Article 12 in a Privatized India

Sumanta Narayan Podder

The place of Article 12 in the Constitution of India is unique. Whereas it falls under Part III of the Constitution, i.e. within the Fundamental Rights, it embodies something different. It is because of this Article that we are able to claim our rights, be it fundamental, other constitutional, or any other legal rights actionable against any State authority in a court of law, viz. The Supreme Court and the High Courts. The statement of the Article, as enshrined in the Constitution, goes as follows:

“In this part, unless the context otherwise requires, 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”[i]

The statement of this Article since enshrined has gone through interpretation of a large spectrum by the Apex Court and other High Courts. The case laws are well known to the legal fraternity and hence their re-iteration in this passage would but only increase the volume of this article, which is not intended. Only mention can be made of the fact that the connotation “other authorities” in the Article has got wide ambit by the Judiciary through the years of its operation, and the qualifiers for an authority to become State and perform the duties of a public nature and thus having legal and justiciable obligations towards people, as well as legal personalities are well settled and clear enough to be listed[ii] as follows:

1. A body is a “State” when the entire share capital of the body is held by the Government, because in that case, the body would become an instrumentality of the Government;
2. A body is adjudged to be a “State” where the financial assistance given by the Government is so large so as to meet the entire expenditure of the body, thus the body is impregnated with governmental character;
3. The body enjoys monopoly status which is conferred or protected by the Government;
4. A deep and pervasive Governmental control affords an indication that the body is a state instrumentality;
5. The functions performed by the body are of public nature and importance and closely related to Government functions.

The above list is only indicative and not exhaustive. The main test to impart a “State” character to a body is not how the body is brought into existence, but why it has been brought into existence. The structure of the body does not matter – it may be statutory or non-statutory in nature, it may be set up by or under an Act of the Legislature or even by Administration. It does not matter whether the body had initially been founded by the Government or any other private entity. It does not matter what functions does the body discharge – it may be governmental, semi-governmental, educational, commercial, banking, social service etc. Once a body is characterized as “authority” under Art. 12, several important and significant consequences immediately follow, viz

1. The body becomes subject to the discipline of the Fundamental Rights, i.e. its actions and non-actions can be challenged with reference to the Fundamental Rights;
2. The body also becomes subject to the discipline of Administrative Law;
3. The body becomes subject to the Writ Jurisdiction of the Supreme Court under Art. 32 and that of the High Courts under Art. 226.

The framers of our Constitution did not have in their mind a concept of laissez fair type state while framing it, instead they had in their mind that India should be a Welfare State. This is clear from a conjoint reading of the Preamble and also the Directive Principles of State Policy as enshrined in Part IV of our Constitution. The working of the Welfare State was not conceived to be limited only to provide health, education, housing, sustenance etc. From the Preamble, it is evident that the Indian state should strive for securing justice, not only ‘political’, but also ‘social’ and ‘economical’. This vision is embedded in Art. 38(1) of our Constitution as,

“The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may social order in which justice, social, economic and political, shall inform all the institutions of the national life.”

Not only this broad provision, but also provisions enshrined in Arts. 38(2), 39, 41, 42, 43, 45, 46 and 47 of the Constitution India are the various other welfare functions the State is expected to discharge. All these together are called Directive Principles of State Policy. As summarized by Dr. P. Puneeth[iii],

“These require the State to minimize inequalities in income and endeavour to eliminate inequalities in status, facilities and opportunities amongst individuals as well as groups of people residing in different areas or engaged in different vocations. The State is also ordained to direct its policies towards securing adequate means of livelihood and distribution of material resources of the community so as best to subserve the common good; prevention of concentration of wealth and means of production to the common detriment; equal pay for equal work. The State is also under an obligation to prevent abuse of health and strength of the workers and tender age of the children. It shall strive to provide opportunities and facilities for the children to develop in a healthy manner and in conditions of freedom and dignity and protect them and to youth against exploitation and moral and material abandonment. Public welfare functions envisaged under the Constitution also include securing right to work, to education and to public assistance in cases of underserved want; to make provisions for early childhood care and education to the children below the age of six years; to raise the level of nutrition and the standard of living and to improve public health; to promote with special care educational and economic interests of the weaker sections of people.”

If we summarize all these, we get a classification of the principles of Group IV as:

1. Certain ideals, particularly economic, which, according to the framers of the Constitution, the State should strive for;
2. Certain directions to the Legislature and the Executive intended to show in what manner the State should exercise their legislative and executive powers;
3.  Certain rights of the citizens which shall not be enforceable by the courts like the Fundamental Rights, but which the State shall nevertheless aim at securing by regulation of its legislative and administrative policy.

In short, the Directives emphasize, in amplification of the Preamble, that the goal of the Indian polity is not laissez faire, but a welfare state where the State has a positive duty to ensure to its citizens social and economic justice and dignity of the individual. It would serve as an “Instrument of Instruction” upon all future Government, irrespective of their party creeds. In the words of Dr. Ambedkar,[iv]

“Though these Directives are not enforceable by the courts and if the Government of the day fails to carry out these objects no court can make the Government ensure them, yet these principles have been declared to be fundamental in the governance of the country, and a Government which rests on popular vote can hardly ignore them, while shaping a polity.”

These Directives are of wider import than the Fundamental Rights as envisaged in Part III of the Constitution, as Part III imposes a restriction on the activities of the State, and the Part IV ordains the State to carry out certain functions. Hence a conflict may arise between the two. But while the Fundamental Rights are enforceable by the courts and the courts are bound to declare as void any law that is inconsistent with any of the Fundamental Rights, the Directives are not so enforceable by the courts, and the courts cannot declare as void any law which is otherwise valid, on the ground that it contravenes any of the Directives. Hence, in case of any conflict between Part III and Part IV the former should prevail in the courts. An attempt to confer a primacy upon the Directives as against the Fundamental Rights has, however, been foiled by the majority of the Supreme Court in the Minerva Mills case[v].

            A consideration of the above shows that the State is in a constant obligation to give effect to the Directives. Here comes the point of the present era economic system that our country has adopted since 1991, i.e. New Economic Policy (NEP). The main facet of it was that India was marching towards creating a free market economic condition. The free markets require that the state recedes from the market and restricts its economic functions. The outcome of which is that the state should gradually, on its own pace, dependent on the societal conditions, free the market from its regulations. It is imperative that the State is to have an effective control over the market and/or economy to promote the public welfare schemes as envisioned in the Constitution. State control and regulation are sine qua non for the implementation of the Directives of the Constitution. But in the post-1991 era, the State has been gradually losing its grip over the economy. Privatization occurs in many modes, viz, disinvestment, PPP programmes, private financial initiatives and contractual activities in Governmental organizations and institutions. This is happening in India currently at an elevated pace. Lots of State-regulated and State-owned bodies have recently been privatized and de-regulated and dis-invested. Once in a body the financial stake of State becomes less than 51%, the applicability of Art. 12 ceases to operate in reference to that body. Hence also ceases the Judicial review of the actions and non-actions of that body, and eventually ceases the chance of getting relief for the violation of any Fundamental Rights of any stakeholder of that body, be any employee or other concerned persons. Hence the wider import of the term “State” is losing its spectrum of applicability by the action of the Government itself and the justiciable rights of the people are being threatened. When the State is increasingly adopting the measures of deregulation, disinvestment and denationalization, they are not only losing their regulatory powers, but also its redistributionist capability. Let us quote from three eminent personalities on this matter to further understand it clearly,

“The emergence of a transnational regime for the protection and promotion of foreign investment challenges directly the proposition that global capital has not tangible, institutional fabric. This rules regime cumulatively attempts to fashion a global tapestry of economic policy, property rights, and constitutionalism that institutionalizes the political project of neo-liberalism. This project advances the idea that the state should recede from the market, restrict its economic functions, and limit its redistributionist capacity. The paradox is that at a time when institutions of democracy are being reproduced globally, democracy is not to be trusted in economic matters.”[vi]

            Similar views were expressed by Upendra Baxi too,

“deregulation signifies not an end of the nation-state but an end to the redistributionist state”[vii]

Although NEP is not unconstitutional per se, seemingly there exists a clear conflict between the Directive Principles and hence more privatization means increasingly robbing of the justiciable rights of the masses by narrowing the import of the term “State” as originally conceived in the Constitution as well as various judicial interpretations of the term. Celebrated and judicially active Justice V. R. Krisna Iyer expressed his concerns thus,

“We have a new democracy run from afar be strong capitalist proprietors influencing the political process and humouring the glitterati and wining parties Right, Left and Centre through a monoculture of globalization, liberalization, marketization and privatization plus anti-socialism … Herein lies the contradiction between the Constitution and the elections held under the Constitution.”[viii]

In this context, Upendra Baxi again observes that,

“Without any amendment of the Preamble, it is not fully open to the proponents of ‘privatization’ to practice unbridled forms of it. Similarly, it is not open to advocate or practice ‘privatization’ without changing the text of Articles 38, 39 or 43-A. Pending such changes … ‘privatization’ ... is fraught with grave constitutional improprieties and even invalidity.”[ix]

Hence, it is clear that the scheme of constant privatization and denationalization as taken up by the present Government in every filed of economic activities not only poses a threat to the Constitutional mandates over the State, but also cripples the large mass of this country in a way that they will not be able to go to the courts to claim their Fundamental Rights as the authorities which will give rise to the actionable claim will be stripped of from its “State” character due to this privatization. Thus, the Government at the Centre is bypassing its Constitutional obligations in the guise of privatization and in the guise of non-justiciability of the Directive Principles, hence, surreptitiously evading Judicial Review of its activities.

Twenty years ago, a bench of Supreme Court in a case recorded its observation in a matter of privatization like this,

“…It is to be noted that in the meantime the socio-economic policy of the Government of India has changed … and the State is today distancing itself from commercial activities and concentrating on governance rather than on business. Therefore, the situation prevailing at the time of Sukhdev Singh is not in existence at least for the time being, hence, there seems to be no need to further expand the scope of ‘other authorities’ in Article 12 by judicial interpretation at least for the time being.”[x]

Now let us come to the present times. Last six months of nation-wide lockdown has taken a large toll on the working people (be it salaried class of wage-earners). Millions of people have lost their jobs without any future possibilities of re-employment. The financial health of our country is lurking and the current GDP is an all-time low. Experts are not at all optimistic about a near-future boosting of economy. In this situation, the Government at the Centre is aggressively advancing in line with its policy of privatization and denationalization as well as deregulation in almost all fields and opening up the Indian market towards the control of international capital and thus distancing itself from taking the measures of social welfare it ought to have adopted in times like this. The Central Legislature is not in a mood to listen to the popular opinions, rather, it is gradually diminishing the space for the same. In this context, if the Supreme Court does not come up with its solemn duty of protecting the Constitution by every means, and relies on its decision in Zee Telefilms Ltd. of 2000, the Constitutional provisions will definitely become farcical and there will be a sheer mockery of constitutional democracy. The earlier NDA Government, under Atal Bihari Vajpayee had appointed a commission on 22 February 2000 under the chairmanship of Manepalli Narayana Rao Venkatachalaiah, viz, The National Commission to Review the Working of the Constitution (NCRWC) for suggesting the possible amendments to the Constitution of India in this era of privatization and liberalization, and in its report of about two thousand pages submitted on 31^st March, 2002 this commission proposed some changes, and among its other recommendations, in the first recommendation, of para 3.5 it stated that,

“In Article 12 of the Constitution, the following Explanation should be added:

Explanation – In this Article, the expression ‘other authorities’ shall include any person in relation to such of its functions which are of a public nature”.

This recommendation, though not complete in itself or fully analytical of the situation, was at least an attempt to further widen the import of the term “State” as envisaged in Art. 12 of the Constitution. But since then the judiciary has not come up with a strong conviction to take up this issue seriously and change its previous position. Hence, the need of the hour is to expand the connotation of “State” to include such authorities which may ordinarily not be a State instrumentality under current interpretative regime, but perform public duty in essence, in order to enable the public to claim their rights if violated, vis a vis to pave a way to expand the horizon of Judicial Review. In short, the Apex Court is required to gradually shed off its adversarial role and adopt an inquisitorial role to protect the larger mass as well as the Constitution itself.

[The author is a student of LLM, residing at West Bengal]