Gist of Delhi HC Judgment: Mother Dairy is a public authority
6 Feb, 2015Gist of the case
1. Applications were filed under the RTI Act seeking certain information from the Mother Dairy Fruit & Vegetable Private Limited (Mother Dairy) which were rejected alleging that it is not applicable as the petitioner is not a ‘public authority’ under Section 2(h) “public authority” means any authority or body or institution of self-government established or constituted (a) by or under the Constitution; (b) by any other law made by Parliament; (c) by any other law made by State Legislature; (d) by notification issued or order made by the appropriate Government, and includes any- (i) body owned, controlled or substantially financed; (ii) non-Government organization substantially financed, directly or indirectly by funds provided by the appropriate Government; of the Act.
2. On appeal, the CIC found the Mother Dairy to be substantially financed and controlled by the appropriate government. Holding it to be a public authority under the Act, the CIC directed Mother Dairy to appoint a PIO and an Appellate Authority.
3. Against the order of the CIC, a petition was filed to the Delhi High Court claiming that:
(i) Mother Dairy is a company registered under the Companies Act, 1956 and is a subsidiary of NDDB where the entire equity of the petitioner is held by the National Dairy Development Board (NDDB).
(ii) The loans granted by NDDB to Mother Dairy accounted for only 18% of it’s borrowing and, thus, it could not be stated to have been substantially financed by NDDB. Mother Dairy had neither received any finances from central government, nor did any government hold any equity capital of the petitioner.
(iii) In order to fall within the definition of a Public Authority under sections 2(h) “public authority” means any authority or body or institution of self-government established or constituted (a) by or under the Constitution; (b) by any other law made by Parliament; (c) by any other law made by State Legislature; (d) by notification issued or order made by the appropriate Government, and includes any- (i) body owned, controlled or substantially financed; (ii) non-Government organization substantially financed, directly or indirectly by funds provided by the appropriate Government; (d)(i) & (ii) of the Act, a body must be substantially financed by an appropriate Government. The loans granted to Mother Dairy were not by the Central Government but by NDDB and other banks.
4. The Delhi High Court ruled that the Mother Dairy is a Public Authority observing that:
(i) the Central Government is empowered to appoint all directors including the Chairman of NDDB. The power of shareholders of a company to appoint and remove directors results in them exerting real influence over the affairs of a company.
(ii) the formation of Mother Dairy was only for the purposes of corporatizing certain activities and undertakings, which were being managed directly as divisions of NDDB. Its entire shareholding petitioner is held by NDDB and indisputably it is under control of NDDB.
(iii) the fact that shareholders of a company do not interfere with the day to day functions of the company cannot lead to a conclusion that shareholders do not control the company. ‘Managing’ a company, cannot be read as synonymous to ‘controlling’ a company. There is nothing in the language of Section 2(h) “public authority” means any authority or body or institution of self-government established or constituted (a) by or under the Constitution; (b) by any other law made by Parliament; (c) by any other law made by State Legislature; (d) by notification issued or order made by the appropriate Government, and includes any- (i) body owned, controlled or substantially financed; (ii) non-Government organization substantially financed, directly or indirectly by funds provided by the appropriate Government; (d)(i) of the Act, which indicates that the appropriate government must directly control a public authority or such control must be manifested by direct interference with the day-to-day management of the company. If an appropriate government has the ability to direct the affairs of a body and exercise its dominion over its affairs, the fact that it does so by appointing its representatives as managers of the said body or ensuring that its representatives are so appointed, would not mean that the body is not controlled by the appropriate government.
(iv) subsidiary companies are sometimes created for better and a focused management of cohesive units. This does not imply that the ultimate shareholders have ceded control over the affairs of the corporate entities or their business undertakings.
(v) the basic infrastructure of the petitioner’s undertakings were promoted by funds provided by the Central Government; whether the said funds found their way through NDDB or otherwise is not material.
5. Cases discussed:
a) Thalappalam Service Cooperative Bank Limited and Others v. State of Kerala and Others: (2013) 16 SCC 82
b) LIC v. Escorts Ltd.: (1986) 1 SCC 264
c) Balmer Lawrie & Co. Ltd. & Ors v. Partha Sarathi Sen Roy & Ors.: (2013) 8 SCC 245
d) Krishak Bharti Cooperative Ltd. v. Ramesh Chander Bawa: W.P. (C) 6129/2007
e) CIT v. Messers Jeewanlal Limited, Calcutta: AIR 1953 SC 473
f) Vodafone International Holdings BV v. Union of India: (2012)6 SCC
RTI Citation : RTIFI/2015/CIC/1474
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