force of law. The employees of these statutory bodies have a statutory status and they are entitled to declaration of being in employment when their dismissal or removal is in contravention of statutory provisions."

Two limits were stated expressly: "By way of abundant caution we state that these employees are not servants of the Union or the State. These statutory bodies are \"authorities\" within the meaning of Article 12 of the Constitution."

Orders: the declaration and mandamus in favour of Bhagatram were upheld; the Industrial Finance Corporation was held to be an authority under Article 12, and the High Court's view that the association could not plead discrimination under Article 16 was set aside.

Mathew J (concurring) — the instrumentality test

Mathew J agreed that ONGC satisfied the Rajasthan Electricity Board test, because it could issue binding directions to third parties whose disobedience was punishable. But he addressed the larger question — whether a corporation set up to carry on business of public importance can be the State even without such powers.

He began from the purpose of fundamental rights: "The governing power wherever located must be subject to the fundamental Constitutional limitations." He weighed the factors that point to State action — State financial aid, control, monopoly status, and whether the operation is an important public function — and warned that "State financial aid alone does not render the institution receiving such aid a state agency."

On the LIC and the IFC he found Government capital, a share of profit going to Government, Government control of policy, business of great public importance, and monopoly. "In these circumstances, I think, these corporations are agencies or instrumentalities of the 'state' and are, therefore, 'state' within the meaning of Article 12."

Separate legal personality was no answer: "These corporations are instrumentalities or agencies of the state for carrying on businesses which otherwise would have been run by the state departmentally." And: "merely because a corporation has legal personality of its own, it does not follow that the corporation cannot be an agent or instrumentality of the state, if it is subject to control of government in all important matters of policy."

He also answered the fear that employees would become Government servants: "I do not think there is any basis for the apprehension expressed that by holding that these public corporations are 'state' within the meaning of Article 12, the employees of these corporations would become government servants."

Alagiriswami J (dissenting)

Alagiriswami J held that the Rajasthan Electricity Board test — the power of commanding others on pain of punishment — was not met, and that the Bench could not depart from it. He warned: "We would be opening a veritable Pandora's box." His conclusion: "I would hold that Oil & Natural Gas Commission, Life Insurance Corporation and the Industrial Finance Corporation are not authorities within the meaning of Article 12 of the Constitution and regulations framed by them have no force of law."

Statutory corporations such as the ONGC, the LIC and the IFC, which are owned, managed and controlled by Government and act under statutes empowering them to make regulations, are "other authorities" within Article 12. Regulations framed by them under statutory power have the force of law, so an employee removed in breach of them has a statutory status and may obtain a declaration that he continues in service, not merely damages. Such employees are nonetheless not Government servants.

Mathew J's concurrence adds the wider principle: a corporation may be the State as an agency or instrumentality of Government, judged by factors such as Government financial support, deep and pervasive control, monopoly status and the public importance of its function — and its separate legal personality does not prevent this.

• Direct question: Discuss the meaning of "other authorities" in Article 12 with reference to statutory corporations. Trace the line: Rajasthan Electricity Board (power to issue binding directions) → Sukhdev Singh (statutory corporations are authorities; Mathew J's instrumentality factors) → Ramana Shetty and Ajay Hasia → the cumulative test in Pradeep Kumar Biswas.
• Problem question: an employee of a statutory corporation is dismissed in breach of its service regulations. Argue that the regulations have the force of law and the corporation is the State, so he can seek a declaration of continuance in service and invoke Articles 14 and 16.
• Short note on Mathew J's concurrence: list his factors — State financial aid, control of policy, monopoly, public importance of the function — and his point that separate legal personality does not stop a corporation being an instrumentality of the State.
• Use the dissent to show the tension between the older "command" test and the newer instrumentality approach.