Case ID: 4411

Judgment:
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 O.P. Sharma for the Appellant. P.R. Mridul	 B.P. Mridul	 B.P. 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. 40	00	000/ 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. P.B.R. 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. P.C.	 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 I.P.C. 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. P.C. [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 2(c) 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]