RATNE AND ANOTHER v. THE PEOPLE’S BANK AND ANOTHER

001-SLLR-1984-V1-WIJERATNE-AND-ANOTHER-v.-THE-PEOPLE’S-BANK-AND-ANOTHER.pdf


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l/Vyetatne and Another v. The People's Bank and Another
1
WIJERATNE AND ANOTHER
v.
THE PEOPLE S BANK AND ANOTHER
SUPREME COURT
SHARVANANDA, J.. WANASUNDERA, J., COLIN-THOME, J..
SOZA, J. AND RANASINGHE, J.
S.C. – 63/83 & 65/83JANUARY 9. 10. 11 AND 12. 1984.
Applications under Article 126 seeking relief for alleged breach of fundamentalrights – Articles 4(c) and 12 of the Constitution ~ Alleged discrimination anddeprivation of promotional prospects by People's Bank – Is it infringement byexecutive or administrative action? Maintainability.
The People's Bank reorganised its security services so as to place the petitioners Th ■Class B of the Inspectors Grade although at the relevant period they were drawing asalary higher than Class A of the Inspectors Grade. Two applications were filedunder Article 126 of the Constitution alleging discrimination and deprivation ofpromotional prospects and infringement thereby of fundamental rights to equalitycontrary to Article 12 and Article 4(a) and (d) of the Constitution.
The petitioners contended that the Co-operative movement in Sri Lanka wasorganised as a part of executive or administrative action and the People's Bank wasan agency created by the State to further or promote the Co-operative movement.
Hence the Bank was an organ of Government and/or an administrative agency of the”State.
On a preliminary objection that the application was not maintainable as the action ofthe People's Bank was not executive or administrative action-
Held
The jurisdiction of the Supreme Court to grant relief under Article 126 of the■ Constitution is limited to infringements of fundamental rights by executive oradministrative action.
The petitioners' service has<fb connection with the relationship of the People'sBank and the Co-operative movement and it is not necessary to consider the legalcharacter of this relationship. A public corporation can for certain purposes serve asan agent or surrogate of the State, ft nil Ho~~ •'
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whether it is performing a governmental function or not. It rr!W/ happen that certainof its functions may be governmental, whilst the others are not. When a publiccorporation is performing its non-governmental functions its action does not havethe attributes of£tate action or' executive or administrative actionIt is not possible to make an exhaustive enumeration of the tests which wouldinvariably and in all cases provide an unfailing answer to the question whether acorporation is a governmental agency or instrumentality Consideration of any singlefactor or the various factors seriatim will not suffice but the Court will have toconsider the cumulative effect of all the factors to arrive at a decision.
The main role of the People's Bank is that of a commercial Bank. There is no nexusbetween the State and the banking activities of the People's Bank. The State is notinvolved in the commercial activities of the Bank. The commercial activities of theBank cannot qualify as State action.
The petitioners are employed by the Bank in connection with its commercialactivities. The employment of the petitioners in the Bank cannot be stamped asState employment. There is no State action involved in the People's Bankre-organising us security services and formulating its own scheme of recruitment toc*arry on its banking activity. In the circumstances even if there is substance in theallegation of the petitioners that there was discrimination in the matter of theirappointment, their grievances cannot form the subject-matter of an application tothe Supreme Court for relief under Article 126 of the Constitution where the allegedinfringement is nqt by executive or administrative action.
Cases referred to
Wijetunga v. Insurance Corporation ot Sri Lanka 11982) 1. Sn L.R I
Trendtex Trading Corporation v. Centra! Bank (1977) 1 All E.R. 881.894.
(31 Pfizer v. Minister of Health (1963) 3 AH E R. 779.788.
i(4) New York v. United States (1945) 326 U S. Reports 572.
Ramana v. I.A. Authority of India A.I.R. (1979/ S.C. 1628.
Jackson v. Metropolitan Edition Co. (1974) 419 U S 365.
APPLICATIONS under Article 126 of the Constitution.
Nimal Senanayake. S.A.. with Faiz Mustapha. Miss S.M. Senaratne. Miss A.8.Dissanayake. Saliya Mathew, L.E. Samarasmghe and Miss Theleopa for petitioners.
Or. J.A.L. Cooray with K. Kanag-lswaran and M.8. Peramuna for 1st respondent(S.C. 63/83).
Mark Fernando for 1st respondent (S.C. 65/83).
K.M.M.B. Kulatunga*S.A., Solicitor-General with Sunil de Silva, DeputySolicitor-General and A. Kasturiarachchi, S.C for Attorney-General.
Cur. adv vult.
SC Wijeratne and Another v. The People's Bank and Another fShan/ananda, J.)3
January 24. 1984.#
SHARVANANDA, J.
The petitioners above named are security officers of the People'sBank, the 1st respondent above named, The dutide performed bythese officers consist in providing security for cash transport for allbank vehicles when transporting cash and other security duringtwenty-four hours of the day and in doing such assignment asinstructed by the Bank. Under the Bank's reorganisation of securityservice the petitioners had been placed in the category of Class Binspectors of the security service, though at the relevant time theyhad been drawing a salary higher than Class A inspectors of theservice. They complain that the purpose and result of placing themin Class B inspectors grade is to deprive them of the opportunity ofpromotion to Superintendent's grade open to the other officers inthe Inspectors' grade, who were drawing a lower salary. They statethat the action of the People's Bank constitutes an infringement oftheir fundamental rights to equality and contrary to Article 12 andArticle 4(c) & (d) of the Constitution of the Democratic SocialistRepublic of Sri Lanka. By their applications they have applied to thisCourt for relief under Article 126.
The People's Bank has denied the petitioners' allegation ofdiscrimination and has sought to justify their scheme of securityservice consisting of several gradation of officers. At thecommencement of the hearing of the applications which weretaken up together, counsel for the People's Bank took thepreliminary objection that the applications under Article 126 of theConstitution cannot be maintained as there had been noinfringement of petitioners' alleged fundamental rights by' executive or administrative action *. This court decided to hearargument on the preliminary objection which went to the root of the,inquiry.
The question emerges whether the action of the People's Bank inplacing the petitioners in category B Inspectors’ Grade of servicealthough they were drawing a salary higher than Class A Inspectorssavours of * executive or administrative action ", The jurisdiction ofthe Supreme Court to eatertain and grant relief under Article 126 islimited to infringemeira of fundamental rigljfs by " executive oradministrative action ' only. If the infringement does not stem from
executive or administrative action " the Supreme Court has no
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jurisdiction under Article 126 to entertain or grant the expeditiousrelief provided try Article 126 to the applicant. If ' executive oradministrative action * is not the causa causans of any infringementof fundamental .rights assured by the Constituti|n, the remedy willhave, as was conceded by all parties, to be pursued by way of anordinary action in the competent civil court.
In support of his preliminary objection counsel for the respondentrelied heavily on the judgement of this court in the case ofWijetunga v. Insurance Corporation of Sri Lanka (1) where on areview of all relevant authorities I held that an employee ot theInsurance Corporation of Sri Lanka was not entitled to maintain hisapplication under Article 126 of the Constitution for the allegedinfringement by the Corporation of his fundamental right of freedomof speech and expression and freedom to join a trade union,guaranteed to him by Articles 14( 1 >(a) and 14(1){d) of theConstitution, on the ground that the action of the Corporation didnqj constitute ' executive or administrative action ', in respect ofwhich only the jurisdiction vested in the Supreme Court by Article126 of the Constitution could be invoked by an aggrieved person. Inthat judgement I have examined fairly exhaustively the connotationand significance of the term * executive or administrative actionCounsel for the petitioners has not urged any convincing argumentor contention which persuades me to review the tests framed byme to identify ' executive or administrative action On the otherhand re-examination of the problem has confirmed the correctnessof the above judgement in S.C. 87/82.
The cardinal question as to whether the People's Bank is properlyto be regarded as merely an instrument subservient to the State orin truth, is a commercial bank not identifiable with the State has tobe decided by looking into the function and control of the bank. AsLord Denning stated in Trendtex Trading Corporation v. CentralBank (2). ' I would look to all evidence to see whether theorganisation was under government control and exercisesgovernmental functions Hence whether the People's Bank is tobe accorded the status of a*department ^Government, and an" alter ego ' or organ of the Government or not must depend on itsConstitution, its powers and duties and its activities.
SC Wijeratne and Another v. The People's Bank and Another (Sharvanande. J.) 5
The People's fiank is a statutory Corporation. It was establishedas a body corporate having perpetual successidn and a commonseal and called the People's Bank by Act* No.29 of 1961. Itprovides that the^People's Bank may sue and he, sued in suchname. Section 4 of the Act states that the purpose of the bank' shall be to develop the co-operative movement of Ceylon, ruralbanking and agricultural credit by furnishing financial and otherassistance to co-operative societies, approved societies.Cultivation Committees and other persons '.
Section 5 provides that in carrying out its purposes the Bank mayexercise all or any of the following powers
"(a) to grant subject to the provisions of sub-section (2).-
short-term, medium-term and long-term loans and otheraccommodation to co-operative societies, approvedsocieties and Cultivation Committees ;
short-term, medium-term and long-term loans «tQco-operative societies, approved societies. CultivationCommittees and individuals for constructing, repairingor renovating buildings ;
short-term, medium-term and long-term loans and otheraccommodation to any person who intends to carry onor is carrying on any agricultural, industrial or businessundertaking which, in the opinion of the Board of*Directors of the Bank, is a small-scale undertaking ; and
short-term loans to persons resident in rural areas fdrthe purchase of articles necessary for their personal ordomestic requirements ;
(£>) to carry on and transact, subject to such modifications andexceptions as may be prescribed, the kinds of businesssimilar to those carried on and transacted by the Bank ofCeylon under the Bank of Ceylon Ordinance ;
(According to section 71 read with the First Schedule ofthat Ordinance the Bank was authorised to carry on, interalia, the busine^l of banking),,
to carry on the business of a pawnbroker subject to suchconditions as may be prescribed ;
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to provide technical assistance to any person to whom the
Bank grants any loan or overdraft, and to undertake orsponsor the training of persons in assessing the value ofland and the credit worthiness of borrowers, in assayinggold, irf banking and in finance ;*
to acquire, hold, take or give or lease or hire, mortgage,pledge and sell or otherwise dispose of any immovable ormovable property;
(/) to invest the idle funds of the Bank in such securities as theBoard of Directors of the Bank may consider appropriate ;
to employ such officers and servants as may be necessaryfor carrying out the work of the Bank ,
to make rules in respect of the conditions of service' anddisciplinary control of the officers and servants of the Bank ;
0) to establish provident funds and pension funds for. andschemes for the benefit of such officers and servants, andto make contributions to such funds and schemes from thefunds of the Bank ;
(y) to borrow funds for the purpose of the business of the Bankand to give security for any loans or overdrafts obtained ;
(k) to enter into contracts ; and
(/) to do all such other things as are connected with orincidental to the exercise of the aforesaid powers.'
Section 7 provides –
“(1) The general supervision, control of administration of theaffairs and business of the Bank shall be vested in the Boardof Directors of the Bank ;
(2) The Board may exercise all or any of the powers of theBank.
Section 8 of the Act, as amended by Act No. 61/80 provides thatthe Board shall consist of terf directors apftanted by the Minister,two of whom shall be nominated by the Minister in charge of thesubject of Co-operatives.
SC Wyeratne and Another v. The People's Bank and Another (Sharvananda, J.)7
Section 8 as amended by Act No. 25/78 enables the Minister toremove a Director from office without assigning dny reason thereof.Section 10 as amended by Act No. 25/78 empowers the Ministerto appoint a Chairman of the Board from among the directors andthat he could terminate the appointment of the Ch'airman withoutassigning any reason.
Section 12 as amended by Act No. 61/80 states that theauthorised capital of the bank' shall be 1000 million rupees dividedinto 20 million shares of Rs.50 each. '
Section 15 mandates the Government to –
grant to the Bank out of the Consolidated Funds of Ceylon-
a sum of five hundred thousand rupees out of which thepreliminary expenses connected with the establishmentof the Bank, other than any expenses relating to theconstruction of buildings, shall be defrayed and anybalance of which after such preliminary expenses aredefrayed shall be disposed of as provided by subsection(4) of section 22 (viz. by crediting to the Special Reserveof the Bank).
two million rupees which shall be disposed of as providedby subsection (2) and subsection (5) of section 22 (viz ;by crediting to the Special Reserve of the Bank).
such sum as may be authorised by resolution of theHouse of Representatives to be granted out of the'Consolidated Fund of Ceylon for the entitlement of thebad and doubful debts in excess of the assets of agyco-operative bank which is dissolved under the provisionsof this Act; and
lend to the Bank such sums as may be authorised byresolution passed by the House of Representatives to be lentto the Bank out of the Consolidated Fund of Ceylon for thegranting of long-term or medium-term loans by the Bank.
(2) Every sum lent out of the Consolidated Fund of Ceylon to theBank under paragraph (b) of subsection (i) shall be repaid bythe Bank in actfbrdance with such tergis and conditions asmay be determined by the Minister with the concurrence ofthe Minister of Finance.’
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~ “ ” » ~ —
Section 2 j provides that the Minister of Financ^shall guaranteethe repaymenrof.any sum due to the Bank on any loan, overdraft orother accommodation granted by the Bank with the approval of theMinister and the repayment of any sum due on debentures issued,under this Act.'
Section 23 provides for the dissolution of the Co-operativeFederal Bank of Ceylon Ltd., and for the assets and liabilities of theco-operative Federal Bank Ltd., to be the assets and liabilities of theBank.
Section 25 says –
no co-operative society shall, unless exempted in writing bythe Commissioner of Co-operative Development, deposit itsfunds in or maintain any current or deposit account with anycommercial bank other than the Bank ;
No co-operative society shall, except with the writtenapproval of the Commissioner of Co-operative Development,obtain a medium-term or long-term loan from anycommercial bank other than the Bank.
Section 32 states that –
(1) There shall be a General Manager of the Bank who shall bethe Bank's chief executive officer and who shall conduct thebusiness of the Bank under the general supervision andcontrol of the Board. . .'
Section 34 states –
(1) The accounts of the Bank for each financial year shall besubmitted to the Auditor-General for audit. . . .'
Section 36 vested in the General Manager of the Bank or anyaccountant or any other officer of the Bank authorised by theGeneral Manager, the power to examine the books and accounts ofany co-operative society to which and of any other person to whoma loan has been granted by the Bank.
Section 37 provides for recommendation to the Commissioner ofCo-operative Development by*the Board for action to be taken todissolve and liquidate a co-operative society against which theGeneral Manager has reported adversely.
SC Wijeratne and Another v. The People's Bank and Another (Sharvananda, J. I 9
• *•
By section 4^, as amended by section 57 of the Act No. 18 of1965 the Bank become liable for payment of income tax.
Section 42(a) which is a new section enacted by the People'sBank (Amendmenl) Act No. 61/80 provides –
' the Minister may from time to time give general or special
directions in writing to the Board as to the performance of the
duties and the exercise of powers of the Bank and it shall be the
duty of the Board to comply with such directions
Section 71 of the Finance Act No. 11/63 as amended by LawNo. 16/73 authorises the Bank to acquire in whole or any part anyagricultural, residence or business premises, if the Bank wassatisfied that these premises were-
sold in execution of a mortgage decree ;
transferred by the owner of the premises to any other personin satisfaction of a debt or by way of conditional transfer.
• .
Counsel for the petitioner pointed to the inter-connection of theactivities of the Bank and the Co-operative Movement andsubmitted that the Bank was established principally for the purposeof developing the Co-operative Movement in Sri Lanka and forproviding financial assistance to co-operative societies and otherinstitutions and for undertaking performance of the objectives of theCo-operative Federal Bank of Ceylon Ltd. He also contended that*the Co-operative’Movement in Sri Lanka was from its inceptionorganised as a part of * executive and administrative ' action in SriLanka and that the Bank was an agency to further or promote. tf>eco-operative movement in Sri Lanka and that hence the Bank wasan organ of Government and/or administrative agency of the State.
A co-operative society is a voluntary organisation of privatepersons in a group to work on an equal footing for the promotion oftheir economic interest. It aims at a common end which is of benefitto all members of the society. It works on the principle of mutualhelp. The intention of the Co-operative Movement is to secure formen of small means the same advantages which a wealthier personbuying, selling or bor^ving on a bigger scale and with substantialproperty to support his credit, can enjof in his independentdealings. Its main object is the promotion of the economic interest
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of its members in accordance with co-operative principles. On thisview of the Co-operative Movement it is a matter of State policy toencourage the financing of co-operative societies and inimplementation of that policy to give State aid by way of financialfacilities and funds. In this background it cannfet be said that bygiving such State aid, the State participates in the activities of theCo-operative Movement or societies and involves itself in the affairsof the society. However laudable the State policy be co-operativesocieties who are the beneficiaries of such policy do not therebybecome departments of State and their action cannot becharacterised as State action.
It is however not necessary in the circumstances of this case togo into the question of legal character of the relationship of thePeople's Bank and the Co-operative Movement in Sri Lanka as thepetitioners' service as Security Officers of the Bank has noconnections to that relationship.
When private individuals or groups are endowed by the State withpowers or functions governmental in nature, they become agenciesor instrumentalities of the State, only when exercising these powersor performing these functions.
A public corporation can for certain purposes serve as an agentor surrogate of the State. It all depends on the nature of itsfunctions, whether it is performing a governmental function or not.It may happen that certain of its functions may £e governmental,whilst the others may not. When a public corporation is performingit| non-governmental functions its action does not have theattributes of State action or “ executive or administrative action '.When the Bank performs its functions of redemption or acquisitionof land, under Section 71 of the Finance Act No. 11/63, it may beurged with certain cogency that such action of the Bank constitutes' executive or administrative action '. But in this case, thepetitioners were not employed in the service of the Bank for theperformance of duties connected with the exercise by the Bank ofits powers under the said section 71.
It is quite apparent from the material before us that the major roleof the 1st respondent is in the*commercial sptoere and that its mainrole is that of a commercial bank. Such commercial activities of theBank cannot qualify as State actions. Having regard to the duties
SC Wijeratne and Another v. The People s Bank and Another (Sharvananda. J.) 11
performed by the petitioners it appears that the petitioners areemployed by the Bank in connection with their .commercialactivities. In that perspective their employment in the Bank cannotbe stamped as State employment. There is no nexus between theState and the banking activities of the 1st respondent for suchaction of the Banl? to be treated as that of the State. The State isnot involved in the commercial activities of the 1 st respondent.
State action comprehends official action of all governmentofficers. The more difficult problem arises when the label is soughtto be affixed to conduct of private individuals or groups with whomGovernment is somehow 'involved" or who allegedly.exercisegovernment authority. In cases where the State's only significantinvolvement is through financial support or limited regulation of theprivate entity it may be well to inquire whether the State has sothoroughly insinuated itself into the operations of the enterprise.
i
Government which represents the executive authority of theState may act through the instrumentality or agency of naturalpersons or it may employ the instrumentality or agency of juridicalpersons to carry out its functions.
In the early days when the Government had limited traditionalfunctions it could carry out these functions through civil servantsconsisting of natural persons. But with the concept of welfare Statesuperseding that of a police State it was found that the civil servicewas not sufficient to handle the new services, which requiredinitiative and expertise for their effective administration. The publiccorporations were thus conceived to operate the new publicenterprises. Parliament thus came to create autonomouscorporations. Government was thus able to handle the n#ewproblems through the medium of public Corporations which,subject to certain limitations with regard to carrying of Governmentpolicy, were free to carry out their functions in their own way. Unlikea department of Government these corporations were not tramelledby the all pervasive control of the Government. The measure ofcontrol exercised by the Government over these corporations mayvary from corporation to corporation according to exigencies ofeach case. It is in this background that the question arises as howto determine whether a particular corporation is acting asinstrumentality or d$ency of the (Jovemm^nt for its action to belabelled ' executive or administrative action '.
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When a corporation is wholly controlled by Government not onlyin its policy making but also in execution of its functions it would bean instrumentality or agency of the State. On the other hand wherethe Directors of the Corporation though appointed by thegovernment with a direction to carry out governmental policies areotherwise free* from the fetters of governmerttal control in thedischarge of their functions, the corporation cannot be treated asinstrumentality or agency of the State. It is not possible to formulatean all inclusive or exhaustive test to determine whether thecorporation can be identified with the government. Mere finding ofsome control by the State would not be determinative of thequestion. The existence of deep and pervasive State control mayafford an indication that a corporation is a State agency.
Then again when a corporation is endowed by the State withpowers or functions governmental in nature it may become an(agency or instrumentality of the State when exercising thosepowers or performing those functions. With the development of the 'welfare State it has become difficult to define what functions aregovernmental and what are not. Governmental purposes include 'the*traditional activities of government, for example, defence,foreign affairs, maintenance of law and order and administration ofjustice. Since Victorian times there has been a vast extension of thepowers and purposes of government in all democratic countries.Indeed, it is difficult in modern complex societies readily to discernany activity which could not constitute a purpose or function ofgovernment. Wilmer, L.J. pointed out in Pfizer v. Minister of Healthfa) that since mid-Victorian times there has beer a revolution inpolitical thought and ' a totally differnt conception prevails today asto //hat is and what is not within the functions of GovernmentDouglas, J. observed to the same effect in New York v. UnitedStates (4). 'A State's projects is as much a legitimategovernmental activity where it is traditional or akin to privateenterprise or conducted for profit'. If the functions of thecorporations are of public importance and closely related togovernmental functions it would be a relevant factor in categorisingthe corporation as an instrumentality or agency of the Government.The public nature of the functions, if impregnated withgovernmental character or tied with the gover^gient may render thecorporation an agency 6f the government.
SC Wyeratne and Another v. The People's Bank and Another (Sharvananda, J) 13
• *•
It will thus be^een that there are several factors which may haveto be considered in determining whether a corporation's an agencyor instrumentality of the government. Bhagawathi, J. in his verylucid judgement in Ramana v. I.A. Authority of India (5).summarised sometof those factors ' whether there is any financialassistance given by the State, and if so. what is the magnitude ofsuch assistance whether there is any other form of assistance givenby the State, and if so, whether it is of the usual kind or it isextraordinary, whether there is any control of the management andpolicies of the corporation by the State and what is the nature andextent of such control, whether the corporation enjoys Stateconferred or State-protected monopoly status and whether thefunctions carried out by the corporation are public functions closelyrelated to governmental functions
He further observed that this particularisation of relevant factorsis however not exhaustive and by its very nature it cannot be,because with increasing assumption of new tasks', growingcomplexities of management and administration and the necessityof continuing adjustment in relation between the corporation anflgovernment calling for flexibility, adaptability and innovative skills, itis not possible to make an exhaustive enumeration of the testswhich would invariably and in all cases provide an unfailing answerto the question whether a corporation is governmentalinstrumentality or agency. Consideration of any single factor maynot suffice, a court will have to consider the cumulative effect o£these various faotors to arrive at its decision. * It is not enough toexamine seriatim each of the factors upon which a claimant reliesand to dismiss each as being individually insufficient to suppoi) afinding of State action. It is the aggregate that is controlling'-perDouglas, J. in Jackson v. Metropolitan Edition Co. (6). It is thecumulative effect of all the relevant factors that determines themeasure of State responsibility.
Bearing the above considerations in mind, I cannot find any Stateaction involved in the People's Bank reorganising its securityservices and formulating its own scheme of recruitment to carry onits banking activity. The petitioners are employed in connexion withthe commercial activity of the Banl^ In the circumstances even ifthere is substance in#their allegation of discrimination in the matterof their appointment, in the absence of executive or administrative
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action, their grievance cannot form the subject-matter of anapplication.to this Court for relief under Artiele 126 of theConstitution. Their application to this Court is misconceived.Accordingly, I uphold the preliminary objection of the 1strespondent and dismiss each of the applications-S.C. No. 63/83and S.C. No. 65/83 with half costs.
WANASUNDERA, J.-l agree.
COLIN-THOME, J.-l agree.
SOZA, J.-l agree.
RANASINGHE, J.-l agree.
Preliminary objection upheld and applications dismissed.