Meaning of State as per Constitution Of India-Article 12 | Law Notes


The term 'state' has occurred at many places in many rulings. The following is an extract that explains the meaning of 'state' in so far as the constitution of India in reference to Article 12 is concerned. I am giving the link of the ruling at the end of the post. My Indian friends would be interested in this ruling as the same discusses many aspects of statutory interpretation and contracts when the parties have different bargaining power. The ruling has also been called as a land mark ruling as it is fairly extensive. [
Meaning of State as per Constitution of India

Article 12 of Constitution

The word "State" has different meanings depending upon the context in which it is used. The expression "The State" when used in Parts III & IV of the Constitution is not confined to only the federating States or the Union of India or even to both. By the express terms of Article 12, the expression "the State" includes :

(i)                 the Government of India;

(ii)                Parliament of India;

(iii)              the Government of each of the States which constitute the Union of India;

(iv)              the Legislature of each of the States which constitute the Union of India;

(v)                all local authorities within the territory of India;

(vi)              all local authorities under the control of the Government of India;

(vii)            all other authorities within the territory of India; and (viii) all other authorities under the control of the Government of India.

The definition of the expression "the State" in Article 12, is however, for the purposes of Parts III and IV of the Constitution, whose contents clearly show that the expression "the State" in Article 12 as also in Article 36 is not confined to its ordinary and constitutional sense as extended by the inclusive portion of Article 12 but is used in the concept of the State in relation to the Fundamental Rights guaranteed by Part III of the Constitution and the Directive Principles of State Policy contained in Part IV of the Constitution which principles are declared by Article 37 to be fundamental to the governance of the country and enjoins upon the State to apply making laws. 

Article 298 of the Constitution expands the executive power of the Union of India and of each of the States which collectively constitute the Union to carry on any trade or business. By extending the executive power of the Union and of each of the States to the carrying on of any trade or business Article 298 does not, however, convert either the Union of India or any of the States which collectively form the Union into a Merchant buying and selling goods or carrying on either trading or business activity, for A the executive power of the Union and of the States whether in the field of trade or business or in any other field, is always subject to constitutional limitations and particularly the provisions relating to Fundamental Rights in Part III of the Constitution and is exercisable in accordance with and for the furtherance of the Directive Principles of State Policy prescribed by Part IV of the Constitution. The State is an abstract entity and it can, therefore only act through its agencies or instrumentalities, whether such agency or instrumentality be human or juristic. The trading and business activities of the State constitute "public enterprise". The structural forms in which the Government operates in the field of public enterprise are many and varied. These may consist of Government departments, statutory bodies, statutory corporations, Government companies etc. The immunities and privileges possessed by bodies so set up by the Government in India cannot, however, be the same as those possessed by similar bodies established in the private sector because the setting up of such bodies is referable to the executive power of the Government under Article 298 to carry on any trade or business.

State Instrumentalities

Authorities constituted under and corporations established by statutes have been held to be instrumentalities and agencies of the Government in a long catena of decisions of the Supreme Court. The observations in several of these decisions are general in nature and take in their sweep all instrumentalities and agencies of the State, whatever be the form which such instrumentality or agency may have assumed. If there is an instrumentality or agency of the State which has assumed the garb of a Government company as defined in section 617 of the Companies Act[1], it does not follow that it thereby ceases to be an instrumentality or agency of the State. For the purposes of Article 12 one must necessarily see through the corporate veil to ascertain whether behind that veil is the face of an instrumentality or agency of the State. The corporation squarely falls within these observations and it also satisfies the various tests which have been laid down. Merely because it has so far not the monopoly of inland water transportation is not sufficient to divest it of its character of an instrumentality or agency of the State. It is nothing but the Government operating behind a corporate veil, carrying out a governmental activity and governmental functions of vital public importance. There can thus be no doubt that the corporation is "the State" within the meaning of Article 12 of the Constitution.

In relation to the particular Case:

The Central Inland Water Transport Corporation is not only a Government company as defined in section 617 of the Companies Act 1956, but is wholly owned by the three Governments - Central Government and the Governments of West Bengal and Assam jointly. It is financed entirely by these three Governments and is completely under the control of the Central Government, and is managed by the Chairman and Board of Directors appointed by the Central Government and removable by it. In every respect it is thus a veil behind which the Central Government operates through the instrumentality of a Government company. The activities carried on by the Corporation are of vital national importance. There can thus be no doubt that the corporation is a Government undertaking in the public sector. The corporation itself has considered that it is a Government of India Undertaking. The complete heading of the impugned Rule is "The Central Inland Water Transport Corporation Ltd. (A Government of India Undertaking) Service, Discipline and Appeal Rules, 1979." In the face of so much evidence it is ridiculous to describe the corporation as a trading company. The activities of the corporation are of great importance to public interest, concern and welfare and are activities of the nature carried on by a modern State and particularly a modern welfare State.[ Sukhdev Singh & Ors. v. Bhagat Ram Sardar Singh Raghuvanchi & Anr., [1975] 3 S.C.R. 619;Ramana Dayaram Shetty v. The International Airport Authority of India & Anr., [1979] 3 S.C.R. 1014; Managing Director, Uttar Pradesh Ware Housing Corporation & Anr. v. Vinay Narain Vajpayee, [1980] 2 S.C.R. 773; Ajay Hasia etc. v. Khalid Mujib Sehravardi & Ors. etc., [1981] 2 S.C.R. 79; Prakash Rekhi v. Union of India & Anr., [1981] 2 S.C.R. 111; B.S. Minhas v. Indian Statistical Institute & Ors [1983] 4 S.C.C. 582; Manmohan Singh Jaitla v. Commissioner, Union Territory of Chandigarh & Ors., [1984] Supp. S.C.C. 540; Workmen of Hindustan Steel Ltd. & Anr. v. Hiodustan Steel Ltd. & Ors., [1984] Supp. S.C.C. 554, 560; - P.K. Ramachandra Iyer & Ors. v. Union of India & Ors., [1984] 2 S.C.R. 141; A.L. Kalra v. Project and Equipment Corporation of India Ltd., [1984] 3 S.C.R. 316 and West Bengal State Electricity Board & Ors. v. Desh Bandhu Ghosh & Ors., [1985] 3 S.C.C. 116 followed. Praga Tools Corporation v. C.A. Imanual & Ors., [1969] 3 S.C.R. 773; State of Bihar v. Union of India & Anr., [1970] 2 S.C.R. 522; S.L. Agarwal v. General Manager, Hindustan Steels Ltd., [1970] 3 S.C.R. 363; Sabhajit Tewary v. Union of India & Ors.,[1975] 3 S.C.R. 616; and S.C. Dhanoa v. Municipal Corporation Delhi & Ors., [1981] 3 S.C.C. 431 distinguished.Rai Sahib Ram Jewaya Kapur & Ors. v. State of Punjab, [1955] 2 S.C.R. 225; Rajasthan State Electricity Board, Jaipur v. Mohan Lal & Ors., [1967] 3 S.C.R. 377; Gurugobinda Basu v. Sankari Prasad Ghosal & Ors., [1964] 4 S.C.R. 311, 315; Rylands v. Fletcher, [1868 L.R. 3 H.L. 330 and Donoghue v. Stevenson, [1932] A.C. 562 referred to.]

1.As the corporation is "the State" within the meaning of Article 12, it was amenable to the writ jurisdiction of the High Court under Article 226.

2. It is now well-established that an instrumentality or agency of the State being "the State" under Article 12 of the Constitution is subject to the Constitutional limitations, and its actions are State actions and must be judged in the light of the Fundamental Rights guaranteed by Part III of the Constitution. The actions of an instrumentality or agency of the State must, therefore, be in conformity with Article 14 of the Constitution. [Sukhdev singh & Ors. v. Bhagatram Sardar Singh Raghuvanshi & Anr., [1975] 3 S.C.R. 619;Ramana Dayaram Shetty v. The International Airport Authority of India & Ors., [1979 3 S.C.R. 1014; Ajay Hasia etc. v. Khalid Mujib Sehravardi & Ors. etc., [1981] 2 S.C.R. 79; and Union of India v. Thulsiram Patel etc., [1985] 3 S.C.C. 398 referred to. Radhakrishna Agarwal & Ors. v. State of Bihar & Ors., [1977] 3 S.C.R. 249 distinguished.] the purposes of both Part III and Part IV of the Constitution, State actions, including actions of the instrumentalities and agencies of the State, must not only be in conformity with the Fundamental Rights guaranteed by Part III but must also be in accordance with the Directive Principles of State Policy prescribed by Part IV. Clause (a) of Article 39 provides that the State shall, in particular, direct its policy towards "securing that the citizens, men and women, equally have the right to adequate means of livelihood." Article 41 requires the State, within the limits of its economic capacity and development, to "make effective provision for securing the right to work." An adequate means of livelihood cannot be secured to the citizens by taking away without any reason the means of livelihood. The mode of making "effective provision for securing the right to work" cannot be by giving employment to a person and then without any reason throwing him out of employment. The action of an instrumentality or agency of the State, if it frames a service rule such as clause (a) of Rule 9 or a rule analogous thereto would, therefore, not only be violative of Article 14 but would also be contrary to the Directive Principles of State Policy contained in clause (a) of Article 39 and in Article 41

Duties of State

When our Constitution states that it is being enacted to give to all the citizens of India "Justice, Social, economic and political", when clause (I) of Article 38 of the Constitution directs the State to strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which social, economic and political justice shall inform all the institutions of the national life, when clause (2) of Article 38 directs the State in particular, to minimise the inequalities in income, not only amongst individuals but also amongst group of people residing in different areas or engaged in different vocations and when Article 39 directs the State that it shall, in particular, direct its policy towards securing that the citizens men and women equally, have the right to an adequate means of livelihood and that the operation of the economic system does not result in the concentration of wealth and reasons of production to the common detriment and that there should equal pay for equal work for both men and women, it is the doctrine of distributive justice which is speaking through the words of the Constitution. [Lingappa Pochanna Appelwar v. State of Maharashtra & Anr., [1985] 1 S.C.C. 479 referred to.][quoted from: Central Inland Water ... vs Brojo Nath Ganguly & Anr ;  1986 AIR 1571, 1986 SCR (2) 278 Supreme Court of India]


Constitution-IP
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[1] "617. Definition of 'Government Company'.-

For the purposes of this Act Government company means any company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments and includes a company which is a subsidiary of a Government company as thus defined."

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