Introduction
The Constitution is the supreme law of the land and it provides the rules and regulations which must be obliged by the people and organisations of the country whether private or the public for the maintenance of peace, stability among the citizens and to promote prosperity of the nation. To promote peace and harmony the constitution provides a group of rights known as fundamental rights which re guaranteed to all the citizens of the nation by the Constitution of India under Part III. These rights apply universally to all citizens residing in the nation, irrespective of their race, place of birth, religion, caste or gender. The Fundamental Rights are the law of rights which are protected from the violation by the Government. Although the Fundamental Rights cannot be enforced upon the private individuals or entities which most of the time causes mis-carriage of the justice thereby defeating the very purpose of fundamental rights as envisaged by the framers of the constitution.
It is high time that the definition of the ‘State’ provided by the Constitution needed to widen in the wake of increasing number of private organisations performing quasi- governmental or public functions must be subjected to the discipline of the Fundamental Rights through their inclusion within the definition of state under Article 12 and that their acts or omissions which are violative of the Fundamental Rights guaranteed in part III of the Constitution be judicially reviewed. [1]
[1] https://newjurist.com/need-for-defining-state-in-the-wake-of-liberalization.html
Liberalisation
Liberalisation is a broad term that refers to the practice of making laws, systems, or opinions less severe, usually in the sense of eliminating certain government regulations or restrictions. The term is used most often in relation to economics, where it refers to economic liberalization, the removal or reduction of restrictions placed upon (a particular sphere of) economic activity.[1]
Economic liberalisation encompasses the processes, including government policies, that promote free trade, deregulation, elimination of subsidies, price controls and rationing systems, and, often, the downsizing or privatization of public services. Government policies are redirected to follow a noninterventionist, or laissez-faire, approach to economic activity, relying on market forces for the allocation of resources. It was argued that market-oriented policy reforms would spur growth and accelerate poverty reduction. [2]
Government intervention in markets is seen as both inefficient and distortionary. It is argued that even if an interventionist State acts with good intentions, it does not have the competence to manage the economy well.
Since, the idea of liberalisation is non interference in the working and business of the private organisation in order to promote the economic growth, it may lead to exploitation of fundamental rights of the individuals. Most of the Fundamental rights provided to the citizens are claimed against the State and its instrumentalities and not against the private bodies. Article 12 gives an extended significance to the term ‘state’. It is very important to determine what bodies fall under the definition of a state so as to determine on whom the responsibility has to be placed.
In India the seeds of globalization were sown in the early 1980’s but the real thrust was provided through the New Economic Policy (1991) (NEP) of P.V. Narasimha Rao Government. The original plan was that basic industries should be owned or controlled by the State and the private sector must accept the national plan and fit to it and this was in consonance with the mixed economy vision, which was deeply rooted to the Indian Constitution.
With increased Foreign Direct Investment, the government is removing the bottlenecks, which will hinder foreign investment and affect foreign investor confidence and foreign capital flow. Disinvestment in public sector and privatization results in undermining the rights of workers
[1] https://en.wikipedia.org/wiki/Liberalization
[2] https://www.un.org/esa/socdev/rwss/docs/2010/chapter6.pdf
since they are not bound by constitutional obligations. Public law of the country is unequipped to deal with these tribulations.
Wisdom and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provision or the Constitution. [1]
However, with the beginning of New Economic Policy, the state is losing control over the economy. When the states are increasingly adopting the measures of deregulations, disinvestment, denationalization, they are not only losing their regulatory powers but, more importantly, their redistributionist capacity as well.
In November, 2019, India launched its biggest privatization drive in more than a decade. An “in-principle” approval was accorded to reduce Government of India’s paid-up share capital below 51 per cent in select Central Public Sector Enterprises (CPSEs). Among the selected CPSEs, strategic disinvestment of Government’s shareholding of 53.29 per cent in Bharat Petroleum Corporation Ltd (BPCL) was approved.
This recent approval of strategic disinvestment in Bharat Petroleum Corporation Limited (BPCL) led to an increase in value of shareholders’ equity of BPCL by ` 33,000 crore when compared to its peer Hindustan Petroleum Corporation Limited (HPCL)! This reflects an increase in the overall value from anticipated gains from consequent improvements in the efficiency of BPCL when compared to HPCL which will continue to be under Government control. [2]
With increasing privatisation of government entities and increasing population the major portion of jobs are from these private sectors. These private entities are majorly focussed of profit making and majorly violate the socio- economic and civil rights of citizens with no recourse to redress the such violation.
The Recommendation of the National Commission to Review the Working of the Constitution, 31st march 2002 also suggested that private, non-state entities discharging important quasi- governmental or public functions must be subjected to the discipline of the Fundamental Rights through their inclusion within the definition of state under Article 12 and that their acts or
[1] Balco Employees Union (Regd.) vs Union Of India & Ors. on 10 December, 2001
[2] Privatization and Wealth Creation – Ch-09 – https://www.indiabudget.gov.in/budget2020-21/economicsurvey/
omissions which are violative of the Fundamental Rights guaranteed in part III of the Constitution be judicially reviewed. [1]
The need of the times is that fundamental rights be made available against private entities, otherwise persons aggrieved by actions of these large private corporations will have no place to turn to, thereby defeating the very purpose of fundamental rights as envisaged by the framers of the constitution.
[1] https://newjurist.com/need-for-defining-state-in-the-wake-of-liberalization.html
Privatization and Corruption Relation
Government institutions in India are an alternative term for corrupt systems and officials. At the same time, we have seen the private sector grow exponentially over the years. This leads to the belief that privatization can significantly reduce corruption.
On the other hand, private sector employees are often well paid to create a motivated workforce, so they I don’t want bribes. Private companies will immediately take strict and necessary measures against bribery and other illegal crimes. The competitiveness of private companies also boosts GDP. GDP is boosted by taxes paid by these private organizations. However, both the private and public sectors are involved in corruption.
The Satyam scam, the 2G scam, the Common Wealth Games scam, the Telgi, the Bofors scam, the Harshad Mehta scandal, etc. are just a few examples to help you understand that corruption is about the people who run the office, not the department. The biggest frauds have often been perpetrated through joint involvement of the private and public sectors. It is common to see private companies paying large bribes to government agencies to secure large deals. Ultimately, privatization was also part of the private sector, so it does not guarantee less corruption. In fact, where there is a lot of government corruption, the market is more concentrated and prices are higher.
The size of the sale and the nature of the assets being privatized can make things brittle. Privatization can also be used for personal or political gain. It’s only good if the state achieves a fair value of state assets for taxpayers. [1]
[1] https://taxila.in/blog/impact-of-privatization-on-indian-economy/
State Under Indian Constitution
According to Article 12 of the Constitution of India, the term ‘State’ can be used to denote the union and state governments, the Parliament and state legislatures and all local or other authorities within the territory of India or under the control of the Indian government.
Over the period of time, the Supreme Court has explained the ambit of ‘State’ to include Corporation such as LIC and ONGC since they perform tasks “very close to governmental or sovereign functions.” In fact, the term ‘State’ also accommodates any authority that’s created by the Constitution of India and has the power to make laws. It need not perform governmental or sovereign functions.
Executive and legislature of Union and states include union and state governments along with Parliament and State legislatures. The President of India and Governors of states can also be referred as ‘State’ as they are a part of the executive. The term ‘government’ also includes any department of government or any institution under its control. The Income Tax Department and the International Institute for Population Sciences could be cited as examples.
In R.D Shetty v. Airport Authority of India Justice P.N Bhagwati gave 5 Point test This is a test to determine whether a body is an agency or instrumentality of the state and goes as follows
- Financial resources of the State, where State is the chief funding source i.e. the entire share capital is held by the government.
- Deep and pervasive control of the State
- The functional character being Governmental in its essence, meaning thereby that its functions have public importance or are of a governmental character.
- A department of Government transferred to a corporation.
- Enjoys “monopoly status” which State conferred or is protected by it.
This was elucidated with the statement that the test is only illustrative and not conclusive in its nature and is to be approached with great care and caution. [1]
[1] https://www.drishtiias.com/daily-updates/daily-news-analysis/state-under-article-12-of-the-constitution
Other authorities within the definition of State
‘Local authorities’, as used in the definition, refers to municipalities, Panchayats or similar authorities that have the power to make laws & regulations and also enforce them. The expression ‘Other authorities’ could refer to any entity that exercises governmental or sovereign functions.
in Article 12 the expression ‘other authorities’ is used after mentioning a few of them, such as, the Government, Parliament of India, the Government and Legislature of each of the State and all local authorities. In University of Madras v. Santa Bai, the Madras High Court held that ‘other authorities’ could only mean authorities exercising governmental or sovereign functions. It cannot include persons, natural or juristic, such as, a university unless it is ‘maintained by the State’.
In Article 12 the bodies specifically named are the Government of the Union and the States, the Legislature of the Union and the States and local authorities. There is no common genus running through these named bodies nor can these bodies so have placed in one single category on any rational basis.
In Electricity Board, Rajasthan v. Mohan Lal, the Supreme Court held that the expression ‘other authorities’ is wide enough to include all authorities created by the Constitution or statute on whom powers are conferred by law. It is not necessary that the statutory authority should be engaged in performing governmental or sovereign function.
The extended Interpretation of the definition of the term ‘State’ is limited in its application only to Part III and Part IV and it does not extend to the other provisions of the Constitution, e.g., Article 309, 310, 311, which find a place in Part XIV therefore, an employee of a Statutory Corporation can claim the protection of Fundamental Rights but cannot seek the safeguards contained in Article 311 for the civil servants of the State.
The question as to when a body can be said to fall within the scope of the term “State” within the meaning of Article 12 was considered by a Constitution Bench of seven learned Judges of the S.C. in Pradeep Kumar Biswas v. Indian Institute of Chemical Biology. Referring to the different stages in the history of the development of the law by Judicial decisions on the subject and affirming the statement of the law made in Rajasthan S.E.B. v. Mohan Lal, the majority of five learned judges overruled Sabhajit Tewary v. Union of India, and held that the council of Scientific and Industrial Research, although a registered society, was a State within the meaning of Article 12.
Considering the test formulating in Ajay Hasia case, and holding that the tests so laid down, were not a rigid set of principles, so that if a body fell within anyone of them, it must, ex hypothesis, be considered to be a State within the meaning of Article 12, the majority ruled that 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 Government. Such control must be particular to the body in question and must be pervasive.
Not all Statutory Bodies can be termed as ‘State’.
Is Judiciary within the definition of State
The question whether the judiciary should be included within the definition of “state” in Article 12 arose for consideration of the Supreme Court in Naresh vs. State of Maharashtra (AIR 1967 SC 1) where it was held that even if a court is presumed to be within the expression state under Article 12, a writ under Article 32 cannot be issued to such court of competent jurisdiction against its judicial orders because such orders cannot be said to violate fundamental rights. The Indian judiciary it is said though not expressly mentioned in Article 12 can be included within the expression state since courts are set up by statute and exercise power conferred by law.
It is noticed however that the judiciary is averse to being considered state because it would hamper their “independent” character. They are sensitive to issues which directly come to bear upon their decision or discretion in matters brought before them. Whenever, a judge departees from a particular provision he defines the ‘field of exception’ and states ‘ the overriding principle’ on which his decision was based.
No judge passes an order which is not recorded in the minutes and a question of this kind is not dealt with by the judge as within his mere discretion as to what he considers expedient or convenient. A judge ordinarily decides controversies between the parties, in which controversies he does not figure, but occasion may arise collaterally where the matter may be between the judge and the fundamental rights of any person by reason of the judge’s action.
However, in Rupa Ashok Hurra v. Ashok Hurra the Apex Court reaffirmed and ruled that no judicial proceeding could be said to violate any of the Fundamental rights and that it is a settled position of law that superior courts of justice did not fall within the ambit of ‘state’ or ‘other authorities’ under Article 12.
This gave the rationale that a Superior Judicial body when acting “Judicially” would not fall under the definition of State but when it performs any administrative or similar functions e.g. conducting examination, it will fall under the definition of “state” and that remedy could be sought in that context only in case of violation of fundamental rights.
In this era of judicial activism, judicial legislation and wide-ranging capability to review matters the judiciary wields immense political power and since the Fundamental Rights in their creation were to be used against centres of power, it is high time that in appropriate matters the judiciary too is subject to the rigors of Part III of the constitution so that the highest constitutional ideals are realized.
With the economic liberalization in India and the globalization of the world’s economy, a general uncertainty is being entertained about the application and efficacy of Fundamental Rights due to the emergence of private sector undertakings and corporation both national and international.
The guarantee of Fundamental Rights under part III of the Constitution is essentially a device whereby the authority of an individual is protected from encroachment by those who have the power and capacity to do the same. The concentration of economic power in the hands of these corporations along with the governmental/ political support given to them have resulted in their encroaching upon and violating the Fundamental Rights of individuals and using their possessing these rights in the capacity of a private individual as an excuse or justification for the same.
Conclusion
The effect of these private entities being regarded as state or its instrumentality would be a considerable reduction in the actions of these organizations that adversely affect the Fundamental Rights of citizens as they will come under the scrutiny of courts and judicial review and limitations on their arbitrariness, irrationality and utter disregard for the rights of their employees as a consequence of their subjection to writ jurisdiction under Articles 32 and 226 of the Constitution of India.