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Report No. 275

3. Substantially Financed

5.43 A reading of the section 2(h) of the RTI Act establishes that a body owned, controlled or 'substantially financed' as well as a non-Governmental Organisation 'substantially financed', directly or indirectly, by the appropriate Government, is a 'public authority', within the purview of the definition given in the said section. It, therefore, follows that if a body/entity is substantially financed by the appropriate Government, then even if it is not constituted under the Constitution of India or a Statute, and is a Non-Governmental Organisation/private body, it will be well within the ambit of the RTI Act, 2005.

5.44 To enrich this understanding, it is imperative to understand the meaning and scope of the term 'substantially financed'. Since this term has not been defined by the Legislature in the RTI Act, other sources are required to be perused for according it a fruitful meaning. 5.45 From an economic standpoint, talking about Public-Private Partnerships (PPPs), the United Nations Economic and Social Commission in Asia and the Pacific (UNESCAP) mentions that land acquisition done by the Government on behalf of the private entity as well as tax incentives, can be classified as Government support measures.127

5.46 Similarly, the World Bank while discussing Government support in financing PPPs, elucidates that the Government may decide to provide direct support for the project, for example through subsidies/grants, equity investment and/or debt[emphasis added]. Funded support involves the government committing financial support to a project, such as:128

  • direct support - in cash or in-kind (e.g. to defray construction costs, to procure land, to provide assets, to compensate for bid costs or to support major maintenance);
  • waiving fees, costs and other payments which would otherwise have to be paid by the project company to a public-sector entity (e.g. authorising tax holidays or a waiver of tax liability);
  • providing financing for the project in the form of loans (including mezzanine debt) or equity investment (or in the form of viability gap funding).

5.47 In terms of waving fees and payments as an example of Government extending financial support, there are also instances of cricket association(s) within the bounds of a local body such as the Municipality, being extended the benefit of tax exemptions on otherwise leviable property taxes.

5.48 In the case of Palser v. Grimling,129 while interpreting the provisions of Section 10(1) of the Rent and Mortgage Interest Restrictions Act, 1923, the House of Lords held that "substantial" is not the same as "not unsubstantial", i.e., just enough to avoid the de minimis principle. The word "substantial" literally means solid, massive etc.

5.49 Etymologically speaking, in Black's Law Dictionary (6th edition), the word "substantial" is defined as "of real worth and importance; of considerable value; valuable. Belonging to substance; actually existing; real: not seeming or imaginary; not illusive; solid; true; veritable. Something worthwhile as distinguished from something without value or merely nominal. Synonymous with material." The word "substantially" has been defined to mean "essentially; without material qualification; in the main; in substance; materially."

5.50 Interestingly, in the Shorter Oxford English Dictionary (5th edition), the word "substantial" means "of ample or considerable amount of size; sizeable, fairly large; having solid worth or value, of real significance; sold; weighty; important, worthwhile; of an act, measure etc. having force or effect, effective, thorough." The word "substantially" has been defined to mean "in substance; as a substantial thing or being; essentially, intrinsically."

Therefore, it can be said that the word "substantial" is not synonymous with "dominant" or "majority". It is closer to "material" or "important" or "of considerable value." "Substantially" is closer to "essentially". Both words can signify varying degrees depending on the context[emphasis added].130

5.51 The Chairman, Press Council of India, Justice P.B. Sawant, former judge, Supreme Court of India, underscoring the importance of bringing private bodies within the purview of right to information, opined that:131

Private bodies, especially where their activities affect the fundamental rights of the public, must be required to disclose information. In times of far reaching privatisation, institutions such as electricity boards and banks cannot be left out of law's scope.

5.52 In the case of, The Hindu Urban Cooperative Bank Ltd. v. The State Information Commission & Ors.,132(The Hindu Urban Cooperative Bank case), the Punjab & Haryana High Court observed that the word "substantial" has not been defined under RTI Act and has no limited or fixed meaning. For the purpose of legislation, it has to be construed in its ordinary and natural sense relatable to the aims, fundamental purpose and objects sought to be achieved to provide transparency to control corruption and to promote accountability under the RTI Act.

5.53 In the Thalappalam case, the Apex Court observed that the expression "substantially financed" in Sections 2(h)(d)(i) and (ii) indicate the degree of financing, which must be actual, existing, positive and real to a substantial extent, not moderate, ordinary, tolerable etc. The Court further stated that:

Merely providing subsidiaries, grants, exemptions, privileges etc., as such, cannot be said to be providing funding to a substantial extent, unless the record shows that the funding was so substantial to the body which practically runs by such funding and but for such funding, it would struggle to exist. The State may also float many schemes generally for the betterment and welfare of the cooperative sector like deposit guarantee scheme, scheme of assistance from NABARD etc., but those facilities or assistance cannot be termed as 'substantially financed' by the State Government to bring the body within the fold of 'public authority' Under Section 2(h)(d)(i) of the Act.

But, there are instances, where private educational institutions getting ninety-five per cent grant-in-aid from the appropriate government, may answer the definition of public authority under Section 2(h)(d)(i).

5.54 It was also observed that though the term 'Non-Government Organisations' as such is not defined in the RTI Act, but over a period of time, it has acquired a meaning of its own and has to be seen in that context. If a Non-Government Organisation which though neither owned nor controlled by the State, receives substantial financing from the appropriate Government, it would also fall within the definition of 'public authority' under section 2(h)(d)(ii) of RTI Act.

5.55 The Delhi High Court in the case of Indian Olympic Association v. Veerish Malik & Ors.,133

held that, what amounts to 'substantial' financing cannot be straight-jacketed into rigid formulae, of universal application. Of necessity, each case would have to be examined on its own facts. That the percentage of funding is not 'majority' financing, or that the body is an impermanent one, are not material. Equally, that the institution or organization is not controlled, and is autonomous is irrelevant; indeed, the concept of nongovernment organization means that it is independent of any manner of government control in its establishment, or management.

That the organization does not perform or pre-dominantly performs 'public' duties, too, may not be material, as long as the object for funding is achieving a felt need of a section of the public, or to secure larger societal goals. To the extent of such funding, indeed, the organization may be a tool, or vehicle for the executive government's policy fulfilment plan. This view, about coverage of the enactment, without any limitation, so long as there is public financing.

5.56 In the case of Nagar Yuwak case, it was observed by the Bombay High Court that the term 'substantially financed' has been repeatedly used by the Parliament with a view to eliminate, from the equation, such institutions which are financed directly or indirectly with a small or a little contribution of funds by the appropriate Government.

5.57 In the case of Population Services International v. Rajesh Dhiman,134 the Delhi High Court, while deciding whether the petitioner organisation (PSI) would be 'public authority' within the RTI Act, observed that, "if taken on absolute terms, a contribution ranging between Rs. 11 to 16 crores by the Government from its corpus of public funds cannot be considered as insignificant". Such a contribution would render PSI as being 'substantially financed' by the Government. The Court further observed that, "...if over 1 crore or over 10% of the revenue funding comes from Government, directly or indirectly, it would certainly qualify as substantial funding."

5.58 In the case of Visvesvaraya Technological University v. Assistant Commissioner of Income Tax,135 the Apex Court placed reliance on the judgment of the High Court of Karnataka in the case of CIT v. Indian Institute of Management,136particularly on the view expressed that the expression "wholly or substantially financed by the Government" as appearing in section 10(23-C) of the Income Tax Act, 1961, cannot be confined to annual grants and must include the value of the land made available by the Government.

The Apex Court further referred to the observations of the Karnataka High Court, which had held that, apart from annual grants the value of the land made available, the investment by the Government in the buildings and other infrastructure and the expenses incurred in running the institution must all be taken together while deciding whether the institution is wholly or substantially financed by the Government.

5.59 In the case of Krishak Bharti case, the Delhi High Court held that: It is important to note that the word 'financed' is qualified by the word 'substantially' indicating a degree of financing. Therefore, it is not enough for such bodies to merely be financed by the government. They must be 'substantially financed'. In simple terms, it must be shown that the financing of the body by the government is not insubstantial.

The word 'substantial' does not necessarily connote 'majority' financing. In an annual budget of Rs. 10 crores, a sum of Rs. 20 lakhs may not constitute a dominant or majority financing but is certainly a substantial sum. An initial corpus of say Rs.10 lakhs for such an organization may be 'substantial'. It will depend on the facts and circumstances of a case. Merely because percentage-wise the financing does not constitute a majority of the total finances of that entity will not mean that the financing is not 'substantial'. A reference may be made to two different meanings of the word 'substantial'.

5.60 Further, in the case of CIT v. Parley Plastics Ltd.,137the Bombay High Court held that the term "substantial" does not mean more than 50% and it can be 10% or 20%, depending on the other terms and conditions. If the legislature had any percentage more than 50% in mind, it would have been so provided for.



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