Report No. 275
Concept of State Under Article 12 of The Constitution
3.1 Article 12 of the Constitution of India over the decades, been the subject matter of great interpretational exercise. There have been many deliberations on the scope and extent of the term 'State' defined in this Article.
3.2 The Article reads as follows: In this [P]art, unless the context otherwise requires, 'the State' includes the Government and the Parliament of India and the Government and the Legislature 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.
3.3 This definition was initially considered as exhaustive and limited to authorities stipulated under this Article and those that could be read ejusdem generis. Till the year 1967, the Courts had taken the view that even statutory bodies, Universities, Selection Committees for admissions to Government Colleges were not "other authorities" for the purpose of this Article.
3.4 However, this position changed when a Constitution Bench of the Supreme Court in Rajasthan State Electricity Board, Jaipur v. Mohan Lal,36(Rajasthan State Electricity Board case) interpreted the term 'other authorities' to include all Constitutional and Statutory bodies on whom powers were conferred by law and it was held that it is not at all material that some of the powers conferred were for the purpose of carrying on activities that were commercial in nature.
3.5 Even after this new, expanded scope of the term 'other authorities', in 1969, the Apex Court once again examining the said term, pronounced that a company incorporated under the Companies Act was outside the purview of 'State' as it was not formed statutorily and was not subject to discharge any statutory duty.37
3.6 But then in 1975, another Constitution Bench of the Supreme Court, in the case of Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi,38(Sukhdev Singh case) when faced with the question of status of public corporations, such as, Oil & Natural Gas Commission(ONGC), the Industrial Finance Corporation(IFC) and the Life Insurance Corporation of India (LIC), set up by the statutes for commercial purposes, whether can be included in the term 'other authorities' within the meaning of Article 12.The Court answered the same in the affirmative, and made the following observations:
The concept of State has undergone drastic changes in recent years. Today State cannot be conceived of simply as a coercive machinery wielding the thunderbolt of authority. It has to be viewed mainly as a service corporation...A State is an abstract entity. It can only act through the instrumentality or agency of natural or juridical persons. Therefore, there is nothing strange in the notion of the state acting through a corporation and making it an agency or instrumentality of the State...The governing power wherever located must be subject to the fundamental Constitutional limitations.
The need to subject the power centers to the control of Constitution require an expansion of the concept of State action...the ultimate question which is relevant for our purpose is whether such a corporation is an agency or instrumentality of the government for carrying on a business for the benefit of the public. In other words, the question is, for whose benefit was the corporation carrying on the business?