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Facts: The petitioners in this case challenged the procedure of admission in the Regional Engineering College. The admission process was that they were two tests conducted one was a written exam and the other was a viva test. The viva test of the petitioners lasted only for 2 or 3 minutes where formal relating to their parentage, residence were and no questions relating to the subject. When the admissions were announced, the petitioners found that though they had obtained very good marks in the qualifying examination, they had not been able to secure admission to the college because the marks awarded to them at the viva voce examination were very low and candidates who had much less marks at the qualifying examination, had succeeded in obtaining very high marks at the viva voce examination and thereby managed to secure admission in preference to the petitioners. The petitioners thus filed a writ against the college and challenging the validity of the admissions on various grounds. One of the grounds for admission was that their right to equality under Article 14 of the constitution was violated.
Issue: The issue in the present case was whether college was a state and if it was state whether it violated Article 14 of the Constitution.
Analysis: With increasing Government commercial ventures and economic projects, the corporation has become an effective legal contrivance in the hands of the Government for carrying out its activities, for it is found that this legal facility of corporate instrument provides considerable flexibility and elasticity and facilitates proper and efficient management with professional skills and on business principles. For meeting this administrative need the corporation came into being as the third arm of the Government and over the years it has been increasingly utilized by the Government for setting up and running public enterprises and carrying out other public functions. The corporation even though is a distinct juristic entity with a corporate structure of its own and it carries on its functions on business principles with a certain amount of autonomy which is necessary as well as useful from the point of view of effective business management, but behind the formal ownership, the reality that the government still continues to have deeply pervasive control. It is really the Government that acts through the instrumentality or agency of the corporation and has the juristic veil of corporate personality for the purpose of convenience of management and administration. The features of a corporation may be adopted in order to free the Government from the inevitable constraints of red-tapism and slow motion but by doing so, the Government cannot be allowed to neglect the basic human rights. As this would lead to the government assigning almost every State business such as Post and Telegraph, Rail Road and Telephones, etc., in short every economic activity and thereby cheat the people of India out of the Fundamental Rights guaranteed to them.
A corporation may be created in one of two ways. It may be either established by statute or incorporated under a law such as the Companies Act 1956 or the Societies Registration Act 1860. Where a Corporation is wholly controlled by Government not only in its policy making but also in carrying out the functions entrusted to it by the law establishing it or by the Charter of its incorporation, there can be no doubt that it would be an instrumentality or agency of Government. Thus the court in the present case laid down the following test to determine whether the corporation comes within the ambit of other authorities under Article 12 of the constitution.
(1) If Government holds the entire share capital of the corporation it would go a long way towards indicating that the corporation is an instrumentality or agency of Government.
(2) Where the financial assistance of the State is so much as to meet 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 the 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 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 Government.
(6) Specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive of this inference of the corporation being an instrumentality or agency of Government.
The government stated what the memorandum and articles of association of the company should contain. The Memorandum of Association confers power on the Society to acquire and hold property in the name of the State Government, and the monies for running the college would be provided by the State and Central Governments. The rules made, amended, varied or rescinded for the conduct of the affairs of the Society from time to time needed the approval of the Government of Jammu and Kashmir State. Clause 7 of the Memorandum of Association states that in case the Society or the college is not functioning properly, the State Government will have the power to take over the administration and assets of the college with the prior approval of the Central Government. Clause 6 of the Memorandum of Association empowers the State Government to appoint one or more persons to review the working and progress of the Society, or the college and to hold inquiries into the affairs thereof and to make a report and on receipt of any such report, the State Government has power, with the approval of the Central Government, to take such action and issue such directions as it may consider necessary in respect of any of the matters dealt with in the report and the Society or the College. Thus as the Government of Kashmir satisfied all the six provisions of the test and had complete control over the working of the college, the society was the agency of the government.
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