P.S. Mishra, J.
1. These petitions under Art. 226 of the Constitution of India have in general questioned admission as members several persons in the Hyderabad Stock Exchange Limited. The Exchange, it is not in dispute, is a public limited company. It is, however, recognised by the Securities and Exchange Board of India (SEBI) as a Stock Exchange on its willingness to comply with the conditions under the Securities Contracts (Regulation) Act, 1956 and is thus subject to the control and regulations relating in general to its constitution and in particular, besides other items, to the admission into the Stock Exchange of various classes of members, the qualifications for membership and the exclusion, suspension, expulsion and re-admission of members therefrom or thereinto. The Exchange in its extraordinary General Body Meeting, on 24-8-1992, however, introduced an amendment to its Articles of Association and increased the maximum number of members from 200 to 300. In another General Body Meeting dated 8-10-1992, it has fixed entrance fee at Rs. 7,51,000/- for newmembers or as may be decided by the General Body. On 1-12-1992 it sent proposal of approval of the Screening Committee constituted by it to SEBI and also a proposal for a written test for approval. SEBI in its turn on 18-2-1993 approved the amendment, authorised it to charge admission fee of Rupees 6,00,000/- for new members and directed it to follow the guidelines of the Government of India and SEBI and the provisions of the Securities Contracts (Regulation) Act and the rules framed thereunder. However, on a fresh representation by the Exchange on 4-3-1993 SEBI agreed to Us proposal on 23-3-1993 for the admission fee for the new members of Rupees 7,51,000/-. Further correspondence finally resulted in a letter from SEBI, dated 17-6-1993, approving the procedure for selection of the members by a written examination and on such conditions as were introduced for the new members by the Exchange as directed by SEBI and in accordance with the guidelines in this behalf. The Exchange accordingly published notices on 2-7-1993, 5-7-1993 and 6-7-1993 inviting applications for membership in almost all leading newspapers. It also uent brochures containing informations regarding new membership to all the applicants' and intimated to them on 19-7-1993 the criteria i.e. educational qualifications, experience, financial net-worth; written test and interview and that the applicants would be selected only in accordance with the marks allotted to them, the maximum being 10 marks for eductional qualifications, experience, financial net-worth and written test and 20 marks for the interview.
2. There is no controversy before us that applications were placed before the Screening Committee and such applicants, who failed to qualify on the grounds that they did not satisfy the criteria of educational qualifications experience and finaneial net-worth, were informed accordingly and those who qualified were called for written test. In some cases, however, even after the written test when it was detected that the applicants were not qualified either in the experience criterion or in the financial net-worth, the Exchange informed them accordingly. Main controversy, however, has arisen on account of thealleged decision of the governing body of the Exchange, allegedly on the recommendations of the Screening Committee, to enter into moderation of the marks allotted in the written test. After the written test, it is alleged, there was some agitation and the Screening Committee recommended to the governing body and the governing body accepted the recommendation and resolved that all the examinees, who had been taken to the written test, would be awarded four points or 20 marks out of 100 irrespective whether they got less than 10 marks in the written test or more than 10 marks in the written test.
3. According to the Exchange, it had the approval of SEBI for allotting marks for each item of the criteria and the decision of moderation also received approval of SEBI. Petitioners, however, have contended that moderation has in fact resulted in awarding of grace marks to all the candidates who went through the written test and has resulted in a total manipulation of the selection of the members in the sense that those who fully qualified and fulfilled all the criteria and performed better than many who failed to qualify in the written test, have been denied the membership whereas persons who failed to qualify in the written test have been admitted as members by the Exchange. Petitioners have alleged that those who have wielded power in the Exchange had filled it with their relatives and nominees as candidates for membership and when they found that such persons were likely to be eliminated on account of their failing to qualify in the written test, they managed to introduce the so called moderation for benefitting them. The Exchange, however, has maintained that there has been good reasons for moderation and the same is a recognised mode of evaluating merit and to make up or compensate for any disadvantage suffered by the examinees in securing the marks on account of unreasonable and stiff question paper set up by the examiner or for having included a question or questions outside the syllabus in any question paper or for such other valid reasons considered good by the concerned University or the academic body. The Exchange has produced on the record the factthat all candidates were informed that written test would be held at the University College of Arts and Social Sciences, Osmania University, Hyderabad, between 2.30 p.m. and 4.30p.m. on 3-4-1994. Question papers which were prepared by I.I.M., Ahmedabad, were however, of objective type, 100 questions were required to be answered in 90 minutes only. This fact, however, that questions were objective type and were required to be answered in one and half hours only became known to the examinees and all others concerned when the seal of the question papers was opened and question papers were distributed to the examinees in the examination hall. The invigilator distributed the question papers only at 3.00 p.m. and at 4.30 p.m. answer papers were taken from the examinees. Immediately after the examination, according to the Exchange, the examinees protested against the short duration for answering 100 questions as well as against the high standard of the question paper when compared to the minimum educational qualifications prescribed for the membership. Since there was protest at the examination hall and in the premises of the Hyderabad Stock Exchange on 3-4-1994 and thereafter, on other days also affecting the trading activities of the Exchange, the Screening Committee held emergency meeting on 5-4-1994, took a decision of compensating the loss sustained by all the examinees uniformly by way of awarding moderation marks of 20 to everybody. The Screening Committee was satisfied that the question paper was of high, standard compared to the minimum- qualification prescribed, the cut in the duration of the test also affected the examinees and all candidates deserved the benefit of moderation. The governing body of the Exchange approved the same.
4. Writ Petition No. 7041 of 1994 which questioned the awarding of moderation marks of 20 to all the examinees uniformly along with other questions as to the membership, was dismissed in limine. Writ Appeal No. 516 of 1994 has been filed invoking this Court's power under Clause 15 of the Letters Patent. Writ Petitions; however, in which the ground against moderation marks is raised,have been ordered to be heard along with thewrit appeal.
5. The Securities Contracts (Regulation) Act (Act 42 of 1956) is enacted to prevent undesirable transactions in securities by regulating the business of dealing therein and by providing for certain other matters connected therewith. A 'Stock Exchange' is defined under Section 2(j) of the said Act to mean 'any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities.' 'Contract' has been defined under the said Act to mean -- 'a contract for or relating to the purchase or sale of securities'. 'Securities' under Section 2(h) included 'shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate'. Any Stock Exchange, Section 3 of the Act says, which is desirous of being recognised for the purposes of this Act may make an application in. the prescribed manner to the Central Government and every application shall contain such particulars as may be prescribed, and shall be accompanied by a copy of the bye-laws of the stock exchange for the regulation and control of contracts and also a copy of the rules relating in general to the constitution of the stock exchange and in particular to the governing body of such stock exchange, its constitution and powers of management and the manner in which its business is to be transacted, the powers and duties of the office bearers of the stock exchange, the admission, into the stock exchange of various classes of members, the qualifications for membership, and the exclu-sion, and re-admission of members therefrom or thereinto and the procedure for the registration of partnerships as members of the stock exchange in cases where the rules provide for such membership and the nomination and appointment of authorised representatives and clerks. Section 4 of the Act speaks of 'grant of recognition to stock exchanges' and states in sub-section (1) thereof that the Central Government if was satisfied, after making such enquiry as may be neces-sary in this behalf and after obtaining such further information, if any, as it required, that the rules and bye-laws of the stock exchange applying for registration were in conformity with such conditions as were prescribed with a view to ensure fair dealing and to protect investors, that the stock exchange was willing to comply with any otter conditions, including conditions as to the number of members, which the Central Government, after consultation with the governing body of the stock exchange and having regard to the area served by the stock exchange and its standing and the nature of the securities dealt with by it, impose for the purpose of carrying out the objects of the Act and that it would be in the interest of the trade and also in the public interest to grant recognition to the stock exchange, might grant recognition to the stock exchange subject to the conditions imposed upon it and in such form as might be prescribed. Sub-section (2) of this section reads as follows:
'The conditions which the Central Government may prescribe under clause (a) of sub-section (1) for the grant of recognition to the stock exchange may include, among other matters, conditions relating to-
(i) the qualifications for membership of stock exchanges;
(ii) the manner in which contracts shall be entered into and enforced as between members;
(iii) the representation of the Central Government on each of the stock exchanges by such number of persons not exceeding three as the Central Government may nominate in this behalf; and
(iv) the maintenance of accounts of members and their audit by chartered accountants whenever such audit is required by the Central Government.'
6. The Act also contains the definition of 'Rules' under Section 2(g) to mean -- 'with reference to the rules relating in general to the constitution and management of a stock exchange, to include in the case of a stock exchange which is an incorporated asso-ciation, its memorandum and articles of association. Section 8 of the Act provides as follows:
'Power of Central Government to direct Rules to be made or to make rules:
(1) Where, after consultation with the governing bodies of slock exchange generally or with the governing body of any stock exchange in particular, the Central Government is of opinion that it is necessary or expedient so to do, it may, by order in writing together with a statement of the reasons therefor, direct recognised stock exchanges generally or any recognised stock exchange in particular, as the case may be, to make any rules or to amend any rules already made in respect of all or any of the matters specified in sub-section (2) of Section 3 within a period of two months from the date of the order.
(2) If any recognised stock exchange fails or neglect to comply with any order made under sub-section(l) within the period specified therein, the Central Government may make the rules for, or amend the rules made by the recognised stock exchange, either in the form proposed in the order or with such modifications thereof as may be agreed to between the stock exchange and the Central Government.
(3) Where in pursuance of this section any rules have been made or amended, the rules so made or amended shall be published in the Gazette of India and also in the Official Gazette or Gazettes of the State or States in which the principal office or offices of the recognised stock exchange or exchanges is or are situate, and, on the publication thereof in the Gazette of India, the rules so made or amended shall, notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or in any other law for the time being in force, have effect as if they had been made or amended by the recognised stock exchange or stock exchanges, as the case may be.'
7. Besides the rules as the document of incorporation and amendments thereto as envisaged under the Act, a recognised stockexchange is authorised to make bye-laws by Section 9 of the Act, subject to the previous Approval of the Securities and Exchange Board of India for the regulation and control of contracts and in. particular without pre-judice to the generality of the power to provide that the contravention of any bye-laws would render the member concerned liable to one or more of the- following punishments, namely, (1) fine, (2) expulsion from membership, (3) suspension from membership for a specified period, and (4) any other penalty of a like nature not involving the payment of money. SEBI is empowered by Section 10 of the Act to make bye-laws for all or any of the matters specified in Section 9 or amend any bye-laws made by the stock exchange either on a request ,in writing received by it from the governing body of a recognised stock exchange or on its own motion if it is satisfied, after consultation with the governing body of the stock exchange, that it is necessary or expedient so to do and after recording its reasons for so doing. Before we proceed with the matter in controversy before us, we may note that reference to Securities and Exchange Board of India in the Regulations Act 42 of 1956 has been made by way of amendment by the Securities and Exchange Board of India Act, 1992 with effect from 30-1-1992. Act 15 of 1992 has envisaged the Exchange Board as a body to protect the interests of investors in securities and to promote the development of, and to regulate the securities market by such measure as it thinks fit. This Act has made provisions for registration of stock-brokers, sub-brokers, share transfer agents, etc., and it is conceded, the Exchange is one such person registered with SEBI for it is involved in the business of contract for or relating to the purchase or sale of securities.
8. The Central Government has made Rules in exercise of the powers conferred by Section 30 of Act 42 of 1956 which included qualifications for membership of a recognised stock exchange. Rule 8 thereof reads as follows:
'8. Qualifications for membership of a recognised stock exchange:
The rules relating to admission of membersof a stock exchange seeking recognition shall inter alia provide that:
(1) No person shall be eligible to be electedas a member if-
(a) he is less than 21 years of age;
(b) he is not a citizen of India;
Provided that the governing body may in suitable cases relax this condition with the prior approval of the Central Government;
(c) he has been adjudged bankrupt or areceiving order in bankruptcy has been madeagainst him or he has been proved to be|insolvent even though he has obtained his.final discharge;
(d) he has compounded with his creditors unless he has paid sixteen annas in the rupee;
(e) he has been convicted of an offence involving fraud or dishonesty;
(f) he is engaged as principal or employee in any business other than that of securities except as a broker or agent not involving any personal financial liability unless he undertakes on admission id severe his connection with such business:
Provided that the Central Government may, for reasons sufficient in the opinion of the said Government, permit a recognised stock exchange to suspend the enforcement of this clause for a specified period on condition that the applicant is not associated with or is a member of or subscriber to or shareholder or debenture holder in or connected through a partner or employee with any other organisation, institution, association, company or corporation in India where forward business of any kind whether in goods or commodities or otherwise is carried on or is not engaged as a principal or employee in any such business;
(g) ..... (omitted)
(h) he has been at any time expelled or declared a defaulter by any other stock exchange;
(i) he has been previously refused admission to membership unless a period of oneyear has elapsed since the date of such rejection.
(2) No person eligible for admission as a member under sub-rule (1) shall be admitted as a member unless:
(a) he has worked for not less than two years as a partner with, or as an authorised assistant or authorised clerk or remisier or apprentice to, a member; or
(b) he agrees to work for a minimum period of two years as a partner or representative member with another member and to enter into bargains on the floor of the stock exchange and not in his own name but in the name of such other member; or
(c) he succeeds to the established business of a deceased or retiring member who is his father, uncle, brother or any other person Who is, in the opinion of the governing body, a close relative:
Provided that the rules of the stock exchange may authorise the governing body to waive compliance with any of the foregoing conditions if the person seeking admission is in respect of means, position, integrity, knowledge and experience of business in securities, considered by the governing body to be otherwise qualified for membership.
(3) No person who is a member at the time of application for recognition or subsequently admitted as a member shall continue as such if-
(a) he ceases to be a citizen of India:
Provided that nothing herein shall affect those who are not citizens of India but who were members at the time of such application or were admitted subsequently under the provisions of clause (b) of sub-rule (1) of this rule, subject to their complying with all other requirements of this rule;
(b) he is adjudged bankrupt or a receiving order in bankruptcy is made against him or he is proved to be insolvent;
(c) he is convicted of an offence involving fraud or dishonesty;
(e)..... (omitted) (f) he engages either as principal or em-ployee in any business other than that of securities except as a broker qr agent not involving any personal financial liability, provided that-
. (i) the governing body may, for reasons, tobe recorded in writing, permit a member toengage himself as principal or employee inany such business, if the member in questionceases to carry on business on the stock exchange either as an individual pr as apartner in a firm,
(ii) in the case of those members who were under the rules in force at the time of such application permitted to engage in any such business and were actually so engaged on the date of such application, a period of three years from the date of the grant of recognition shall be allowed for severing their connection with any such business,
(iii) nothing herein shall affect members of-a recognised stock exchange, permitted Under the proviso to clause (f) of sub-rule(l) to suspend the enforcement of the aforesaid clause, for so long as such suspension is effective, except that no member of such exchange shall engage in forward business of any kind whether in goods or commodities or otherwise and, if actually so engaged on the date of such application, he shall severe his connection with any such business within a period of three years from the date of the grant of recognition.
(4) A company as defined in the Companies Act, !956 (1 of 1956) shall be eligible to be elected as a member of a stock exchange if-
(i) such company is formed in compliance with the provisions of Section 322 of the said Act,
(ii) a majority of the directors of such company are shareholders of such company and also members of that stock exchange; and
(iii) the directors of such company, who are members of that stock exchange, have ulti-mate liability in such company:
Provided that where the Central Government makes a recommendation in this regard, the governing body of a stock exchange shall, in relaxation, of the requirements of this clause, admit as member the following corporations, companies or institutions, namely-
(a) the Industrial Finance Corporation, established under the Industrial Finance Corporation Act, 1948 (15 of 1948);
(b) the Industrial Development Bank of India, established under the Industrial Development Bank Act, 1964 (18 of 1964);
(c) the Life Insurance Corporation of India, established under the Life Insurance Corporation Act, 1956 (31 of 1956);
(d) the General Insurance Corporation of India constituted under the General Insurance Corporation (Nationalisation) Act, 1972 (57 of 1972);
(e) the Unit Trust of India, establishedunder the Unit Trust of India Act, 1963 (52 of1963);
(f) the Industrial Credit and Investment Corporation of India, a company registered under the Companies Act, 1956 (1 of 1956);
(g) the subsidiaries of any of the Corporations or companies specified in (a) to (f) and any subsidiary of the State Bank of India or any nationalised bank set up for providing merchant banking services, buying and selling securities and other similar activities.
(4A) A company as defined in the Companies Act, 1956 (I of 1956), shall also be eligible to be elected as a member of a Stock Exchange if-
(i) such company is formed in compliance with the provisions of Section 12 of the said Act;
(ii) such company undertakes to comply with such financial requirements and norms as may be specified by the Securities and Exchange Board of India for the registration of such company under sub-section (1) of Section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992); .
(iv) the directors of the company are not disqualified for being members of a stock exchange under clause (1) except sub-clause (b) and sub-clause (f) thereof or clause (3) (except sub-clause (a) and sub-clause (f) thereof) and the Director of the company had not held the offices of the Director or any company which had been a member of the stpck exchange and had been declared defaulter or expelled by the stock exchange; and
(v) not less than two directors of the company are persons who possess a minimum two years' experience--(a) in dealing in securities; or
(b) as portfolio managers; or
(c) as investment consultants.
(5) Where any member of a stock exchange is a firm, the provisions of sub-rules(1), (3) and (4), shall, so far as they can, apply to the admission or continuation of any partner in such firm.'
9. When the Exchange got approval of its proposal to increase the number of members, it seems SEBI directed it to enroll only such persons as members who qualified for being admitted as such a member and directed the Exchange to follow the procedure of inviting applications for the membership from persons fulfilling the following requirements:
Minimum Educational Qualification: Should have passed 10 + 2 or 12th Standard or equivalent examination.
Experience: Should have worked for not less than two years as an Authorised Assistant or Authorised Clerk or apprentice to a member of a recognised Exchange and duly registered with the concerned Exchange or persons having experience in activities relating to securities market e.g., sub-broker, investment advisor, corporate analyst or experience in a Merchant Banking concern or finance department of a company or in an audit firm.
Age: (a) should have completed 21 years ofage as on 30-6-1993;
(b) Should not have completed 60 years as on 1-7-1993.
Admission Fee: Admission fees of Rupees 7,51,000/- is payable of which a sum of Rs.50,000/- should be deposited with the exchange along with the application for membership by means of demand draft drawn in favour of The Hyderabad Stock Exchange Limited and the balance amount in the case of successful applicants shall be payable on selection in three instalments. If the applicant is not admitted to membership, the amount will be refunded without interest.
Security Deposit: The successful applicants shall be required To pay Security Deposit as decided by the Board from time to time and abide by Capital Adequacy Norms as prescribed by SEBI from time to time.
Minimum Networth: The candidate should have a minimum networth of Rs. 13.5 lakhs, out of which minimum liquid asset should be Rs. 5 lakhs. For the consideration of net-worth, the fixed and liquid assets of spouse and minor children shall also be considered.
Selection Critaria: Apart from the above criteria, a written lest and interview will be conducted for selection.
10. To make, it seems, the above rational and with a view to have a reasonable basis for eliminating such applicants who appear to possess the minimum educational qualifications, experience or to fulfill other conditions, a formula of fixing marks at a uniform level for each criteria, except for interview for which 20 marks were reserved, SEBI and the Exchange allotted ten as the minimum to qualify for the interview and the selection including for the written test. Although there is some argument before us that a person possessing the minimum of the wealth making him or her fit to be admitted as a member of the Exchange can be found to be more suitable for the purpose of the business of the Exchange than one who is very rich but not possessed of the requisite calibre, we do not propose to detain ourselves to deal with this and other similar arguments before us exceptobserving that what is contemplated for thepurposes of security and which in somerespects appear to go beyond the rules ofeligibility or ineligibility for being admitted asa member of the Exchange, cannot be calledwholly inadmissible or uncalled for, for thepurposes of scrutiny of the candidates formembership of the Exchange.
11. In Writ Petition No. 6591 of 1994 a challenge is drawn to SEBI to justify how it can issue any directions to the Exchange and it is urged that the power under the Securities Contracts (Regulation) Act in this behalf is the reserve of the Central Government and not of SEBI. Our attention has been drawn to the rules forming part of the articles of association of the Exchange which give discretion to the governing body of the Exchange to admit members and also provide for the procedure for admitting new members. It is contended that unlessithe rules of the Exchange are amended as contemplated under Section 8 of the Act aforequoled, any restriction of being qualified in accordance with the criteria laid down by SEBI is illegal We have good reasons, however, to overlook this argument and proceed to dispose of the case on other points, as it is not a case of the rules of the Exchange being amended by the guidelines issued by SEBI but of the Exchange being called upon by SEBI to conform to the bye-laws and conditions which are intended to ensure fair dealing to the investors and to protect them. It is imperative, as we have seen, that no dealing in securities is permissible except under and in accordance with the conditions of a certificate of registration obtained from SEBI in accordance with the Regulations made under Act 15 of 1992. The Exchange, although a public limited company, is one such person which has obtained the certificate of registration from SEBI and thus it is bound to function in accordance with the Regulations made under Act 15 of 1992. Section 11 of this Act (15 of 1992) gives to SEBI power to regulate the working of such a person who is dealing in securities and Section 11B, which has been introduced by an amendment Act of 1995, gives to SEBI power to issue directions in the interest of investors, or orderly developmentof securities market, or to prevent the affairs of any intermediary or other person, or to secure the proper management of any such intermediary or person. In any case, since the Exchange has made no exception to the directions and. guidelines as given to it by SEBI, those who are outside of the Exchange and are aspiring to become members can have no right to seek interference of the Court in any dealing between the Exchange and SEBI. It is, therefore, a case, in our opinion, in which the only matter that this Court should attend to should be relating to the eligibility of the applicants under the notices issued by the Exchange inviting applications and whether in scrutinising the applications or eliminating applicants the Exchange has committed any illegality or violated any of the rights of the applicants.
12. Learned counsel for the Exchange, however, has urged rather forcefully that the Exchange being a body incorporated under the Companies Act and so being not a State under Art. 12 of the Constitution of India, is not amenable to the writ jurisdiction of this Court. The appellant and the writ petitioners who have sought interference of the Court in the selection of the members by the respondent -- Exchange, have raised a private dispute of a sort. The Exchange is neither a statutory body nor an instrumentality or agent of a State, nor has any public duty to perform in admitting members to itself.
13. Part III of the Constitution of India contains Art. 12 which defines 'the State' to include the Government and Parliament of India and the Government and the Legislature of each of th& States and all local or other authorities within the territory of India or under the control of the Government of India. What started in 1960s almost as a dissenting voice in a Kerala five Judge Bench judgment in V. Punnan Thomas v. State of Kerala, : AIR1969Ker81 received the sanction of the Supreme Court as the law of the land in Ramana v. I.A. Authority of India, : (1979)IILLJ217SC . The Supreme Court in this judgment has pointed out (Para 14 of AIR):
'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. But ordinarily where a Corporation is established by statute, it is autonomous in its working subject only to a provision, often times made, that it shall be bound by any directions that may be issued from time to time by Government in respect of policy matters. So also a Corporation incorporated under law is managed by a Board of Directors or Committee of management in accordance with the provisions of the statute under which it is incorporated. When does such a Corporation become an instrumentality or agency of Government? Is the holding of the entire share capital of the Corporation by Government enough or is it necessary that in addition, there should be a certain amount of direct control exercised by Government and if so, what should be the nature of such control? Should the functions which the Corporation is charged to carry out possess any particular characterstic or feature, or is the nature of the functions immaterial?'
The Supreme Court has said as follows (at p. 1639, Para 14 of AIR):
'Now, one thing is clear that if the entire share capital of the Corporation is held by the Government, it would go a long way towards indicating that the Corporation is an instrumentality or agency of Government. But, as is. quite often the case, a Corporation established by statute may have no shares or shareholders, in which case it would be a relevant factor to consider whether the administration is in the hands, of a Board of Directors appointed by Government, though this consideration also may not be determina-live, because even where the Directors areappointed by Government, they may becompletely free from governmental control inthe discharge of their functions. What thenare the tests to determine whether a Copo-ration established by statute or incorporatedunder law is an instrumentality or agency ofGovernment? It is not possible to formulatean all -- inclusive or exhaustive test which,would adequately answer this question. Thereis no cut and dried formula which wouldprovide the correct division of Corporationsinto those which are instrumentalities oragencies of Government and those which arenot.'
The Supreme Court in this judgment has proceeded to consider various factors such as whether the operation of the Corporation is an important public function, and concluded (para 19 of AIR):
'It will thus be seen that there are several factors which may have to be considered in determining whether a Corporation is an agency or instrumentality of Government. We have referred to some of these factors and they may be summarised as under: Whether there is any financial assistance given by the State, and if so, what is the magnitude of such assistance whether there is any other form of assistance, given by the State, and if so, whether it is of the usual kind or it is extraordinary, whether there is any control of the management and policies of the Corporation by the State and what is the nature and extent of such control, whether the Corporation enjoys State conferred or State protected monopoly status and whether the functions carried out by the Corporation are public functions closely related to governmental functions. This particularisation of relevant factors is, however, not exhaustive and by its very nature it cannot be because with increasing assumption of new tasks, growing complexities of management and administration and the necessity of continuing adjustment in relations between the Corporation and Government calling for flexibility, adaptability and innovative skills, it is not possible to make an exhaustiveenumeration of the tests which would invariably and in all cases provide an unfailing answer to the question whether a Corporation is governmental instrumentality or agency. More over even amongst these factors which we have described, no one single factor will yield a satisfactory answer to the question and the court will have to consider the cumulative effect of these various factors and arrive at its decision on the basis of a particularised inquiry into the facts and. circumstances of each Case. 'The dispositive question in any State action case', as pointed out by Dougles, J., in Jackson v. Metropolitan Edison Co., (1974) 419 US 345 (supra) is not whether any single fact or relationship presents a sufficient degree of State involvement, but rather whether the aggregate of all relevant factors compels a finding of State responsibility'. It is not enough to examine seriatim each of the factors upon which a Corporation is claimed to be an instrumentality or agency of Government and to dismiss each individually as being insufficient to support a finding to that effect. It is the aggregate or cumulative effect of all the relevant factors that is controlling.'
14. This judgment of the Supreme Court is an authority and the law stated in it, which has not been diluted, is that where a Corporation is an instrumentality or agency of Government, it would, in the exercise of its power or discretion, be subject to the same constitutional or public law limitations as Government. The rule inhibiting arbitrary action by Government must apply equally where such Corporation is dealing with the public, whether by , jy of giving jobs or entering into contracts or otherwise and it cannot act arbitrarily and enter into relationship with any person it likes, at its sweet will, but its action must be in conformity with some principle which meets the test of reason and relevance.
15. Dealing with a case of an Engineering College under the management of a Society registered under the Jammu and Kashmir Registration of Societies Act, 1898 and the Memorandum thereof and referring particularly to one of the clauses of the Memo-randum of Association Which provided for making rules for the conduct of the affairs of the Society and to add, to amend, vary or rescind them from time to time with the approval of the Government of Jammu and Kashmir State and the Central Government and such other provisions which appear to subject the Society to the directions and control of the State Government and the Central Government, the Supreme Court in Ajay Hasia v. Khalid Mujib, : (1981)ILLJ103SC has said (at p. 492 para 7):
'Where constitutional fundamentals vital to the maintenance to human rights are at stake, functional realism and not facial cosmetics must be the diagnostic tooi, for constitutional law must seek the substance and not the form.'
The Supreme Court in this judgment has also pointed out (at p 493):
'To use the corporate methodology is not to liberate the Government from its basic obligation to respect the fundamental rights and hot to override them. The mantle 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 play traunt with the basic human rights',
and concluded (para 11):
'The inquiry has to be not as to how the juristic person is born but why it has been brought into existence. The Corporation may be a statutory Corporation created by a statute or it may be a Government Company or a Company formed under the Companies Act', 1956 or it may be a Society registered under the Societies Registration Act, 1860 or any other similar statute. Whatever be its genetical origin it would be an 'authority' within the meaning of Art. 12 if it is an instrumentality of agency of the Government and that would have to be decided on a proper assessment of the facts in the light of the relevant factors. The concept of instrumentality or agency of the Government is not limited to a Corporation created by a statute but is equally applicable to a company orsociety and in a given case it would have to be decided on a, consideration of the relevant factors whether the company or the society is an instrumentality or agency of the Government so as to come within the meaning of the expression 'authority' in Art. 12.''
The Supreme Court has added (Para 12):
It is also necessary to add that merely because a juristic entity may be an authority and therefore 'State' within the meaning of Art. 12 it may not be elevated to the position of 'State' for the purpose of Arts. 209,310 and 311 which find a place in Part XIV. The definition of 'State' in Art. 12 which includes an 'authority' within the territory of India or under the control of the Government of India is not limited in its application only to Part-III and by virtue of Art. 36, to Part IV, it does not extend to the other provisions of the Constitution and hence a juristic entity which may be 'State' for the purpose of Parts-Ill and IV would not be so for the purpose of Part-XIV or any other provision of the Constitution.'
16. We do not propose to add the above several other judgments of the Supreme Court on the subject, but before we refer to a very important aspect of the law with reference to the power of this Court under Art. 226 of the Constitution of India and some leading judgments of the Courts, including the Supreme Court, we may point out that 'State' as defined under Art. 12 of the Constitution of India alone is not covered by the expansive jurisdiction of the Court under Art. 226 of the Constitution. Article 226 reads:
'..... every High Court shall have powerthroughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases, any Government, within those territories directors, orders or writs.....'
17. The use of the expression 'any person or authority' and including in the expression 'authority' in appropriate cases 'any Government' indicates the expansion of the power of the Court and that the expression 'all local or other authorities within theterritory of India' in Art. 12 of the Constitution is an expression that may be found induded in the expression 'authority' under Art. 226, but is not the same as the 'authority' in the latter provision which is more expansive and wider in reach and purport.
18. In Shri Anadi Mukta Sadguru S.M.V.S.J.M.S. Trust v. V.R. Rudani, AIR 1989 'SC 1607 the Supreme Court has dealt with a case of a Science College at Ahmeda-bad, which was being run by a Trust and has temporary affiliation to the Gujarat University under the Gujarat University Act, 1949, which, of course, later received permanent affiliation as amended by Gujarat Act VI of 1973. The University teachers and those employed in the affiliated colleges were paid in the pay scale recommended by the University Grants Commission. At one stage there was some dispute between the University area teachers Association and the University and the implementation of certain pay scales. That dispute by agreement of parties was referred to the Chancellor of the University for decision. The Chancellor gave his award holding that the revised pay scales should be applicable to all irrespective of the employment under the University and affiliated college. The State Government accepted the award of the Chancellor and issued directions to all affiliated colleges to pay their teachers in terms thereof. The trustees challenged the Government's directive and approached the University to terminate the services of the teachers who were entitled to the revised scale of pay on the ground that they were surplus. The Vice-Chancellor, however, refused the request of the trustees. The trustees then decided to close down the college and -surrendered the affiliation of the college to the University. Teachers moved the High Court. The trustees resisted the prayer on the grounds, inter alia: (I) the Trust is not a statutory body and is not subject to the writ jurisdiction of the High Court; (2) the resolution of the University directing payment to teachers in the revised pay scales was not binding on the trust; (3) the University had no power to burden the trust with additional financial liability by retrospectively revising the pay scales; (4) the claim for gratuity byretrenched teachers was untenable; and (5)Ordinance 120E prescribing closure compensation was ultra vires of the powers of theSyndicate.
19. The High Court rejected the above submissions and accepted the writ petitions. The trustees moved the Supreme Court. The Supreme Court has in the said judgment considered the question of maintainability of the writ petition under Art. 226 of the Constitution in these words : (1989)IILLJ324SC
'The essence of the attack on the maintainability of the writ petition under Art. 226 may now be examined. It is argued that the management of the college being a trust registered- under the Public Trusts Act is not amenable to the writ jurisdiction of the High Court. The contention in other words is that the trust is a private institution against which no writ of mandamus can be issued. In support of the contention, the counsel relied upon two decisions of this Court: (a) Executive Committee of Vaish Degree College, Shamli v. Lakshmi Narain, (1976) 2 SCR 1006 : AIR 1976 SC 888 and (b) Deepak Kumar Biswas v. Director of Public Instruction : (1987)ILLJ516SC . In the first of the two cases, the respondent institution was a Degree College managed by a registered co-operative society. A suit was filed against the college by the dismissed principal for reinstatement. It was contended that the Executive Committee of the college which was registered under the Co-operative Societies Act and Affiliated to the Agra University (and subsequently to Meerut University) was a statutory body. The importance of this contention lies in the fact that in such a case, reinstatement could be ordered if the dismissal is in violation of statutory obligation. But this Court refused to accept the contention. It was observed that the management of the college was not a statutory body since not created by or under a statute. It was emphasised that an institution which adopts certain statutory provisions will not become a statutory body and the dismissed employee cannot enforce a contract ofpersonal service against a non-statutory body.
The decision in Vaish Degree College was followed in Deepak Kumar Biswas case. There again a dismissed Lecturer of a private college was seeking reinstatement in service. The Court refuse to grant the relief although it was found that the dismissal was wrongful. This Court instead granted substantial monetary benefits to the lecturer. This appears to be the preponderant judicial opinion because of the common law principle that a service Contract cannot be specifically enforced.
But here the facts are quite differerit and, therefore, we need not go thus far. There is no plea for specific performance of contractual service. The respondents are not seeking a declaration that they be continued in service. They are not asking for mandamus to put them back into the college. They are claiming only the terminal benefits and arrears of salary payable to them. The question is whether the trust can be compelled to pay by a writ of Mandamus?
If the rights are purely of a private character no mandamus can issue. If the management of the college is purely a private body with no public duty mandamus will not lie. These are two exceptions to Mandamus. But once these are absent and when the party has no other equally convenient remedy, mandamus cannot be denied. It has to be appreciated that the appellant-trust was managing the affiliated college to which public money is paid as Government aid. Public money paid as Government aid plays a major role in the control, maintenance and working of educational institutions. The aided institutions like Government institutions discharge public function by way of imparting education to students. They are subject to the rules and regulations of the affiliating University. Their activities are closely supervised by the University authorities. Employment in such institutions, therefore, is not devoid of any public character (See The 'Evolving Indian Administrative Law by M.P. Jain (1983) p 266). So are the service conditions of the academic staff. When the University takes a decision regard-ing their pay scales, it will be binding on the management. The service conditions of the academic staff aje, therefore, not purely of a private character. It has super-added protection by University decisions creating a legal right-duty relationship between the staff and the management. When there is existence of this' relationship, mandamus cannot be re-fused to the aggrieved party.
The law relating to mandamus has made the most spectacular advance. It may be recalled that the remedy by prerogative writs in England started with very limited scope and suffered from many procedural disadvantages. To overcome the difficulties, Lord Gardiner (the Lord Chancellor) in pursuance of Section 3(l)(e) of the Law Commission Act, 1965, requested the law Commission to review the existing remedies for the judicial control of administrative acts and commissions with a view to evolving a simpler and more effective procedure. The Law Commission made their report in March, 1976 (Law Com No. 73) it was implemented by Rules of Court (Order 53) in 1977 and given statutory force in 198! by Section 31 of the Supreme Court Act, 1981. It combined all the former remedies into one proceeding called judicial review. Lord Denning explains the scope of this 'Judicial review':
'At one stroke the courts could grant whatever relief was appropriate. Not only certiorari and mandamus, but also declaration and injunction. Even damages. The procedure was much more simple and expeditious. Just a summons instead of a writ. No formal pleadings. The evidence was given by affidavit. As a rule no cross-examination, no discovery, and so forth. But there were important safeguards. In particular, in order to qualify, the applicant had to get the leave of a judge.
The statute is phrased in flexible terms. It gives scope for development. It uses the words 'having regard to'. Those words are very indefinite. The result is that the courts are not bound hand and foot by the previous law. They are to 'have regard to' it. So the previous law as to who are -- and who are not -- public authorities, is not absolutely binding. Nor isthe previous law as to this matters in respect of which relief may be granted. This means that the judges can develop the public law as they think best. That they have done and are doing.' (See --- The Closing Chapter by Rt. Hon. Lord Denning p. 122)
There, however, the prerogative writ of mandamus confined only to public authorities to compel performance of public duty. The 'public authority' for them means everybody which is created by statute -- and whose powers and duties are defined by statute. So Government departments, local authorities, police authorities, and statutory undertakings and corporations, are all 'public authorities'. But there is no such limitation for our High Courts to issue the writ 'in the nature of mandamus'. Article 226 confers wide powers on the High Courts to issue writs in the nature of prerogative writs. This is a striking departure from the English law. Under Article 226, writs can be issued to 'any person or authority'. It can be issued 'for the enforcement of any of the fundamental rights and for any other purpose.'
Article 226 reads:
'226. Power of High Courts to issue certain writs.-- (1) Notwithstanding anything in Art. 32, every High Court shall have power throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority including in appropriate cases, any Government, within those territories directions, orders or writs, including (writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari) or any of them for the enforcement of any of the rights conferred by Part III and for any other purpose.
xxxx xxxx xxxx xxxx xxxx The scope of this article has been explained by Subba Rao, J., in Dwarkanath v. Income-tax Officer, : 57ITR349(SC) ,
This article is couched in comprehensive phraseology and it ex facie confers a wide power on the High Courts to reach injustice wherever it is found. The Constitution designedly used a wide language in describing the nature of the power, the purpose for whichand the person or authority against whom it can be exercised. It can issue writs in the nature of prerogative writs as understood in England; but the use of the expression 'nature', for the said expression doss not equate the writs that can be issued in India with those in England, but only draws an analogy from them. That apart, High Courts can also issue directions, orders or writs other than the prerogative writs. It enables the High Courts to mould the reliefs to meet the peculiar and complicated requirements of this country. Any attempt to equate the scope of the power of the High Court under Art. 226 of the Constitution with that of the English Courts to issue prerogative writs is to introduce the unnecessary procedural restrictions grown over the years in a comparatively small country like England with a unitary form of Government into a vast country like India functioning under a federal structure. Such a construction defeats the purpose of the article itself.'
The term 'authority' used in Art. 226, in the context, must receive a liberal meaning unlike the term in Art. 12. Article 12 is relevant only for the purpose of enforcement of fundamental rights under Art. 32. Article 226 confers power on the High Courts to issue writs for enforcement of the fundamental rights as well as non-fundamental rights. The words 'Any person or authority' used in Art. 226 are, therefore, not to be confined only to statutory authorities and instrumentalities of the State. They may cover any other person or body performing public duty. The form of the body concerned is not very much relevant. What is relevant is the nature of the duty imposed on the body. The duty must be judged in the light of positive obligation owed by the person or authority to the affected_ party. No matter by what means the duty is imposed. If a positive obligation exists mandamus cannot be denied.
In Praga Tools Corporation v. C.V. Imanual, : (1969)IILLJ479SC , this Court said that a mandamus can issue against a person or body to carry but the duties placed on them by the Statutes even though they are not public officials orstatutory body. It was observed (at p. 778 of 1969-3 SCR): (at pp 1309-10 of AIR):
'It is, however, not necessary that the person or the authority on whom the statutory duty is imposed need be a public officials or an official body. A mandamus can issue, for instance, to an official of a society to compel him to carry out the terms of the statute under or by which the society is constituted or governed and also, to companies or corporations to carry out duties placed on them by the statutes authorising their undertakings. A mandamus would also lie against a company constituted by a statute for the purpose of fulfilling public responsibilities. (See Halsbury's Law of England (3rd Ed. Vol. II p. 52 and onwards).'
Here again we may point out that mandamus cannot be denied on the ground that the duty to be enforced is not imposed by the statute. Commenting on the development of this law, Professor De Smith states: 'To be enforceable by mandamus a public duty does not necessarily have to be one imposed by statute. It may be sufficient for the duty to have been imposed by charter, common law, custom or even contract.' (Judicial Review of Administrative Act 4th Ed. p 540). We share this view. The judicial control over the fast expanding maze of bodies affecting the rights of the people should not be put into watertight compartment. It should remain flexible to meet the requirements of variable circumstances. Mandamus is a very wide remedy which must be easily available lo reach injustice whenever it is found'. Technicalities should not come in the way of granting that relief under Art. 226. We, therefore, reject the contention urged for the appellants on the maintainability of the writ petition.'
20. The above judgment has shown, what at a mere glance to the language used in Art. 226 of the Constitution of India shows, that the Court has got power throughout the territories in relation to which it exercises jurisdiction to issue to any person or autho-rity including in appropriate cases any Government within those territories, directions, orders or writs, including writs in the nature of Habeas Corpus, Mandamus, Prohibition,quo warranto and Certiorari or any of them for the enforcement of any of the rights conferred by Part III of the Constitution andfor any other purpose. The words 'to any person or authority' and the words 'for the enforcement of any of the rights conferred by Part III and for any other purpose' leave no scope to question the authority of the Court to issue a writ even to a private person, whether it is a living being or a legal entity as a juridical person. Since in respect of the prerogatives, in particular the Courts in India have adopted the rules of prudence, which Courts in England applied to themselves, although in terms for the use of Art. 226, there is good reason to argue that self-imposed inhibitions of the English Courts are not applicable in India, and what ordinarily is applied to the use of the Writ of Prohibition, Mandamus, Quo Warranto or Certiorari in England is applied by the Courts in India as well. Mandamus, Certiorari, Quo Warranto and Prohibition some times overlap and are interchargeable, yet in cases of private disputes between the parties, or matters concerning the application of private faw or enforcement of a private law, the Courts do not issue Writs like Mandamus, Certiorari, Prohibition or Quo Warranto. It is, however, not unknown that exceptions have been made by the Courts and such exceptions are found justifiable for reasons of the conduct of the parties which on the one hand appeared to affect only a private law, but on the other hand has effect upon the action in rem.
21, In Rohtas Industries v. Its Union, : (1976)ILLJ274SC the Supreme Court has said (para 9):
'The expansive and extraordinary power of the High Courts under Art. 226 is as wide as the amplitude of the language used indicates and so can affect any person even a private individual and be available for any other purpose even one for which another remedy may exist. The amendment to Art. 226 in 1963 inserting Aft. 226(1-A) reiterates the targets of the Writ power as inclusive of any ppsonby the expressive reference to the residence of such person. But it is one thing to affirm the jurisdiction, another to' authorities its freeexercise like a bull in a China shop. This Court has spelt out wise and clear restraint's on the use of this extraordinary remedy and High Courts will not go beyond those wholesome inhibitions except where the monstrosity of the situation or other exceptional circumstances cry for timely judicial interdict or mandate. The mentor of law is justice and a potent drug should be judiciously administered. Speaking in critical retrospect and portentous prospect, the writ power has, by and large, been the people's sentinel on the qui vive and to cut back on or liquidate that power may cast a peril to human rights. We hold that the award here is not beyond the legal reach of Art. 226, although this power must be kept in severely judicious leash.'
22. The Supreme Court has made these observations in a case in which the award of an arbitrator was under challenge. The arbitrator was appointed under a memorandum of agreement under which the management as well as the registered Union and two unregistered Unions were parties. One of the contentions before the Court was that an award under S. 10-A of the Industrial Djsputes Act savours of a private arbitration and is not amenable to correction under Art. 226 of the Constitution and, even if there be jurisdiction, a discretionary desistence from its exercise is wise, proper and in consonance with the canons of restraint.
23. A Bench decision of the Madras High Court in the case of Film Division, Bombay v. R.M. Seshadri, (1973) 2 Lab LJ 444, is illustrative of the exercise of the power under Art. 226 of the Constitution against a private arbitrator. The Court has observed:
'It is, however, contended that under Art. 226 of the Constitution of India no power lies in this Court to issue a rule against a private arbitrator. In support of this contention, our attention is invited to Engineering Mazdoor Sabha v. Hind Cycles Ltd., : (1962)IILLJ760SC . That was a case of special leave under Art. 136(1) of the Constitution. The expression used in the Article is 'Court or Tribunal'. The Supreme Court was of the view that an arbitrator,acting under S. 10-A of the Industrial Disputes Act, could not, for purposes of Article 136(1) be regarded as a Tribunal. The Supreme Court was not concerned with the scope of Art. 226. But as a matter of fact, there are observations to be found in the judgment of the Supreme Court that the terminology of Art. 226 was much wider than that of Art. 136(1) and the Court pointed out that under Art. 226 of the Constitution, the Court has power to issue a direction to any person or authority. That in fact, is the language used by Art. 226 itself. We may also observe that though once Courts were exercised over the limitations of the English writs no longer is it felt that those limitations need necessarily apply to the wider concept of the power under Art. 226 of the Constitution.'
24. In the case of the Workmen of B&C; Mills v. State of Tamil Nadu, (1982) 2 Lab LJ 90, the Madras High Court has pondered whether for a person or authority to be amenable to the jurisdiction of the High Court under Art. 226, it should fall under the category of 'other authority' within the meaning of Art. 12 of the Constitution of India. The Court has observed :
'Before considering the question whether a writ of mandamus as prayed for by the petitioner can be issued against the second respondent, Commissioner of Labour, it is necessary to consider the scope and nature of a writ of mandamus. A writ of mandamus is a command issued by a court to a person holding a public office or against a Corporation or inferior court for the enforcement of duties which under the law for the time being in force are clearly incumbent upon such person or court in his or its public character or Corporation in its corporate character.'
25. The Court in this judgment has quoted from Halsbury's Laws of England, Third Edition, Vol. 2, at page 84, which is as follows:
'The order of mandamus is an order of a most extensive remedial nature, and is, in for a command issuing from the High Court of Justice, directed to any person, corporation or inferior tribunal, requiring him or themto do some particular thing therein specifiedwhich appertains to his or their office and is inthe nature of a public duty. Its purpose is toapply defects of justice; and accordingly it willissue, to the end that justice may be done, inall cases where there is a specific legal rightand no specific legal remedy for enforcingthat right.'
26. The above in fact is echoed in Judicial Review of Administrative Action by Professor De Smith, 4th Edition at page 540, in these words:
'Mandamus lies to secure the performance of a public duty in the performance of which the applicant has a sufficient legal interest. The applicant must show that he has demanded performance of the duty and that performance has been refused by the authority obliged to discharge it. It is pre-eminently a discretionary remedy, and the Court will decline to award it if another legal remedy is eoually beneficial, convenient and effective.
The duty to be performed must be of public nature..... To be enforceable by mandamus a public duty does not necessarily have to be one imposed by statute. It may be sufficient for the duty to have been imposed by charter,common law, custom or even contract.'
27. Garner in his 'Administrative Law',4th Edition at page 183, has stated:
'This order is different in nature from prohibition and certiorari; it commands any person to whom it is directed to carry out a public duty imposed by law. The duty which it is sought to enforce by order of mandamus must be of a public nature.'
28. Corpus Juris Secondum, Vol. 55, page 15, also describes mandamus in these words:
'Mandamus has been broadly defined as a writ issuing from a Court of competent jurisdiction, directed to a person, officer, corporation or inferior court commanding the performance of a particular duty which results from the official station of the one to whom it is directed or from operation of law, or as a writ commanding the performance of an act which the law specially enjoins as aduty resulting from an office, trust or station. It is a proceeding to compel -- one to perform some duty which the law imposes on him and the writ may prohibit the doing of a thing as well as command it to be done.'
29. The Supreme Court in Sohanlal v. Union of India, : 1SCR738 , has stated:
'Normally a writ of mandamus does not issue to or an order in the nature of mandamus is not made against a private individual. Such an order is made against a person directing him to do some particular thing, specified in the order, which appertains to his office and is in the nature of a public duty.'
30. In Praga Tools Corporation v. C.V. Immaneul, : (1969)IILLJ479SC , it is observed:
'Article 226 provides that every High Court shall have power to issue to any person or authority orders and writ, including writs in the nature of habeas corpus, mandamus, etc., or any of them for the enforcement of any of the rights conferred by Part-Ill of the Constitution and for any other purpose. But, it is well understood that a mandamus lies to secure the performance of a public or statutory duty in the performance of which the one who applies for it has a sufficient legal interest.
Therefore, the condition precedent for the issue of mandamus is that there is. one claiming it a legal right to the performance of a legal duty by one against whom it is sought. An order of mandamus, is, in form, a command directed to a person, corporation or inferior Tribunal requiring him or them to do a particular thing therein specified which appertains to his or their office and is in the nature of a public duty. It is, however, not necessary that the person on the authority on whom the statutory duty is imposed need be a public official or an official body.
It is therefore, clear that a writ of mandamus is an extraordinary remedy. It is in form a command directed to a person, corporation or an inferior Tribunal requiring him or them to do a particular thing therein specified which appertains to his or their office and isin thenature of a public duty. So long as the duty that is sought to be performed is in the nature of a public duty, it is not necessary that the person or the authority on which the duty is imposed should be a public official or an official body. It is further necessary that the person claiming a 'writ of mandamus must have a legal right to the performance of a legal duty by the one against whom the writ is sought.'
31. There is no dearth of case law on thesubject and this Court has also been notbehind in adverting to some of the aspects ofthe broader question as to the jurisdiction ofthis Court to issue writs, directions or ordersin exercise of its power under Art. 226 of theConstitution of India. One can profitablyrefer to a Full Bench judgment of this Court inSri Konaseema Co-operative Central BankLtd. v. N. Seetharama Raju, AIR 1990 AndhPra 171. We are tempted to extract a passagefrom the said judgment which reads as follows(paras 21 and 25):
'Municipalities and Gram Panchayats, it may, be noted, are illustrations of local self-Government. Co-operative Societies, on the other hand, represent a collective cooperative effort of a group of persons to improve their economic well-being. A cooperative society stands no comparison to Municipalities and Gram Panchayats. The bye-laws made by a local authority hind all the persons within its area, whereas the bye-laws of a society bind only its members and its employees. The former is law. The latter is only acontract.
For the above reasons, we hold that the bye-laws of a co-operative society governed by the A.P. Co-operative Societies Act, do not have the force of law, as held by the Supreme Court in Co-operative Central Bank. This is so even where the society which made them is characterized as a 'State' within the meaning of Art. 12. This does not however mean that, where a particular co-operative society can be characterized as a 'State' it is not bound to follow those bye-laws. We have already indicated hereinabove that such society must follow its bye-laws, and it would be compelled to follow such bye-laws by wayof a writ petition so as to ensure fair and equal treatment the mandate of Art. 14.'
The Full Bench has also spoken on thefeatures of mandamus and certiorari in thesewords (para 37-of AIR):
'The basic feature of mandamus and certiorari is that they are public law remedies and are not available to enforce private law rights: Though the strict technical rules governing these writs in English law are not applicable in India, yet the broad principles underlying the said writs have to be kept in mind by this Court while exercising the powers under Art. 226. Not keeping the said distinction in mind would obliterate the distinction between a writ petition and'a suit; there will be choas. As pointed out by a Constitution Bench of the Supreme Court in T.C. Basappa v. T. Nagappa, : 1SCR250 , though the power of the High Court under Art. 226 need not be constructed by the technical rules applicable to these prerogative writs in English law, it is yet necessary to 'keep to the broad and fundamental principles that regulate the exercise of jurisdiction in the matter of granting such writs in English law.'
Similarly, it was pointed out in Dwaraka v. I.T.O., : 57ITR349(SC) , that 'Article 226 is couched in comprehensive phraseology and it ex facie confers a wide power on the High Court to reach injustice wherever it is found. A wide language in describing the nature of the power, the purpose for which and the person or authority against whom it can be used, was designedly used by the Constitution. But this does not mean that the High Court can function arbitrarily under this Article. There are some limitations implicit in the Article and the others may be evolved to direct the Article through defined channels.' The object behind Art. 226 was to strengthen the then existing judicial system, to make it more effective and not to dispense with duplicate, or replicate the existing system. It was not to supplant the existing judicial system, but to confer an additional power in the service of people and Constitution that this extraordinary power was created. It is for this reason that notwithstanding the widelanguage of Art. 226, Courts havs been observing certain self-imposed restrictions upon this power. One of the well accepted limitations upon the exercise of this power is that it is not available to enforce the terms of a contract i.e. a contract which is not statutory in nature. This is so even if one of the contracting parties is the State, a Government or other local authority. This is the:principle affirmed by the Supreme Court in a large number of cases, some of which are Radba-krishna Agarwal v. State of Bihar, AIR 1977 SC 1496; State of Punjab v. Balbir Singh, AIR 1977 SC 1717; Bihar E.G.F. Cooperative Society v. Sipahi Singh, : 1SCR375 ; Lekhraj v. Deputy Custodian, Bombay, : 1SCR120 ; Har Shankar v. Deputy E&T; Commr., : 3SCR254 and finally L.I.C. of India v. Escorts Ltd., : 1986(8)ECC189 . In Escort's case, an argument was Urged that inasmuch as the Life Insurance Corporation was an instrumentality of the State, it is debarred by Art. 14 from acting arbitrarily. It is obligatory upon the Corporation, it was contended to disclose the reasons for its action complained of, viz., its requisition to call an Extraordinary General Meeting of the Company for the purpose of moving a resolution to remove some Directors and appoint others in their place. This argument was opposed by the learned Attorney-General for the State, contending that actions of the State or an instrumentality of the State which do not properly belong to the field of public law, but belong to the field of private law are not subject to judicial review. Dealing with the said contentions, the Court observed :
'While we do find considerable force in the contention of the learned Attorney-General it may not be necessary for us to enter into any lengthy discussion of the topic, as we shall presently see. We also desire to warn ourselves against readily referring to English cases on questions of Constitutional Law, Administrative Law and Public Law as the law in India in these branches has forged ahead of the laws in England, guided as we are by our Constitution and uninhibited as we are by the technical rules which have hampered the development of the English law. While wedo not for a moment doubt that every action of the State or an instrumentality of the State must be informed by reason and that, in appropriate cases actions uninformed by reason may be questioned as arbitrary in proceedings under Art. 226 or Art. 32 of the Constitution, we do not construe Art. 14 as a charter for judicial review of State actions and to call upon the Stale to account for its actions in its manifold activities by stating reasons for such actions.
For example, if the action of the State is political or sovereign in character, the Court will keep away from it, the Court will not debate academic matters or concern itself with the intricacies of trade and commerce. If the action of the State is related to contractual obligation or obligations arising out of the contract, the Court may not ordinarily examine it unless the action has some public law character attached to it. Broadly speaking, the Court will examine actions of State if they pertain to the public law domain and refrain from examining them if they pertain to the private law field. The difficulty will lie in demarcating the frontier between the public law domain and the private law field. It is impossible to draw the line with precision and we do not want to attempt it. The question must be decided in each case with reference to the particular action, the activity in which the State or the instrumentality of the State is engaged when performing the action, the public law or private law character of the action and a host of other relevant circumstances. When the State or an instrumentality of the State ventures into the corporate world and purchases the shares of a company, it assumes to itself the ordinary role of a shareholder, and dons the robes of a share-holder, with all the rights available to such a shareholder, there is no reason why the State as a share-holder should expect to state its reasons when it seeks to change the management, by resolution of the Company, like any other shareholder.'
32. Before we close our discussion on the question of maintainability of the petitions, we may refer to the judgment of the Supreme Court in Manmohan Singh v. Commr., U.T.,Chandigarh, : (1985)ILLJ514SC . The Supreme Court has observed as follows (at pp. 367-68):
'The High Court declined to grant any relief on the ground that an aided school is not 'other authority' under Art. 12 of the Constitution and is, therefore, not amenable to the writ jurisdiction of the High Court. The High Court cleariy overlooked the point that Deputy Commissioner and Commissioner are statutory authorities operating under the 1969 Act. They are quasi-judicial authorities and that was not disputed. Therefore, they will be comprehended in the expression 'Tribunal' as used in Art. 227 of the Constitution which confers power of superintendence over all Courts and Tribunals by the High Court throughout the territory in relation to which it exercises jurisdiction. Obviously, therefore, the decision of the statutory quasi-judicial authorities which can be appropriately described as Tribunal will be subject to judicial review, namely, a writ of certiorari by the High Court under Art. 226 of the Constitution. The decision questioned before the High Court was of the Deputy Commissioner and the Commissioner exercising powers under S. 3 of the 1969 Act. And these statutory authorities are certainly amenable to the writ jurisdiction of the High Court.
The matter can be viewed from a slightly different angle as well. After the decision of the Constitution Bench of this Court in Ajay Hasia v. Khalid Mujib Sehravardi, : (1981)ILLJ103SC , the aided school receiving 95% of expenses by way of grant from the public exchequer and whose employees have received the statutory protection under the 1969 Act and who is subject to the Regulations made by the Education Department of the Union Territory of Chandigarh as also the appointment of Headmaster to be valid, must be approved by the Director of Public Instruction, would certainly be amenable to the writ jurisdiction of the High Court. The High Court unfortunately, did not even refer to the decision of the Constitution Bench in Ajay Hasia's case rendered on November 13, 1980 while disposing of the writ petition in 1983. In Ajay Hasta's case, Bhagwati, J. speaking for the Constitution Bench, interalia, observed that 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, Added to this, the existence of deep and pervasive State control which may afford an indication that the Corporation is a State agency or instrumentality. Substituting the words 'public trust' in place of the 'Corporation' the reasons will mutatis mutandis, apply to the school. Therefore, also the High Court was in error in holding that the third respondent-school was not amenable to the writ jurisdiction of the High Court.'
33. We have seen thus that even in respect of prerogative like mandamus the Courts have found situations in which writs have been issued to private individuals like an arbitrator under S. 10-A of the Industrial Disputes Act or interfered with the award which is in the nature of a document of settlement between the parties, found a school administered by a private trust amenable to writ jurisdiction in the case of its not obeying the commands of law to make payment of salary to the teachers in the school and carefully carved out the self-imposed restrictions upon the jurisdiction to point out that one who is obliged to act under the command of statute and has not acted as commanded by law is amenable to writ jurisdiction, whether he is a private individual or a juristic person, but not a State under Art. 12 of the Constitution. The above can be summarised, in our view, in these words:
1)The High Court's power under Article 226 of the Constitution is as wide as the amplitude of the language used indicates and so can affect any person even a private individual and be available for any other purpose, even one for which another remedy may exist;
2) Strictly speaking, the inhibitions recognised by the Courts in England upon the powers of the Courts to issue prerogative writs do not operate in India except as self-imposed restrictions by the Courts themselves;
(3) Wise and clear restraints on the use of extraordinary remedy have been indicated in various pronouncements of the Supreme Court and High Courts, and the High Courts wil not go beyond those wholesome inhibitions. However, where the situations warrant or exceptional circumstances cry for timely judicial interdict or mandate, the Court shall have the power to issue any writ, order or direction. In the words of the Supreme Court -- 'the mentor of law is justice and a potent drug should be judiciously administered. Speaking in critical retrospect and protentous prospect, the writ power has, by and large, been the people's sentinel on the qui vive and to cut back on or liquidate that power may cast a peril to human rights';
(4) Mandamus, certiorari and prohibition are recognised as public iaw remedies. They are not available to enforce private law rights;
(5) The word 'authority' in Article 226 of the Constitution of India is not restricted to the same meaning as the words 'other authorities' should receive in the definition of the 'State' in Article 12 of the Constitution of India. The former, must receive a liberal meaning. The latter is relevant only for the purpose of enforcement of fundamental rights. The High Court's power under Article 226 of the Constitution, however, unlike the power of the Supreme Court under Article 32 of the Constitution is more pervasive in the sense that it can issue writs for enforcement of fundamental rights as well as non-fundamen-tal rights. The words 'any person or authority' used in Article 226 are, therefore, not to be confined only to statutory authorities and instrumentalities of the State. They may cover any other person or body performing public duty. The form of the body concerned is not very much relevant. What is relevant is the nature of the duty imposed on that body. The duty must be judged in the light of positive obligation owed by the person or authority to the affected party, no matter by what means the duty is imposed; and
(6) The judicial control over the fast expanding maze of bodies affecting the rights of the people should not be put into water-tightcompartments. It should remain flexible to meet the requirements of various circumstances.
34. Since we have seen in the scheme of the Securities Contracts (Regulation) Act incorporation of the rules of the association of the Exchange as statutes and the bye-laws applicable to the Exchange being framed only with the approval of SEBI or as directed by it, it is not possible to hold that they (i.e. rules and bye-laws) do not impose upon the Exchange a public duty. If the Exchange has failed to perform its public duty in the sense that it has gone beyond the mandates of the rules and the bye-laws, or in performance of the same has violated any of the fundamental rights of the petitioners, they (the petitioners) can legitimately maintain petitions before this Cour! under Article 226 of the Constitution.
35. Sujata Manohar, J. (as she then was)in Sejal Rikeen Dalai v. Stock Exchange,Bombay, : AIR1991Bom30 , as a Judge of theBombay High Court, has taken the same viewin these words (para 8):
'The Stock Exchange is, inter alia, established to assist, regulate and control dealings in securities and to ensure fair dealings. These are objects of public interest. Therefore, looking to the wide interpretation given to Art. 226 of the Constitution, the first respondent can be considered, for the purpose of this petition, as amenable to the jurisdiction of the High Court under Art. 226 of the Constitution.'
36. A Division Bench of the Patna High Court in Akhileshwar Upadhyaya v. Magadh Stock Exchange Association, : AIR1992Pat61 , has also accepted the Bombay view in these words (para 4);
'Undoubtedly respondent No. 1 isaprivate organisation and it has to be seen whether such an organisation would be amenable to the writ jurisdiction under Arts. 226 and 227 of the Constitution of India. In this context, Mr. Chatterji drew our attention to the various sections of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as the Act) to indicate that under thoseprovisions the Government exercises an all pervading influence in the Constitution as well as the functioning of the Stock Exchange. Mr. Chatterji also places reliance on the case reported in : AIR1991Bom30 , Mrs. Sejal Rikeen Dalai v. Stock Exchange, Bombay, which relates to the Bombay Stock Exchange. In that case their Lordships were of the opinion that the functions of the Stock Exchange were in public interest and for the benefit of the investors. In that context they observed that for safeguarding the public interest, the Court could reasonably exercise its jurisdiction under Art. 226. We do not propose to go into this technical aspect of the matter any further and for the present we accept that if any public interest is involved and the facts and circumstances so demand a writ could be issued on respondent No. 1.'
37. A single Judge of the Karnataka High Court in R. Jagadeesh Kumar v. P. Sri-nivasan, , has expressed a contra view, it appears, because the facts of the case indicated that the Stock Exchange had taken action to expel a member and the Court was of the opinion that it did not involve performance of any public duty or disregard of ahy law which imposed upon the Exchange any public duty. A Bench of the Kerala High Court in Satish Nayak v. Cochin Stock Exchange Ltd., Ernakulam, : AIR1995Ker373 , has apparently shown dissent to the view expressed in Sejal Rikeen Dalai v. Stock Exchange. Bombay : AIR1991Bom30 (supra). But, on facts, the case was similar to the case of R. Jagadeesh Kumar v. P. Srinivasan which a learned Karnataka Judge considered.
38. Since it is conceded that the Exchange accepted the suggestion of the Screening Committee and entered into moderation of a sort and decided to award equal marks in the written test for all those who had appeared in the examination, we are not required to wait for ascertaining the facts in this behalf except to know how the moderation has worked in the case of candidates who were called to appear in the written examination. Two grievances are mainly highlighted for justifying moderation. It is said that candidateswere informed that examinations would be held for a duration of two hours. But when question, papers were made available, it transpired that all objective questions numbering 100 were required to be answered in one-and-half hours time. Accordingly the examination which originally was scheduled for two hours was held for one-and-half hours only and applicants for membership were required to possess the qualification of 12th standard pass, but questions apparently were of high standard which resulted, according to the Exchange, in many examinees not giving proper and correct answers.
39. Moderation which is resorted to appropriately evaluate the response of the students to the question papers and to properly assess their proficiency called standardisation is not an unknown phenomena. It is, however, conceded before us that for standardisation the standard adopted to, is borrowed from R.D.Agarwal's 'Law of Education and Educational Institutions in India', 1982 Edition, Volume II at page 947, whichreads as follows:
'Award of moderation marks:-- Moderation marks are awarded to all the candidates, obviously for the reason that the moderation marks are meant to make up or compensate-
(a) for any disadvantage suffered by the examinees in securing the marks on account of unreasonably stiff question paper set up by ahy examiner, or
(b) for having included a question or questions outside the syllabus in any question paper, or
(c) for such other valid reasons considered good by the concerned University or academic body.'
40. On a similar plea on behalf of the CBSE in Association of Private Schools affiliated to the CBSE, etc. v. State of Tamil Nadu. (1992) 2 Mad LW 155 one of us (P. S. Mishra, J.) as the Judge of the Madras High Court, speaking for the Court has said :
'A Court cannot have any idea of the degree of difficulty existing at the level of average as well as students proficiency or theeffect of the handicaps available with the CBSE. Experts alone should be left with the task of judging the difficult factors that influence the overall performance of the students touching the ill-prepared as well as bright students. This would have deterred us from entering into the desirability of awarding of the additional marks aforementioned besides the marks awarded to the students by their respective examiners had we not been put to a measure that prior year pass/fail data is a reasonable index for standardisation marks. How, as stated on behalf of the CBSE the factors or 'any. difficulty caused during answering the questions due to vagueness, incorrectness or capable of different performances, mis interpretation causing lack of reply, consumption of time for other questions or error' reconciled with the prior pass/fail data, prompted us for a further probe and we categorically asked learned Counsel for the CBSE to inform the Court as to what were the methods that the CBSE results committee adopted for the purpose of reaching through the standardisation marks for the subjects aforementioned. Learned counsel for the CBSE relied upon a 'practical Handbook for teachers on Techniques and Problems of Assessment edited by H. C. Macintosh, Secretary, Southern Regional Examinations Board for the Certificate of Secondary Education, Chapter 8, the Application of Statistics to Assessment' and stated at the Bar that this furnished the method of awarding the standardisation marks to the CBSE students in the subjects aforementioned. 'The Application of Statistics to Assessment by R. B. Morrison', incorporated in the handbook has given the meaning of the word 'statistics' in one sense to mean description of measurements, as in the case of a dislribution of marks or scores for a test or the output figures for a factory and in the other sense to mean, an inferential method, which goes beyond pure description and attempts to discern a pattern in what appears at first sight to be a haphazard collection of data. The book states that it is a method for coping with an uncertain situation or a situation influenced by a number of variable factors, but then added, 'the language of statistics is hot the language of certainty, for statistics cannot proveanything, but the language of probability.'
Dealing with the problem of treatment of marks and test scores, it says, 'In assessment we require efficient ways of tabulating marks and scores to see what characteristics they have. We need to work out averages or mean values and indices of spread for the accumulated data. Individuals differ from each other, and the same individual varies also in ability and performance over a period of time The same holds true for a group of individuals. The degree of uncertainty or error for a single measurement or set of measurements needs to be appreciated, and where possible calculated'. This article recognises as the first statistical exercise after a test or examination to produce a frequency distribution for the scores of marks obtained by the candidates and adds 'For small entries, such as the classroom test, this often takes the form of a distrubution based upon individual marks within a appropriate range of marks' ..... For a large entry, probably marked on a percentage scale, the marks are usually' grouped into appropriate classes with a frequency distribution similar to that shown in Table l(b). This might be the kind of distribution for an assistant examiner with one of the examining boards'.
After the table of frequency distribution of marks, it is stated:
'One cannot have a lenient view or severe marker for objective tests, or one who is inclined to bunch marks, because me marking is completely objective. It is quite possible, however, to have this state of affairs with essay-type examinations and impression assessment, as Hartog and Rhodes et al have found. Such errors may be serious where the marking does not conform to a reasonably specific mark scheme, or where no attempt is made to minimize them by scaling the marks.'
and it proceeds to add,
'Where leniency or severity or differential spreading of the marks is suspected, it is important to scale the marks so that the subjective error of the marker is minimized. The process of scaling or standardisation of marks is to ensure that the frequency distributions from various markers conform to an agreed standard, so that each candidate receives a mark which has been effectively corrected for any anomalies in the marking. In team marking the agreed distribution is usually that of the chief examiner and every care is taken to ensure that the team of examiners conforms. The agreed standardized scale, however, could equally be one to which all examiners, including the chief examiner, conformed.'
The only permissible standardization recommended thus by the author is standardization of marks to ensure frequency distributions from various markers to conform to an agreed standard so that each candidate received marks which have been effectively corrected for any anomalies in the marking. If there are anomalies in the marking, scaling of marks is recommended, not otherwise.'
41. The Court in the said case has concluded that the only permissible standardisation of marks to ensure frequency distribution from various markers to conform to an agreed standard so that each candidate received marks which have been effectively corrected for any anomalies in the marking is, if there are anomalies in the marking, scaling of marks is recommended, not otherwise. The Court in the said judgment has also stated :
'Standardization is meant to remove anomalies on account of liberal or strict valuation. It is resorted to on account of anomalies as to the answers that a candidate may give to a particular question arising on account of a mistake in the question or the question being vague or the key answer being wrong. These are factors that would give to the CBSE a basis to standardise the result. A factor, however, which is unconnected with the examination concerned or the evaluation of the answer by the examiner like the pass/fail data of the previous year would be as irrelevant as the result committee deciding to award grace marks as a whole to every candidate. Standardization has to be a process to ensure that equals in merit are evaluated equally. If it would benefit a person who performed poorly and merited alower placein the result it would, on the one hand deny to a person possessed of real merit his correct position as he would be graded with a person who is lower in merit and give on the other hand, undue advantage to a person who on merit assessment ranked lower but on account of the so-called standardisation/ moderation marks, was pushed higher. In the case in hand, it is yet another tale created on account of its effect.'
42. The view taken by the Madras High Court is not different from the view expressed by the Supreme Court in the case of Umesh Chandra v. Union of India, : AIR1985SC1351 . That was a case in which, after the answer books at the written examination were valued, it was decided to add two marks to the marks obtained in each paper by way of moderation to all candidates who had appeared for the examination for selection of officers for being appointed in the Delhi Judicial Service. The Supreme Court in the said judgment has observed as follows (para 13):
'The question for consideration is whether the High Court in the circumstances of this case had the power to add two marks to the marks obtained in each, paper by way of moderation. It is no doubt, true that the High Court is entrusted with the duty of conducting the, competitive examination under R. 13 of the Rules. It is argued on behalf of the High Court that the power to conduct an examination includes the power to add marks either by way of moderation or by way of grace marks if it feels that it is necessary to do so, and reliance is placed by the High Court on its own past practice, and the practice prevailing in a number of Universities in India, where marks are awarded either as moderation marks or as grace marks. It is true that in some educational institutions marks are awarded by way of moderation at an examination if the examining body finds any defect in the examination conducted by it such as inclusion of questions in the question papers which are outside the syllabus, extremely stiff valuation of the answer books by an examiner or any other reason relevant to the question papers or the valuation of the answer books.The reason given by the High Court for adding the moderation marks has nothing to do either with the question papers of with the mode of valuation. The High Court Approved the list of 27 candidates who had secured the required qualifying marks which would enable them to appear at the viva voce test as prescribed in the Appendix. Thereafter the High Court resolved to add two marks to the marks obtained in each paper by way of moderation on the ground that a few candidates who had otherwise secured very high marks may have to be kept out of the zone of consideration for final selection by reason of their having secured one or two marks below the aggregate or the qualifying marks prescribed in the particular paper. The resolution does not show the names of the particular candidates considered at the meeting in whose case such a concession had to be shown. The affidavit filed on behalf of the High Court, of course refers to certain hard cases which persuaded the High Court to add additional marks byway of moderation. The question for decision is whether such a resolution can be passed by the High Court which is entrusted with the duty of conducting the examination. The High Court had not found any defect in the question papers' or any irregularities in the valuation of the answer books. It may be that some candidates had obtained high marks in some papers and by reason of their not obtaining the required marks in the other paper or 60% and above in the aggregate they may not have become qualified for the viva voce test. In our opinion this alone would not be sufficient to add any marks by way of moderation. It is relevant to note the mandatory character of Cl. (6) in the Appendix to the Rules which says only such candidates will be called for viva voce who have obtained 50% marks in each written paper and 60% in the aggregate except in the case of candidates belonging to the Scheduled Castes/Tribes in whose case the qualifying marks will be 40% in each written paper and 50% in the aggregate. Addition of any marks by way of moderation to the marks obtained in any written paper or to the aggregate of the marks in order to make a candidate eligible to appear in the viva voce test would indirectlyamount to an amendment to Cl.(6) of the Appendix. Such amendment to the Rules can be made under Art. 234 only by the Lt. Governor (Administrator) after consulting the High Court in that regard. In the instant case the resolving to add two marks to the marks obtained in each answer book by a candidate has virtually amended the Rules by substituting 48% in place of 50% which is required to be secured in each written paper and 58% in place of 60% which is required to be secured in the aggregate in the case of candidates not belonging to Scheduled Castes/Tribes and 38% in place of 40% in each written paper and 48% in place of 58% in the aggregate in the case of candidates belonging to Scheduled Castes/Tribes. The adverse effect of the moderation on the candidates who had secured the required qualifying marks at the examination in question is quite obvious, since four candidates whose names were not in the list of 27 candidates published on the first occasion have been included in the first list of candidates chosen for appointment from out of the final list of successful candidates in preference to some of the candidates who had obtained the qualifying marks in the written papers and they would have been, appointed as Sub-Judges but for the interim order made by this Court. These four candidates were also to get into the list of person to be appointed as Sub-Judges because of the high marks they were able to secure at the viva voce test for which they were not eligible but for the moderation marks. The area of competition which the 27 candidates who had been declared as candidates eligible to appear at the viva voce examination before such moderation had to face became enlarged as they had to compete also against those who had not been so qualified according to the Rules. The candidates who appear at the examination under the Delhi Judicial Service Rules acquire a right immediately after their names are included in the list prepared under R: 16 of the Rules which limits the scope of competition and that right cannot be defeated by enlarging the said list by inclusion of certain other candidates who were otherwise ineligible, by adding extra marks by way of moderation. In a competitive examination ofthis nature the aggregate of the marks obtained in the written papers and at the viva voce test should be the basis for selection. On reading Rule 16 of the Rules which merely lays down that after the written test the High Court shall arrange the names in order of merit and these names shall be sent to the Selection Committee, we are of the view that the High Court has no power to include the names of candidates who had not initially secured the minimum qualifying marks by resorting to the devise of moderation, particularly when there was no complaint either about the question papers or about the mode of valuation. Exercise of such power of moderation is likely to create a feeling of distrust in the process of selection to public appointments which is intended to be fair and impartial. It may also result in the violation of the principle of equality and may lead to arbitrariness. The cases pointed out by the High Court are no doubt hard cases, but hard cases cannot be allowed to make bad law. In the circumstances, we lean in favour of a strict construction of the Rules and hold that the High Court has no such power under the Rules. We are of the opinion that the list prepared by the High Court after adding the moderation marks is liable to be struck down. The first contention urged on behalf of the petitioners, has, therefore, to be upheld. We, however, make it clear that the error committed by the High Court in this case following its past practice is a bona fide one and is not prompted by any sinister consideration.'
43. Attempt is made before us to distinguish the judgment of the Supreme Court in Umesh Chandra v. Union of India, : AIR1985SC1351 (supra) on the ground that there has been no such rule as one for the judicial service with which the Supreme Court was concerned which laid down any condition as to who may be called for the viva voce. What, however, is revealed in the case in hand is that the Exchange had started with a clear representation that those who shall qualify in the written test by obtaining more than ten marks alone shall be called for interview, provided, however, that they also qualified in other criteria. Uniform moderation marks has resulted in putting above successful candidates in the written test as many as 31 persons. They have stolen march on account of the so-called moderation marks over others who qualified in spite of the alleged high standard of the question papers and duration of the examination reduced from two hours to one and half hours. The so-called moderation marks have come to them as bonus marks and obviously has denied to several others, including petitioners before us, selection for the viva voce as they are qualified otherwise. All such persons who have been shown successful in the written test only by the so-called moderation marks are respondents in Writ Petition No. 12250 of 1995.
44. We have no hesitation for the above reasons to hold that all of them have been wrongly selected and taken as members at the cost of others, who, but for the bonus marks, woud have been selected if not found unsuitable in the viva voce. Petitioners have made out a case, in our opinion, for Court's intervention with the selection of all these respondents.
45. Before we part with this judgment, we have felt that the Government of India and SEBI have almost made the guidelines mechanical in application and the Exchange has also adopted the same as a rule to find out who qualifies as being possessed of the required amount of liquid cash and property or experience. While these may be relevant for testing the solvency of the member and experience for the type of work members of the Exchange are required to do, merely because someone is able to show his possession of wealth without showing how he has acquired it, there is a chance of many unscrupulous persons entering as members of the Exchange and indulging in activities to enrich themselves at the cost of the public at large. If the recent happenings with the key role of stock brokers have not given any lesson, there is a chance of such persons taking over the control of the Exchange who shall have no regard to the norms of the trace. While solvency, as we Have observed earlier, is important, it should be examined whether the assets are genuine and truly belong to the applicant who seeks membership and that he has notarranged such assets or obtained by questionable means and methods. It is time, we feel persuaded to observe, for the Stock Exchanges to realise that they are not trading in an individual capacity; they are doing some kind of institutional business for which the institution must enjoy the confidence of the people. The Government of India and SEBI shall do service to the people by seeking a declaration of assets of members of the Stock Exchanges and also information as to the source from which assets have been procured and evolve some method by which profits by the members of the Stock Exchanges and their agents are kept under watch and control so that they do not take advantage of the position of the member of the Exchange and repeat scams at the cost of the fair name of the country. In the applications which we dispose of to-day, we have such, statements which show wealth of the petitioners therein which create doubt about their genuineness.; The respondent-Exchange, SEBI and the Central Government thus, in our opinion, shall be taking the blame of permitting such persons, to become members, if proper precautionary measures are not introduced by way of rules, bye-laws or even guidelines issued either by SEBI or the Central Government.
46. For the reasons stated above, we hold that respondents 4 to 34 in Writ Petition No. 12250 of 1995 have been wrongly admitted as members of the Exchange. As a consequence, a writ in the nature of Mandamus has to issue to the respondent Exchange to issue orders removing them from membership. We are, however, not persuaded to issue direction to treat those who have qualified in the written test without moderation marks as successful candidates for being called for interview and on being selected for being admitted as members of the Exchange. It will be fair, in our opinion, if the Exchange is directed to invite fresh applications to fill in the vacancies created on account of the removal of respondents 4 to 34 (in W. P. No. 12250 of 1995) as members of the Exchange and if so advised, before new members are taken, SEBI and the Central Government shall issue necessary directions for screeningunscrupulous applicants.
47. In the result, Writ Appeal No. 516 of 1994 and Writ Petition Nos. 11453, 11275, 12015 and 12250 of 1995 are allowed to the extent indicated above. Respondent-Exchange, SEBI and the Central Government are directed to forthwith remove respondents 4 to 34 (in W. P. No. 12250 of 199-5) from the membership of the respondent-Exchange and proceed to invite fresh applications in the, light of the observations made in the judgment above. It is, however, made clear that; respondents 4 to 34 shall be deemed to be members for completion of the transactions already undertaken by them, but shall not be allowed to take up any fresh transactions.
48. An oral prayer is made for certificate for appeal to the Supreme Court as contemplated under Article 134-A. We are, however, of the opinion that no question of the nature referred to in Clause (1) of Article 132 or Clause (1) of Article 133 of the Constitution of India is available for appeal to the Supreme Court. The prayer is refused.
49. Order accordingly.