N Criminal Appeal No 520 of 1976
Appeal by Special Leave from the judgment and order dated the 17th September 1975 of the Delhi High Court in Criminal Misc
M 212 of 1974 D Mukherjee and OP Sharma for the Appellant
PR Mridul BP Mridul BP Maheshwari and Suresh Sethi for the Respondents
The Judgment of the Court was delivered by SEN J
This appeal by special leave from a judgment of the Delhi High Court upholding an order of the Metropolitan Magistrate Delhi raises a question of some public importance
The question is as to whether the appellant who is a member of the Indian Administrative Service and whose services were placed at the disposal of the Cooperative Store Ltd a society registered under the Bombay Cooperative Societies Act 1925 hereinafter called the Society was a public servant within the meaning of cl
Twelfth of section 21 of the Indian Penal Code 1860 for purposes of section 197 of the Code of Criminal Procedure 1973
The question arises in this way
The appellant is a member of the Indian Administrative Service
By notification No 27 942 Estt 1 dated 23rd April 1972 issued by the Government of India in the Ministry of Agriculture Department Agriculture the services of the appellant who was a Joint Commissioner State Liaison in that Ministry were placed at the disposal of the Department for his appointment as the General Manager Super Bazaar Connaught Place New Delhi with effect from April 7 1972 on which date he took over charge as General Manager
At the request of the Managing Committee of the Society the Government of India extended the period of his deputation for a further period of one year with effect from April 7 1973
On completion 867 of his period of deputation the appellant reverted as Joint Secretary in the Ministry of Agriculture
On October 10 1973 the Food Inspector purchased a sealed bottle of honey from the Super Bazaar at the INA Market
The Public Analyst s report showed the honey to be adulterated
On April 5 1974 the Municipal Corporation Delhi filed a complaint against the appellant and other officials of the Super Bazaar as also against the manufacturer of honey for having committed an offence punishable under section 7 read with section 16 of 
On being summoned by the Metropolitan Magistrate Delhi to appear before him as an accused the appellant raised a preliminary objection that the taking of cognizance of the alleged offence by the Magistrate was barred under section 197 of the Code of Criminal Procedure 1973 for want of sanction of the Central Government since the act complained of was nothing but an act done by him in the discharge of his duties as a public servant
The Metropolitan Magistrate Delhi by his order dated October 9 1974 rejected the objection holding that the appellant at the time of commission of the alleged offence was not a public servant within the meaning of cl
Twelfth of section 21 of the Indian Penal Code and therefore he was competent to take cognizance of the alleged offence
In coming to that conclusion the learned Magistrate held that the services of the appellant having been placed at the disposal of the Society he was in foreign service under FR 9 7 and therefore could not be regarded as a public servant within the meaning of cl
Twelfth of section 21 of the Indian Penal Code for two reasons namely a as the General Manager he was not an officer in the service or pay of the Government and b while functioning as General Manager he was not employed in connection with the affairs of the Union
On appeal the High Court confirmed the view of the learned Magistrate
The short question that falls for our determination in this appeal is whether a member of the Indian Administrative service whose services are placed at the disposal of an organisation which is neither a local authority nor a corporation established by or under a Central Provincial or State Act nor a Government Company by the Central Government or the Government of a State can be treated to be a public servant  within the meaning of cl
Twelfth of section 21 of the Indian Penal Code for purposes of section 197 of 868 the Code of Criminal Procedure 1973
The answer to the question turns on the construction of cl
Twelfth of section 21 of the Indian Penal Code 1860 and section 197 of the Code of Criminal Procedure 1973 which so far as they are relevant are as follows 21
The words public servant  denote a person falling under any of the descriptions hereinafter following namely Twelfth Every person a in the service or pay of the Government or remunerated by fees or commission for the performance of any public duty by the Government b in the service or pay of a local authority a corporation established by or under a Central Provincial or State Act or a Government company as defined in section 617 of the 
section 197 Prosecution of Judges and public servants
1 When any person who is or was a Judge or Magistrate or a public servant not removable from his office save by or with the sanction of the Government is accused of any offence alleged to have been committed by him while acting or purporting to act in the discharge of his official duty no Court shall take cognizance of such offence except with the previous sanction a in the case of a person who is employed or as the case may be was at the time of commission of the alleged offence employed in connection with the affairs of the Union of the Central Government In support of the appeal learned counsel for the appellant has urged two grounds
The first is that the chain of Departmental Stores known as Super Bazaar at Connaught Place New Delhi together with 12 other super bazaars in the metropolitan city of Delhi including the one at the INA market is nothing but a com 869 mercial activity of the Central Government and therefore the appellant was at the time of the commission of the alleged offence employed in connection with the affairs of the Union
That being so the prosecution could not be launched without sanction from the Central Government under section 197 of the Code of Criminal Procedure 1973
The second is that the Cooperative Store Limited which runs the super bazaars having been registered under section 10 of the Bombay Cooperative Societies Act 1925 was a body corporate by virtue of section 23 of that Act and therefore the appellant was a public servant within the meaning of cl
Twelfth of section 21 of the Indian Penal Code
It is said that although the appellant may not be covered by sub cl
a he falls within the ambit of sub cl
b of cl
Twelfth
We find it difficult to accept these submissions
Clause Twelfth of section 21 of the Indian Penal Code protects two classes of public servants viz a every person in the service or pay of the Government or remunerated by fees or commission for the performance of any public duty by the Government and b every person in the service or pay of a local authority a corporation established by or under a Central Provincial or State Act or a Government company as defined in section 617 of the 
The appellant does not answer any of these descriptions
During his period of deputation he was not an officer in the service or pay of the Government nor was he in the service of a local authority a corporation established by or under an Act or a Government company
It is however urged that the expression corporation  appearing in sub cl
b of cl
Twelfth of section 21 of the Indian Penal Code is wide enough to include not only a corporation established by or under a Central Provincial or State Act but also a body corporate
The submission proceeds on the basis of section 23 of the Bombay Cooperative Societies Act 1925 which reads 23
The registration of a society shall render it a body corporate by the name under which it is registered with perpetual succession and a common seal and with power to hold property to enter into contracts to institute and defend suits and other legal proceedings and to do all things necessary for the purposes of its constitution
Clause Twelfth does not use the words body corporate and the question is whether the expression corporation contained therein taken in collocation of the words established by or under a Central Provincial or State Act would bring within its sweep a cooperative 870 society
Indubitably the Cooperative Store Limited is not a corporation established by a Central or State Act
The crux of the matter is whether the word under  occurring in cl
Twelfth of section 21 of the Indian Penal Code makes a difference
Does the mere act of incorporation of a body or society under a Central or a State Act make it a corporation within the meaning of cl
Twelfth of section 21 In our opinion the expression corporation  must in the context mean a corporation created by the Legislature and not a body or society brought into existence by an act of a group of individuals
A cooperative society is therefore not a corporation established by or under an Act of the Central or State Legislature
A corporation is an artificial being created by law having a legal entity entirely separate and distinct from the individuals who compose it with the capacity of continuous existence and succession notwithstanding changes in its membership
In addition it possesses the capacity as such legal entity of taking holding and conveying property entering into contracts suing and being sued and exercising such other powers and privileges as may be conferred on it by the law of its creation just as a natural person may
The following definition of corporation was given by Chief Justice Marshall in the celebrated Dartmouth College case  A corporation is an artificial being invisible intangible and existing only in contemplation of law
Being the mere creature of law it possesses only these properties which the charter of its creation confers upon it either expressly or as incidental to its very existence
These are such as are supposed best calculated to effect the object for which it was created
Among the most important are immortality and if the expression may be allowed individuality proper ties by which a perpetual succession of many persons are considered as the same and may act as a single individual
They enable a corporation to manage its own affairs and to hold property without the perplexing intricacies the hazardous and endless necessity of perpetual conveyances for the purpose of transmitting it from hand to hand
It 871 is chiefly for the purpose of clothing bodies of men in A succession with these qualities and capacities that corporations were invented and are in use
By these means a perpetual succession of individuals are capable of acting for the promotion of the particular object like one immortal being
The term corporation  is therefore wide enough to include private corporations
But in the context of cl
Twelfth of section 21 of the Indian Penal Code the expression corporation  must be given a narrow legal connotation
Corporation in its widest sense may mean any association of individuals entitled to act as an individual
But that certainly is not the sense in which it is used here
Corporation established by or under an Act of Legislature can only mean a body corporate which owes its existence and not merely its corporate status to the Act
For example a Municipality a Zilla Parishad or a Gram Panchayat owes its existence and status to an Act of Legislature
on the other hand an association of persons constituting themselves into a Company under the or a Society under the Societies Registration Act owes its existence not to the Act of Legislature but to acts of parties though it may owe its status as a body corporate to an Act of Legislature
There is a distinction between a corporation established by or under an Act and a body incorporated under an Act
The distinction was brought out by this Court in Sukhdev Singh  ors
vs Bhagatram Sardar Singh Raghuvanshi  ors
It was observed A company incorporated under the is not created by the but comes into existence in accordance with the provisions of the Act
There is thus a well marked distinction between a body created by a statute and a body which after coming into existence is governed in accordance with the provisions of a statute
In Sabhajit Tewary vs Union of India and ors the question arose whether the Council of Scientific and Industrial Research which was a society registered under the Societies Registration Act was a statutory body
It was 872 urged that because the Council of Scientific and Industrial Research had government nominees as the President of the body and derived guidance and financial aid from the Government it was a statutory body
Repelling the contention the Court observed The Society does not have a statutory character like the Oil and Natural Gas Commission or the Life Insurance Corporation or Industrial Finance Corporation
It is a society incorporated in accordance with the provisions of the Societies Registration Act
The fact that the Prime Minister is the President or that the Government appoints nominees to the Governing Body or that the Government may terminate the membership will not establish anything more than the fact that the Government takes special care that the promotion guidance and co operation of scientific and industrial research the institution and financing of specific researches establishment or development and assistance to special institutions or departments of the existing institutions for scientific study of problems affecting particular industry in a trade the utilisation of the result of the researches conducted under the auspices of the Council towards the development of industries in the country are carried out in a responsible manner
Whatever has been said with regard to the Council of Scientific and Industrial Research which was a society registered under the Societies Registration Act equally applies to the Cooperative Store Limited which is a society registered under the Bombay Cooperative Societies Act 1925
It is not a statutory body because it is not created by a statute
It is a body created by an act of a group of individuals in accordance with the provisions of a statute
The Super Bazaar at Connaught Place together with its 12 branches in Delhi is not an instrumentality of the State
In a welfare State like ours there is greater participation by Government in various commercial activities
Some times the Government directly engages itself in such commercial activities by acquiring a monopoly in trade in the public interest
Or it may by an Act of Legislature establish statutory corporations like the State Trading Corporation Life Insurance Corporation of India the Industrial Finance Corporation the Oil and Natural Gas Commission etc
 or it may set up Government companies under section 617 of the  like the Hindustan Steel Limited etc
By no stretch of imagination could it be said that the appellant was employed in connection with the 873 affairs of the Union within the meaning of section 197 of the Code of Criminal Procedure 1973
The Super Bazaars are not owned by the Central Government
They are owned and managed by the Cooperative Store Limited
Pursuant to an agreement executed between the Cooperative Store Limited and the Union of India the Central Government has advanced a loan of Rs 4000000 to the Society for establishment and management of the Super Bazaars and the Central Government also holds more than 97 shares in the total share holding of the Society
Clause 6 of the Agreement provides That the incumbents of supervisory and other key posts including those of General Manager Deputy General Manager Finance Manager Asst
General Manager Purchase Manager Sales Manager and Accounts Manager by whatever other designation they may be known shall not be appointed or removed from their posts by the Debtor except with the prior approval of the Creditor in writing
The Super Bazaar at Connaught Place and at various other places are run by the Cooperative Store Limited under the control of the Ministry of Agriculture Department of Cooperation
The incumbents of supervisory and other key posts including that of the General Manager cannot be appointed or removed without the prior approval of the Central Government
The whole purpose of cl 6 of the Agreement in the matter of appointment of General Manager and other incumbents holding key posts is to safeguard interests of the Central Government
Legally speaking the Super Bazaars are owned and managed by the Society and not by the Central Government and therefore the appellant was not employed in connection with the affairs of the Union within the meaning of section 197 of the Code of Criminal Procedure 1973
Explanation to r 2 a of the All India Services Conduct Rules 1968 and r 2 c of the All India Services Discipline and Appeal Rules 1969 on which reliance was placed can be of no avail
Explanation to r 2 a enlarges the meaning of the expression serving in connection with the affairs of the Union or in connection with the affairs of the State
It provides that a member of the Service whose services are placed at the disposal of a company corporation or other organisation or a local authority by the Central Government or the Government of a State
shall
for the 874 purpose of those rules be deemed to be a member of the Service serving in connection with the affairs of the Union or in connection with the affairs of the State as the case may be notwithstanding that his salary is drawn from the sources other than the Consolidated Fund of India or the Consolidated Fund of that State
The legal fiction contained in Explanation to r 2 a is for a limited purpose
This is evident by the use of the words for purposes of these rules
Rule 2 c of the All India Services Discipline and Appeal Rules 1969 defines Government to mean i in the case of a member of the Service serving in connection with the affairs of a State or who is deputed for service in any company association or body of individuals whether incorporated or not which is wholly or substantially owned or controlled by the Government of a State or in a local authority set up by an Act of Legislature of a State the Government of that State and ii in any other case the Central Government
That again is for purposes of these rules
These provisions cannot be pressed into service for improving upon the language of cl
Twelfth of section 21 of the Indian Penal Code 1860
Before parting with the case we would like to advert to one aspect
It is common ground that the honey in question was sold in a sealed container bearing the manufacture s warranty as to quality as required under r 12 A of the Prevention of Adulteration Rules 1955
That being so the learned Magistrate shall first determine whether or not the appellant was protected under section 19 2 of the 
Subject to this observation the appeal fails and is dismissed
There shall be no order as to costs
PBR Appeal dismissed


Summary:
The services of the appellant a Member of Indian Administrative Service were placed at the disposal of the Co operative Store Ltd for being appointed as the General Manager of the Super Bazaars run by the Co operative Store
On a complaint being filed against the appellant for commission of alleged offence punishable under section 7 read with section 16 of the before the Metropolitan Magistrate Delhi the appellant contended that he was a public servant within the meaning of clause Twelfth of section 21 of the Penal Code that the act complained of was done by him in the discharge of his duties as a public servant and that since as required by section 197 Cr
PC previous sanction of the Central Government had not been obtained the court was not competent to take cognizance of the offence
The Magistrate rejected all these contentions
He held that the appellant could not be regarded as a public servant within the meaning of clause Twelfth of section 21 and that at the relevant time he was neither in the service or pay of the Government nor was he employed in connection with the affairs of the Union
The High Court on appeal upheld tho view of the Magistrate
Before this Court it was contended that the term corporation used in clause Twelfth of section 21 is wide enough to include not merely a statutory corporation but also a body corporate such as the Cooperative Stores 865 established under the State Act like the Bombay Cooperative Societies Act 1925 and that as General Manager he was employed in connection with the affairs of the Union by reason of the fact that the Central Government had advanced a huge loan to the Society for carrying on commercial activities
Dismissing the appeal  HELD The appellant does not answer any of the essential requirements of clause Twelfth of section 21 IPC He was neither an officer in the service or pay of the Government nor of a local authority a corporation established by or under an Act or a Government company
869 D Mere incorporation of a society under a Central or State Act does not make a body a corporation within the meaning of clause Twelfth of section 21
The expression corporation must in the context mean a corporation created by the legislature and not a body or society brought into existence by an act of a group of individuals
A cooperative society is therefore not a corporation established by or under an Act of the Central or State legislature
870 B Corporation in its widest sense may mean any association of individuals entitled to act as an individual
But that is not the sense in which it is used in clause Twelfth of section 21
There is a well marked distinction between a body created by a statute and a body which after coming into existence is governed in accordance with the provisions of a statute
A corporation established by or under an Act of legislature can only mean a body corporate which owes its existence and not merely its corporate status to the Act
An association of persons constituting themselves into a company under the Companies Act or a society under Societies
Registration Act owes its existence not to the Act of legislature but to acts of parties though it may owe its status as a body corporate to an Act of the legislature
871 C G In the instant case the Cooperative Society was a society registered under the Bombay Cooperative Societies Act
It is not a body created by a statute but a body created by an act of a group of individuals in accordance with the provisions of the statute
872 F Nor did the fact that the Central Government had advanced a huge loan to the Society and held major shares in the total shareholding of the Society make the Super Bazaars run by the Society an instrumentality of the State and the appellant employed in connection with the affairs of the Union within the meaning of section 197 Cr
PC 872 H 873 B The clause in the agreement advancing the loan to the Society which provided that the General Manager and other important incumbents of key posts shall not be appointed or removed from their posts by the Society except with the prior approval of the Government in writing was merely incorporated to safeguard the interests of the Central Government
Legally the Super Bazaars were owned and managed by the Society and not by the Central Government 873 E F Explanation to rule 2 a of the All India Services Conduct Rules 1968 which provides that a member of the services whose services were Placed at the 866 disposal of any organisation by the Central Government shall for the purposes of these rules be deemed to be a member of the service serving in connection with the affairs of the Union notwithstanding that his salary is drawn from sources other than the Consolidated Fund of India serves a limited purpose that is for the purposes of these Rules
Similarly rule 2c of the All India Services Discipline and Appeal Rules 1969 is for the purposes of these Rules
These two Rules could not be pressed into service for improving the language of clause Twelfth of section 21 of the Penal Code
873 G 874 D