Cooperative Banks not Instrumentality of State – HP Full Bench

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Vikram Chauhan Vs Managing Director 14.05.2013 HPFB

Before :- A.M. Khanwilkar, C.J., R.B. Misra and D.D. Sud, JJ.

CWP No. 3634 of 2012. D/d. 14.05.2013.

Constitution of India, 1950 (COI) – Articles 12 and 226

For the Petitioner :- Mr. R.K. Gautam, Senior Advocate, with Ms. Archana Dutt and M/s V.B. Verma, B.M. Chauhan, Anjali Soni Verma, Seema Guleria, Rupinder Singh Ajay Sharma, Surender Sharma, R.D. Kaundal vice Mr. A.K. Gupta, and Lalit Sehgal vice Peeyush Verma, Advocates.

For the Respondent :- Mr. Shrawan Dogra, Advocate General with Mr. Romesh Verma, Addl. AG and Mr. J.K. Verma, Dy. Advocate General, Mr. Bhupender Gupta, Senior Advocate, with M/s Janesh Gupta, Ramamant Sharma, Ranjan Sharma, Advocates.

A.M. Khanwilkar, C.J. –

The Division Bench while hearing CWP No. 3634 of 2012-D vide order dated 20th July, 2012 has referred the following question to be considered by the Full Bench:

“Whether the Kangra Central Cooperative Bank, the Himachal Pradesh State Cooperative Bank Ltd. and the Jogindra Central Cooperative Bank, are ‘State’ within the meaning of Article 12 of the Constitution of India and whether a writ would lie against them?”

The question, as formulated raises two independent issues. Firstly, whether the stated Cooperative Banks are State within the meaning of Article 12 of the Constitution? The second question, which, in our view is an independent question, is, whether a writ would lie against those Cooperative Banks?

As regards the first part of the question formulated by the Division Bench, the sweep of expression “other Authorities” occurring in Article 12 of the Constitution of India is the core issue. That, however, is no more res integra. The leading judgment of the Apex Court is in the case of R.D. Shetty v. The International Airport Authority of India and others, (1979 SCC (3) 489 : (AIR 1979 SC 1628). The exposition in this judgment came to be summarized in the judgment of another Constitution Bench of the Apex Court in the case of Ajay Hasia and others v. Khalid Mujib Sehravardi and others, (1981 1 SCC 722 : (AIR 1981 SC 487). The tests laid down in the case of International Airport Authority have been culled out in para 9 of this judgment while making it clear that those tests are not conclusive or clinching but they are merely indicative indicia, which have to be used with care and caution. The Court observed that while stressing the necessity of a wide meaning to be placed on the expression “other Authorities”, it must be realized that it should not be stretched so far as to bring it in every autonomous body, which has some nexus with the Government within the sweep of the expression, which has to be tempered by a wise limitation. It may be apposite to reproduce the relevant portion from paragraph 9 of this very judgment, which reads thus:

“9. …We may summarise the relevant tests gathered from the decision in the International Airport Authority case as follows:

(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 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 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).

(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 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).

(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)

If on a consideration of these relevant factors it is found that the corporation is an instrumentality or agency of government, it would, as pointed out in the International Airport Authority case, be an ‘authority’ and, therefore, ‘State’ within the meaning of the expression in Article 12.”

We may also reproduce the exposition in paragraph 11 of the decision, which is very instructive. The same reads thus:

“11. We may point out that it is immaterial for this purpose whether the corporation is created by a statute or under a statute. The test is whether it is an instrumentality or agency of the government and not as to how it is created. The inquiry has to be not as to how the juristic person is born but why it has been brought into existence. The corporation may be a statutory corporation created by a statute or it may be a Government company or a company formed under the Companies Act, 1956 or it may be a society registered under the Societies Registration 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.” (emphasis supplied).

For applying the above tests, analysis of the factual matrix of the given case becomes inevitable. That ordinarily would give rise to a mixed question of fact and law, which analysis should be best left to the Bench called upon to examine the controversy. The Division Bench in the Reference order was confronted with the conflicting opinions rendered in the case of Chandresh Kumar Malhotra v. HP State Cooperative Bank and others, 1993(2) SLC 243 : 1994 Lab IC(NOC) 36(HP) (hereinafter referred to as HP State Bank); Mohinder Singh Guleri v. The Kangra Central Cooperative Bank Ltd., CWP (T) No. 9979 of 2008(decided on 10.08.2011) (hereinafter referred to as Kangra Bank); Kuldeep Singh and others v. State of HP and others, 2011(2) HimLR 899 ; and also in the case of Mehar Chand and another v. Jogindra Central Cooperative Bank, in CWP No. 641 of 2002 decided on 26.09.2007. (hereinafter referred to as Jogindra Bank), as a result of which thought it appropriate to make reference to the Full Bench for an authoritative pronouncement.

Notably, in the case of Kangra Bank, the issue has been authoritatively answered by the Apex Court in the case of S.S. Rana v. Registrar Cooperative Societies and another, (2006)11 SCC 634 : (2006 AIR SCW 3723). It has been held that Kangra Bank is not a State within the meaning of Article 12. As a result, it is not open even for the Full bench of this Court to take a view different than the one rendered in the said decision. We agree with the submission of the counsel for the Kangra Bank that any attempt to distinguish the decision of the Apex Court would be nothing short of judicial adventurism, which must be eschewed. The Constitution Bench of the Apex Court in the case of Ambika Prasad Mishra v. State of UP and others, AIR 1980 SC 1762 noted that every new discovery or argumentative novelty cannot undo or compel the reconsideration of a binding precedent, even if submissions were to be replete with creative ingenuity and presented with high pressure advocacy. In para 6 of the same judgment, the Apex Court has observed that it is wise to remember that fatal flaws silenced by earlier rulings cannot survive because a decision does not lose its authority “merely because it was badly argued, inadequately considered and fallaciously reasoned.” That binding precedent, therefore, would not only stare at the face of the petitioner, but also the Full Bench of the High Court. It is not open for the High Court to entertain any argument, which is saying short of the said decision being per incurium.

Similarly, in the case of Director of Settlements A.P. and others v. MR Apparao and another, (2002)4 SCC 638 : (AIR 2002 SC 1598) three Judges Bench of the Apex Court held that a judgment of the Court has to be read in the context of questions, which arose for consideration in the case in which the judgment was delivered. Further, when the Supreme Court decides a principle, it would be the duty of the High Court or a Subordinate Court to follow the decision of the Supreme Court. A judgment of the High Court, which refuses to follow the decision and directions of the Supreme Court or seeks to revive a decision of the High Court, which had been set aside by the Supreme Court is a nullity. Also see Palitana Sugar Mills Pvt. Ltd. & another v. State of Gujarat and others, (2004) 12 SCC 645. We do not deem it necessary to multiply the authorities on this aspect except to observe that it is not open to the High Court to distinguish a binding precedent of the Apex Court concerning “Kangra Bank”; and that the attempt made in the decision rendered in Mohinder Singh Guleri (supra) and in the case of the Kangra Central Cooperative Bank Pensioners Association v. State of HP, in CWP No. 1679 of 2010 decided on 15th May 2012 by the learned Single Judges of this Court cannot stand the test of judicial scrutiny. The distinguishing feature mentioned in these decisions, to say the least, is bordering on holding that the binding decision of the Apex Court was per incurium. That is impermissible. We do not approve these decisions.

That leaves us with the enquiry about the status of Himachal Pradesh State Cooperative Bank Ltd and the Jogindra Central Cooperative Bank. To answer the same, it would be useful to refer to the principle expounded by the Apex Court in S.S. Rana’s case (supra).

As regards the Himachal Pradesh State Cooperative Bank Ltd., the question has been answered by the Division Bench of our High Court in the case of Chandresh Kumar Malhotra’s case (supra). The Court has held that the said Bank is not a State for the purpose of Article 12 of the Constitution of India. No other decision of the Division Bench of our High Court has been brought to our notice, which has taken a different view in relation to the said Bank. In that sense, it is not a case of conflicting opinion of coordinate Benches of the same High Court, which may warrant an authoritative pronouncement by the Full Bench of the High Court. For that reason, it is unnecessary to answer the issue pertaining to the Himachal Pradesh State Cooperative Bank Ltd. Moreso because, it is nobody’s case before us that the decision in Chandresh Kumar Malhotra’s case (supra) requires re-consideration.

That takes us to Jogindra Central Cooperative Bank, whether it is a State within the meaning of Article 12. As regards this Bank, the decision pressed into service is of the learned Single Judge of this Court in the case of Mehar Chand and another v. Jogindra Central Cooperative Bank and others, in CWP No. 641 of 2002 decided on 26th September, 2007. No decision of the Division Bench of this court has been brought to our notice, which has taken 12 in CWP No. 641 of 2002 decided on 26th September, 2007 the view that the said Bank was State within the meaning of Article 12 of the Constitution. Thus understood, it is again not a case of conflicting opinion of two coordinate Benches of the same High Court on the point. If the matter of Jogindra Bank were to proceed before the learned Single Judge of this Court perhaps the Single Judge Bench would be bound by the said decision, unless it was persuaded to take a different view – in which case the only option available to that Judge would be to refer the matter to Larger Bench. In that case, the matter could proceed before the Division Bench of two Judges of our High Court and may not require consideration by a Full Bench. On the other hand, if the issue was to be raised before the Division Bench, in the first instance, and that Bench was not inclined to follow the view taken by the learned Single Judge Bench of this Court, it would be free to take a different view and hold that the Jogindra Bank is not a State within the meaning of Article 12 of the Constitution of India. Since the writ petition pertaining to Jogindra Bank is still pending, ordinarily, therefore, the issue ought to be dealt with by the Division Bench in the first instance and not by the Full Bench of the High Court. In other words, the pending writ petition pertaining to Jogindra Bank must proceed before the concerned Bench, who would be free to take appropriate decision in the matter and including keeping in mind the contours expounded by the Apex Court in S.S. Rana’s case (supra). We are inclined to take this view as the question would be a mixed question of fact and law, which can be conveniently dealt with by the concerned Bench. In other words, we do not intend to express any view one way or the other with regard to the correctness of the decision in the case of Mehar Chand (supra) and leave the same open to be considered by the appropriate Bench.

Our attention was invited to the decision of Full Bench of our High Court in Ajmer Singh v. The Hamirpur District Cooperative Marketing and Consumers Federation Ltd. and others, 1995(1) SLC 395 : (1995 Lab IC 1555(HP)). Firstly, the view taken is in respect of the concerned Society. Whether the principle stated therein applies to the fact situation of the case will have to be answered by the appropriate Bench. For the same reason, we do not intend to dilate on the case of Zee Tele Films Ltd. v. Union of India and others, AIR 2005 SC 2677.

That takes us to the second part of the question formulated by the Division Bench, as to whether a writ would lie against the stated Cooperative Banks? This question, essentially, touches upon the scope of power of the High Courts to issue certain writs as predicated in Article 226 of the Constitution of India. This is completely independent issue. In a given case, in spite of the opinion recorded by the Court that the respondent concerned in a writ petition, filed under Article 226 of the Constitution of India, is not a State within the meaning of Article 12 of the Constitution of India. Even then, the High Court can exercise jurisdiction over such respondent in view of the expansive width of Article 226 of the Constitution of India. It is well established position that the power of the High Courts under Article 226 is as wide as the amplitude of the language used therein, which can affect any person – even a private individual – and be available for any other purpose – even one for which another remedy may exist (Rohtas Industries Ltd. and another v. Rohtas Industries Staff Union and others), (1976)2 SCC 82 : (AIR 1976 SC 425). In the case of Engineering Mazdoor Sabha and another v. Hind Cycles Ltd., AIR 1963 SC 874, the Court opined that even if the Arbitrator appointed under Section 10-A is not a Tribunal for the purpose of Article 136 of the Constitution in a proper case, a writ may lie against his Award under Article 226 of the Constitution. In the case of Praga Tools Corporation v. C.A. Imanual and others, 1969(1) SCC 585 : (AIR 1969 SC 1306), the Apex Court held that it was not necessary that the person or the Authority on whom the statutory duty is imposed need be a public official or an official body. That a mandamus can be issued even to an official or a Society to compel him to carry out the terms of the statute under or by which the Society is constituted or governed and also to companies or corporations to carry out duties placed on them by the statutes authorizing their undertakings. Further, a mandamus would lie against a Company constituted by a statute for the purposes of fulfilling public responsibilities. In the same decision, the Apex Court examined the amplitude of the term “Authority” used in Article 226 of the Constitution. The Court opined that it must receive liberal meaning unlike the term in Article 12 of the Constitution. It went to observe that the words “any person or authority” used in Article 226 cannot be confined only to statutory authorities and instrumentalities of the State. It may cover any other person or body performing public duty irrespective of the form of the body concerned. It is emphasized that what is relevant for exercising power is the nature of the duty imposed on the body which must be a positive obligation owned by the person or Authority. Depending on that finding, the Court may invoke its authority to issue writ of mandamus. In the case of Life Insurance Corporation of India v. Escorts Ltd. and others, 1986(1) SCC 264 : (AIR 1986 SC 1370) the Constitution Bench opined that the question must be “decided in each case” with reference to particular action, the activity in which the State or the instrumentality of the State is enacted when performing the action, the public law or private law, character of the Constitution and most of the other relevant circumstances. In a given case, it may be possible to issue writ of mandamus for enforcement of public duty which need not necessarily to be one imposed by statute. It may be sufficient for the duty to have been imposed by charter, common law, custom or even contract, as noted by Professor de Smith, which exposition has found favour with the Apex Court.

The Apex Court after referring to catena of decisions and authorities in the case of UP State Cooperative Land Development Bank Ltd. v. Chandra Bhan Dubey and others,(1999) 1 SCC 741 : (AIR 1999 SC 753) has succinctly delineated the scope of authority under Article 226 of the Constitution. In para 27 of this decision, the Court opined that Article 226 while empowering the High Court for issue of orders or direction to any Authority or person does not make any difference between public functions or private functions, but did not go to elaborate that question in the fact situation of that case. It is unnecessary to multiply the authorities on the point except to observe that a writ would lie against even a Cooperative Society or Company. But that does not mean that the Court is bound to issue such a writ. It is the prerogative of the High Court to issue writ to any person or authority, which is not a State or an instrumentality of the State. The Court would do so with circumspection and keeping in mind the well defined parameters. Whether in the fact situation of a given case, the Court ought to exercise its authority to issue writ or order in the nature of writ under Article 226 of the Constitution, will have to be answered on the basis of the settled principles, on case to case basis. Thus, it will be inapposite to put it in a straight jacket manner that every writ petition filed against the Cooperative Banks must be dismissed as not maintainable or otherwise.

Counsel appearing for the parties invited our attention to several other decisions. However, we do not intend to dilate on all those authorities any further, except to mention the same. Counsel appearing for the Kangra Bank had relied on two Judges Bench decision in the case of Zorastrian Cooperative Housing Society Ltd. and another v. District Registrar, Cooperative Societies (Urban and others), (2005)5 SCC 632(para 32) : (AIR 2005 SC 2306(para 26 of AIR), which took the view that a Cooperative Society cannot be treated as State unless it fulfills the tests spelt out in Ajay Hasia’s case by the Constitution Bench of the Apex Court, followed in the case of Praga Tools (supra). Reference was also made to the seven Judges Bench of the Apex Court in the case of Pradeep Kumar Biswas v. Indian Institutes of Chemical Biology and others, (2002) 5 SCC 111(paras 1 to 4) and another decision in the case of Bhadra Shahakari S.K. Niyamita v. Chitradurga Mazdoor Sangh and others, (2006) 8 SCC 552(para 3) which deals with the question as to whether the appellant, Cooperative Society can be treated as State within the meaning of Article 12 of the Constitution. The learned Senior counsel for the HP Cooperative Society invited our attention to the decision of two Judges Bench of the Apex Court in General Manager, Kishan Sahkari Chini Mills Ltd. Sultanpur, UP v. Satrughan Nishad and others, (2003) 8 SCC 639(paras 6 to 8) : AIR 2003 SC 4531(paras 6 to 8 of AIR), to contend that even if it is a case of nominated Directors of Society that does not presuppose that the State has perennial control over the Society. Reliance is also placed on the another decision of the Apex Court in the case of Shri Anadi Mukta Sadguru S.M.V.S.J.M.S. Trust v. V.R. Rudani and others, AIR 1989 SC 1607(para 14 to 16 to 21) and in case of Zee Telefilms Ltd. and another v. Union of India and others, (2005)4 SCC 649(paras 8, 9 and 35) : (AIR 2005 SC 2677)(Paras 8, 9 and 35 of AIR).

For the view taken by us on both facets of the referred questions, we proceed to answer the Reference as under:

(1) The question as to whether Kangra Bank is a State within the meaning of Article 12 of the Constitution of India, is no more res integra. It has been authoritatively answered by the Apex Court in S.S. Rana’s case (supra).

(2) Even in the case of HP State Cooperative Bank Ltd., the question has been answered by the Division Bench of our High Court in Chandresh Kumar Malhotra’s case (supra). There is no conflicting decision of coordinate Bench of this Court necessitating pronouncement on that question by the Full Bench.

(3) In the case of Jogindra Central Cooperative Bank, the decision in Mehar Chand’s case (supra) is rendered by the learned Single Judge of this Court and no conflicting decision of the co-ordinate Bench muchless of the Division Bench or Larger Bench of our High Court with regard to the stated Bank has been brought to our notice. In any case, the said question can be conveniently answered by the Division Bench in appropriate proceedings whether in the form of writ petition or Reference made by the learned Single Judge of this Court, as the case may be. As and when such occasion arises, the issue can be answered on the basis of settled legal principles and including keeping in mind the exposition of S.S. Rana’s case (supra) of the Apex Court concerning another Cooperative Bank constituted under the Himachal Pradesh State Cooperative Act.

(4) As regards the second part of the question as to whether a writ would lie against the stated Cooperative Banks, we hold that it is not appropriate to give a definite answer to this question. For, it would depend on several attending factors. Further, even if the said Banks were held to be not a State within the meaning of Article 12, the High Court in exercise of powers under Article 226 of the Constitution of India, can certainly issue a writ or order in the nature of writ even against any person or Authority, if the fact situation of the case so warrants. In other words, writ can lie even against a Corporative Society. Whether the same should be issued by the High Court would depend on the facts of each case.

Accordingly having answered the referred questions, we direct the Registry to place the concerned writ petitions and the LPA before the appropriate Bench for proceeding on merits in accordance with law.

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