The Supreme Court has held that the National Book Trust, India (NBT) falls within the definition of “State” under Article 12 of the Constitution because of the cumulative effect of the Government’s deep and pervasive control over its constitution, administration, finances and functioning.
The Bench of Justice Prashant Kumar Mishra and Justice Augustine George Masih upheld the Delhi High Court Full Bench’s decision and dismissed the appeal challenging that determination.
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The Court clarified that recognising NBT as “State” for the purposes of fundamental rights does not convert it into a government department or automatically confer civil servant status upon its employees.
The central issue was whether NBT qualifies as an “other authority” under Article 12.
The Trust argued that it was a society/trust and did not possess the same legal character as a statutory corporation. Rejecting this submission, the Court held that constitutional scrutiny must focus on the substance of the institution’s relationship with the Government rather than its nomenclature or form of incorporation.
Relying on Ajay Hasia v. Khalid Mujib Sehravardi, the Bench explained that even a society registered under the Societies Registration Act, 1860, can constitute an instrumentality or agency of the Government.
The Government may function through companies, societies or other legal structures. Constitutional obligations cannot depend merely on the organisational form through which governmental power or functions are exercised.
The Supreme Court examined the principles established in Ramana Dayaram Shetty v. International Airport Authority of India, Ajay Hasia, and the seven-judge Bench decision in Pradeep Kumar Biswas v. Indian Institute of Chemical Biology.
It reiterated that the relevant indicators are not a rigid checklist. The presence of one factor does not automatically make an institution “State”.
The decisive inquiry is whether the established facts, considered together, demonstrate that the body is financially, functionally and administratively dominated by, or under the control of, the Government.
Such control must be particular to the institution and pervasive in character. Ordinary regulatory supervision of the kind exercised over autonomous bodies is insufficient.
The Bench noted that NBT was established pursuant to a Government of India resolution dated June 15, 1957, and subsequently reorganised through another government resolution dated September 28, 1962.
Its creation was therefore directly attributable to the Government. It was not an independent private initiative that subsequently became subject to governmental regulation.
The Trust was conceived and structured to advance an identified national objective relating to the production and dissemination of literature at moderate prices. The Court considered this origin alongside its governing framework and continuing governmental control.
Examining NBT’s rules, the Court found substantial governmental involvement in its leadership and decision-making machinery.
The Chairman is appointed by the Government of India and holds office at its pleasure. Representatives of the Ministries of Education, Finance, and Information and Broadcasting form part of the governing body. The Government also has the power to nominate other members.
The Executive Committee, entrusted with the administration, direction and control of the Trust’s affairs, similarly includes representatives of these ministries. The Finance Ministry representative functions as Financial Adviser, while the committee’s non-official members are also nominated by the Government.
The Court observed that this arrangement went beyond the incidental association of a government officer with an otherwise independent organisation. Government representatives occupied positions at the heart of the institution’s decision-making process.
The Executive Committee’s power to make regulations was itself subject to prior government approval.
The Court also examined the provisions governing NBT’s finances, accounts and institutional framework.
Financial matters must be placed before the Financial Adviser. In specified cases of disagreement, the matter may be escalated to the Ministers of Education and Finance.
The Trust must submit its annual report and audited accounts to the Government. Its accounts are required to be maintained in the form prescribed by the Government in consultation with the Comptroller and Auditor-General of India.
The CAG, or an authorised person, is empowered to audit the accounts with powers analogous to those available for auditing government accounts. Specified alterations to the Trust’s rules and purposes also require government approval.
Taken together, these provisions demonstrated a relationship substantially different from that between the Government and an ordinary private society subject to general regulation.
NBT contended that government grants were only one source of its income and that its own receipts constituted a substantial share of its total income in certain years.
The Supreme Court acknowledged that financial assistance is an important consideration under Article 12, but held that it is not the exclusive factor.
Income earned from publications could not be assessed separately from the rules governing the Trust’s composition, management, financial administration and governmental supervision.
The Court found that government involvement in NBT’s financial affairs was structurally embedded. It was not confined to imposing conditions on an occasional grant.
Consequently, earning revenue independently through book sales did not, by itself, displace the pervasive governmental control reflected in the Trust’s governing framework.
The Bench expressly clarified that publishing books is not, by itself, a sovereign or exclusively governmental function.
It also rejected the proposition that every educational or public utility activity necessarily converts the organisation undertaking it into “State”.
Referring to Zee Telefilms Ltd. v. Union of India, the Court explained that the performance of a public function, considered in isolation, is insufficient to satisfy Article 12.
NBT’s functions were relevant because they had to be examined alongside its government-led creation and the control exercised over its affairs.
Its objectives include promoting good literature, making books available at moderate prices, publishing classical Indian literature, translating important Indian and foreign works, disseminating knowledge, and organising book exhibitions and seminars.
These activities reflected the public and national purposes for which the Government established the Trust.
The Court also considered subsequent programmes, including the PM-YUVA Young Authors Mentorship Scheme, as corroborative material. It expressly stated that its conclusion did not rest on developments occurring after the Delhi High Court Full Bench’s judgment.
The Supreme Court separately addressed the concern that treating NBT as “State” would necessarily attract all consequences associated with government employment.
It clarified that Article 12 performs a distinct constitutional function for the purposes of Part III, which deals with fundamental rights.
Recognising NBT as “State” does not make it a department of the Government of India. Nor does it make every employee a civil servant or automatically confer the constitutional protections available to government servants under Part XIV.
In particular, Article 12 status has no automatic consequence under Articles 309, 310 or 311 of the Constitution.
The question was whether the Trust was sufficiently an instrumentality of the Government to attract the constitutional discipline of Part III. The Court’s determination did not automatically settle employees’ entitlement to government service protections.
The Bench concluded that governmental involvement began with NBT’s creation, extended to its governing composition and appointment of its principal functionary, and permeated its executive and financial administration.
That control continued through audit, reporting requirements and governmental approval over aspects of its institutional framework.
The Court held that NBT satisfied the test of financial, functional and administrative domination or control, with that control being particular to the Trust and pervasive in character.
Accordingly, it upheld the Delhi High Court Full Bench’s conclusion that NBT is an “other authority” within Article 12 and dismissed the appeal.
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