The Supreme Court has held that the National Book Trust (NBT) is an 'authority' within the meaning of Article 12 of the Constitution and, therefore, qualifies as 'State' for the purpose of enforcing fundamental rights.

The Court observed that the Government exercises deep and pervasive control over the Trust, including its constitution, governing composition, executive functioning and financial administration. It held that the Trust's registration as a society or its independent income generation does not take it outside the ambit of Article 12.

“Trust accordingly satisfies the test of being financially, functionally and administratively dominated by or under the control of the Government, with that control being particular to the Trust and pervasive in character. Its registration as a society, or the fact that it generates part of its income independently cannot displace the cumulative constitutional character of the institution.”, observed a bench of Justice Prashant Kumar Mishra and Justice Augustine George Masih, while dismissing an appeal filed by the National Book Trust, thereby upholding a Delhi High Court judgment which had declared the Trust to be 'State' under Article 12.

The issue before the Court was whether the National Book Trust, established through Government resolutions, could be treated as an instrumentality or agency of the Government despite being constituted as a society/trust.

Examining the Trust's structure, the judgment authored by Justice Mishra, relying on a settled principle of recognition of a body as a state as propounded in Ajay Hasia and Pradeep Kumar Biswas, explained that determination under Article 12 requires a cumulative assessment of the body's financial, functional and administrative relationship with the Government, not income generation alone. It emphasised that the inquiry is not confined to the legal form in which an organisation is incorporated.

Since the Trust was established through Government resolutions and the Government appoints its Chairman, nominates members to its governing bodies and exercises control over its financial administration, audit and rules. Moreover, the CAG audits the Trust; therefore, the Court found it sufficient to hold the Trust to be a State.

“the Government participates in the constitution of the body; determines a substantial part of its governing composition; appoints its Chairman; retains control over the tenure of that office; participates in its financial administration...The rules concerning the Trust's accounts and the audit by the CAG further demonstrate that Government involvement in its financial affairs is structurally embedded and is not confined merely to imposing conditions upon an occasional grant. The fact that the Trust earns revenue from its publications therefore does not, by itself, displace the pervasive governmental control disclosed by its governing framework.”, the Court observed.

“The Government's role begins with the creation of the Trust, extends to its governing composition and appointment of its principal functionary, permeates its executive and financial administration, and continues through audit, reporting and governmental approval over aspects of its governing framework. This is not the limited or general regulatory supervision which can be excluded from the ambit of Article 12 of the Constitution.”, the Court added.

Rejecting the argument that the Trust's independent income from publication sales diluted governmental control, the Court said:

“Financial autonomy in one aspect cannot be isolated from the statutory or regulatory structure governing the body, its composition, management and governmental supervision.”

The Court clarified that performing public functions alone would not automatically make an organisation 'State' under Article 12. The nature of its functions must be considered alongside the extent of governmental control.

It also clarified that the declaration would not convert the Trust into a Government department or automatically make its employees civil servants. Article 12 status does not, by itself, confer the protections available to Government servants under Articles 309, 310 and 311.

Appearance:

Amicus Curiae Mr. Sanjay Jain, Sr. Adv. Ms. Harshita Sukhija, Co-Amicus Mr. Nishank Tripathi, Adv. Ms. Rishika Agrawal, Adv. Mr. Shreyan, Adv.

For Appellant(s) Mr. Yashvardhan, Adv. Mr. Piyush Singh, Adv. Ms. Avantika Chaudhary, Adv. Mr. Shubham Raj, Adv. Mr. Abhishek Kumar Gupta, Adv. Mr. Nitesh Ranjan, AOR

For Respondent(s) Respondent-in-person Mr. K.M. Nataraj, A.S.G. Ms. Madhulika Upadhyay, AOR Mr. Vinayak Sharma, Adv. Mr. Rajan Kr.chourasia, Adv. Mr. Raghav Sharma, Adv. Ms. Satvika Thakur, Adv. Mr. Rajan Kumar Chourasia, Adv. Ms. Madhulika Upadhaya, AOR