[Article 12] Unit-Run Canteens Not Controlled Or Financed By Govt Of India, Won't Fall Under Definition Of 'State': Kerala High Court

The Kerala High Court has stated that Unit Run Canteens do not come within the definition of 'state' as provided under Article 12 of the Indian Constitution.“Merely because the Unit Run Canteens works under the Canteen Stores Department (CSD) and the CSD are founded by the consolidated fund of India, it cannot be said that the Unit Run Canteens is directly controlled and financed by the Government of India, they have an independent stand and are working on separate SOPs, issued from time to time” observed Justice Basant Balaji. The court was hearing a petition by the employees of a Unit Run Canteen functioning in Pangode Army Headquarters challenging an order to replace these employees with contract workers. Background The petitioners are employees of the Unit Run Canteens functioning under the Army Station Head Quarters, Pangode, Thiruvanthapuram. It is governed by the Board of Control of Canteen Services headed by the Minister of Defence. The petitioners are either ex-servicemen or dependant on ex-servicemen and had joined the canteens based on a standard operating procedure (SOP) issued by the respondents.The petitioners were aggrieved by an order of the respondents which notified that the employees of the Unit Run Canteens would be replaced by contractual employees.The respondents argued that the writ petition isn't maintainable as the unit-run canteens do not come under the definition of 'state'. In doing so, the respondents pointed out that the Unit Run Canteens are sanctioned based on the recommendation of the CSD head office. Article 12 provides that “'the State' includes the Government and 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". The respondent pointed out that the 3 criteria in the test for determining 'state' under Article 12 of the Indian Constitution are not fulfilled by the unit-run canteens. The three aspects of the test to determine whether an organization comes under the definition of 'other authorities' are 1) creation, 2) finance, and 3) control. Canteens not a creation of Constitution, Parliament or State LegislatureThe respondents submitted that the creation of a unit-run canteen ("URC") arises out of the need for defense personnel posted in a particular unit, and as such, it is not created by any Act but by an order from the Army. Accordingly, it is not the creation of the constitution or parliament or a State Legislature. The court accepted this argument and observed that “when we apply the test to the facts of the present case, it can be seen that the Unit Run Canteens are not created under any statute or by the parliament or by the legislature; they are created by executive orders, and all the individuals are private individuals. There is no control over administration by the Central Government”. Canteens financed through regimental funds contributed by defense personnelRegarding the second criterion, the respondents pointed out that these canteens are financed by regimental funds created through contributions from the defense personnel. It was argued that URCs do not receive any direct pecuniary benefit from the Government of India, nor do the CSDs under any obligation to grant any financial assistance to URCs. There is no direct or indirect funding from any Government authority, it was stated. The respondents submitted a letter issued by the Ministry of Defence to the Chief of Army Staff, in which they explained the status of the URC and their employees, clarifying that CSD is a department under the Ministry of Defence, and all its employees are Government employees. While the funds of the department form part of the Consolidated Fund of India, the unit canteens like the Army Head Quarters canteen are private undertakings of the unit concerned, it was argued.The respondent added that procurement of stores/goods for the URCs can be done only from a CSD depot by making advance payment from their non-public (regimental) funds and the profits of URCs are distributed, utilised as regimental funds by the unit/formations, for the welfare activities of troops and their families after meeting the operational /running expenses of URCs. It was argued that their funds are non-government funds. Additionally, CSD has no administrative control over the unit canteens or the personnel who are employed by the units under various terms and conditions mutually settled between the units and the employees, they are not Government servants, and therefore, the Ministry has no control over their service conditions and has no jurisdiction over the service conditions of such employees. Thus, there is no direct financial obligation by the State.The court conceded to this argument and held that the URCs are not supported by public funds, and as such, do not fulfil the second criteria of the test. “The funds of the CSDs are not from the funds...

[Article 12] Unit-Run Canteens Not Controlled Or Financed By Govt Of India, Won't Fall Under Definition Of 'State': Kerala High Court

Rubayya Tasneem

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