Article 12 lays down the meaning of State for part III of the Constitution. According to Article 12, the State includes i) the Government and Parliament of India; ii) The Government and Legislature of each State; iii) local authorities and iv) other authorities. Local authorities here refer to the authorities like municipalities, district board, panchayat, etc. However, the term ‘other authorities’ has not been explained. In this article, we would examine the meaning of this term through past precedents.
In Rajasthan Electricity Board v Mohan Lal, it was held that other authorities would be classified into statutory and non-statutory authorities. Any statutory authority having the power to issue directions would be considered State. The statutory authority doesn't need to be engaged in performing government or sovereign functions. Here, nothing was said about non-statutory authority.
In Sukhdev Singh v Bhagatram, there were three statutory corporations LIC, ONGC, and IFC who had dismissed certain employees. These employees demanded reinstatement arguing that these corporations come under the State of Article 12. On the other hand, the corporations argued that they cannot be considered as State under Article 12 since they formed rules only for internal governance and did not issue directions to outsiders. These three corporations were created by statues, had the power to make binding rules and regulations, and were subject to pervasive government control. Such corporations were termed as agency or instrumentality of the State. However, the term ‘agency’ or ‘instrumentality’ was no explained.
In RD Shetty v International Airport Authority of India, the agency or the instrumentality test was laid. An authority which is controlled by the government, financed by the government, doing functions of public good or similar to that of the government should be considered agency or instrumentality of State. This test was later explained in detail in the case of Ajay Hasia v Khalid Mujib.
The test to determine whether a non-statutory corporation is State or not under Article 12 is as follows:
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