Cochin International Airport Ltd. not a State Instrumentality Under Article 12 of Constitution: Kerala High Court

Former Judges of the Kerala High Court to join the Central Government

Case: Ms. Daisy v/s Cochin International Airport Ltd.

Case no.: WP(C).No.8011 OF 2014

Judgment by: P.V.Asha, J.

In a democracy there is a dividing line between a State enterprise and a non-State enterprise, which is distinct and the judiciary should not be an instrument to erase the said dividing line unless, of course, the circumstances of the day requires it to do so. There is no simple litmus test to determine whether an entity is State or “other authority” within the meaning of Article 12 of the Constitution of India. Various facets of the foundation and the working of the entity would be relevant in determining the question in the context of the duties entrusted to it or taken up by it for performance. 

Brief facts

CIAL is a company incorporated under the Companies Act, 1956. It is stated that the State Government is holding only 32.24% of the paid-up capital of the Company. Therefore, it is not a Government company within the definition of section 617 of the Companies Act, 1956. As per amended Article 95, so long as Government of Kerala and/or its Public Sector Undertakings jointly or severally hold not less than 26% of the paid-up equity capital of the company, Government of Kerala shall have the right to nominate from time to time at its discretion one-third of the total number of the directors of the company. It shall also be entitled to remove any such director so appointed and to appoint any other person in their place.

The Directors so appointed by the Government shall be liable to retire by rotation. However, it is provided that the Government of Kerala shall exercise its rights contained in that article only in consultation with the board of the Company. It is an admitted fact that the State Government is having only 32.24% of the share in the paid-up capital of CIAL.

The Company does not get any financial assistance from the Government. It cannot also be said that the Company is having any State protected monopoly. There is no provision enabling the Government to issue any directives to the Company; the company is not also bound to furnish any reports or accounts before Government.

Issues

  • Whether the presence of Government nominees, the Chairman and the Managing Director would make the control of Government deep and pervasive
  • Whether it is discharging public duties is to be examined in the light of various judgments, interpreting Article 12 as well as 226 of the Constitution of India.
  • The CIAL has raised a preliminary objection as to the maintainability of these Writ Petitions. According to them, CIAL does not come under the definition of a State under Article 12 of the Constitution of India.
  • It is also their case that it does not perform any public duties and therefore the writ petitions will not lie against termination of services of its employees under Article 226 of the Constitution of India also.
  • Therefore, it is necessary to examine whether CIAL is an instrumentality of State as defined under Article 12 of the Constitution of India. 

Key features

To determine whether an institution is a State under Article 12 of the Constitution of India the following test was laid down in D.Shetty v/s International Airport Authority of India-

1. One thing is clear that if the entire share capital of the corporation is held by the Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of the Government.

2. Where the financial assistance of the State is so much as to meet the almost entire expenditure of the corporation, it would afford some indication of the corporation being impregnated with governmental character.

3. It may also be a relevant factor whether the corporation enjoys monopoly status which is State conferred or State protected.

4. Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality.

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 the Government.

In Pradeep Kumar Biswas v. Indian Institute of Chemical Biology Court held that the tests formulated in Ajay Hasia are not a rigid set of principles so that if a body falls within any one of them it must, ex hypothesis, be considered to be a State within the meaning of Article 12. The question in each case would be whether in the light of the cumulative facts as established, the body is financially, functionally and administratively dominated by or under the control of the Government. Such control must be particular to the body in question and must be pervasive. If this is found then the body is a State within Article 12. 

Judgment

  • The provisions contained in the Memorandum of Association and Articles of Association it cannot be said that CIAL is financially, functionally and administratively dominated by or under the control of the Government. It cannot also be said that it is having any government conferred monopoly in providing air traffic services because it is the function of Airport Authority of India.
  • CIAL is only facilitating the AAI to perform its statutory obligations. It does not get any sort of financial aid from the Government. It is not bound to submit reports or accounts before the Government. There is no provision enabling the Government to issue any directives. Therefore, the court is of the view that CIAL cannot be said to be an authority or instrumentality of State within the meaning of Article 12 of the Constitution.
  • The next question is whether a writ petition would lie under Article 226 of the Constitution of India. It is seen that CIAL does not have any statutory duty to be performed. No direction can be issued to enforce any personal contracts. The employment of the petitioners by CIAL or the termination of their services do not involve any public element. Therefore it cannot also be said that a writ petition would lie against it under Article 226 of the Constitution of India and the writ petitions are accordingly dismissed.

Edited by Vartika Gajendra Singh

Approved & Published – Sakshi Raje

Shraddha Yadav
I am Shraddha a third year undergraduate student at S.R.M. University, Delhi NCR persuing B.A.LL.B (Hons.). As someone who is interested in research work, I am more into reading and exploring the unexplored part and law being an endless ocean of knowledge attracts me the most specially certain legal fields such as criminal law, family law, human rights laws, international law interests me the most. Being a passionate reader, I enjoy reading philosophical and motivational books and also autobiographies at times (comics and fairy tales as well). Apart from this Mandela art and travelling are also one of my hobbies.