PRATHAMA BANK, HEAD OFFICE MORADABAD, THROUGH ITS CHAIRMAN versus VIJAY KUMAR GOEL & ANR.

Citation: [1989] 3 S.C.R. 935 · Decided: 22-08-1989 · Supreme Court of India · Bench: L.M. SHARMA · Disposal: Disposed off

Judgment (excerpt)

PRATHAMA BANK, HEAD OFFICE MORADABAD, 
THROUGH ITS CHAIRMAN 
v. 
VUA Y KUMAR GOEL & ANR. 
AUGUST 22, 1989 
[LAUT MOHAN SHARMA AND J.S. VERMA, JJ.] 
Regional Rural Banks Act, 1976: Section 3-'Regional Rural 
Bank'-Whether 'State' within Article 12 of the Constitution. 
r 
Constitution of India, 1950: Article 12-'Regional Rural Bank' 
notified under Section 3, Regional Rural Banks Act 1976 whether 
'State". 
U.P. Public Services (Tribunal) Act 1976: Section 2(b)-'Public 
servant'-Employee of Regional Rural Bank---:-Wh'ether 'Public 
servant'. 
The respondent who was an employee of the appellant bank was 
. dismissed from service on the basis of disciplinary proceedings 
instituted against him. He filed a suit challenging the validity of the 
·--( disciplinary proceedings on the ground that the inquiry was vitiated by 
serious violation of principles of natural justice. The trial court decreed 
the suit. The decree was confirmed by the Additional District Judge in 
appeal, and by the High Court in second appeal. 
Before this Court, the appellant contended that (i) having regard 
to the nature of relationship of master and servant between the parties, 
't the decree of re-instatement of the respondent was illegal, and the suit 
as framed was not maintainable because the respondent's remedy was a 
suit for damages; (ii) alternatively, if the respondent was held to be a 
public servant so as to enable him to ask for re-instatement in the 
service, the suit Jnust be dismissed as not maintainable in vie'Y of the 
provisions of the U.P. Public Services (Tribunal) Act, 1976; and (iii) 
there was no violation of the principles of natural justice. 
· 
While confirming the decree with modifications, this Court, 
HELD: (1) ·The High Court was right in holding that as the re-
spondent was not given adequate opportunity to examine the docu-
ments, he was handicapped in filing his show cause and defending him-
self effectively. [938C] 
· 
935 
·i;
A 
B 
c 
D 
E 
F 
G 
H 
936 
SUPREME COURT REPORTS 
[1989] 3 S.C.R. 
(2) The appellant hank is not covered by the definition of 'public 
A 
servant' in section 2(b)-Of U.P. Public Services (Tribunal) Act, 1976. It 
has been constituted in exercise of the pilwer conferred by s. 3 of the 
Regional Rural Banks Act, 1976, and has been sponsored by the Syndi-
cate Bank, a nationalised Bank. Although fifteen per cent of the total 
B 
capital of the Bank has been contributed by the State of Uttar Pradesh, 
it has no controlling power, and none of the conditions mentioned in s. 
2(b) of the U.P. Act is satisfied. [939G] 
1, 
(3) The plaintiff-respondent is not a "public servant" within the 
limited meaning of the expression used in the U .P. Act and the courts 
i;elow are right in overruiing the defence plea of the bar by the U .P. Act --, 
on the jurisdiction of the civil court to entertain the suit. [939H-940A] 
c 
~ 
14) The test for determining if an authority falls within the defini-
,tion of State in Article 12 of the Constitution is whether it is an instru-
mentality or agency of the Government. The enquiry has to be not as to 
how the juristic person is born but why it has been brought into exist-
0 
ence. It is therefore, immaterial whether the authority is created by a 
statute or under a statute. [940C] 
Ajay Hasia & Ors. v. Khalid Mujib Sheravardi & Ors., [1981] l 
sec 722, referred to. 
'r 
E 
( 5) An examination of the relevant Circumstances in regard to the 
appellant Bank leads to the irresistible conclusion that it is an instru-
mentality of the Central Government. By establishing the Rural Banks 
the Central Government acts in discharge of its obligations under Arti-
cles 38 and 48 of Part IV of the Constitution through them. [940G, 942C] 
f 
(6) The provisions of the Regional Rural Banks Act, 1976 do not 
leave any room for doubt that the Regional Rural Banks are under deep 
and pervasive control of the Central Government and have been 
established as its instrumentality and, are, therefore, 'State' within 
Article 12 of the Constitution. [943A] 
G 
(7) There is no merit in the argument that the Courts cannot 
force the services of the respondent on the appellant bank by passing a 
decree for his re-instatement in service and all that can be done is to 
grant a relief by way of compensation in a properly constituted suit. [943B] 
Central Inland Water Tran.sport Corporation Ltd. v. Brojo Nath 
H Ganguly, [1986] 3 SCC 156, referred to. 
PRAT!If\MA BANK v. V.K. GOEL [&:!ARMA, J.] 
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