World Bank Not a Government Agency: Delhi High Court

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Studycafe | Oct 25, 2021 | Views 211799

World Bank Not a Government Agency: Delhi High Court

World Bank Not a Government Agency: Delhi High Court

According to Article 12 of the Indian Constitution, the State includes the Union government, the government of each state, along with parliament, state legislatures, and all other local or other authorities within the Indian boundary or control of India. The definition seems easy enough. However, it is so complex and important that it is considered as the Magna Carta of the Indian Constitution which allows citizens to approach the courts in case of Fundamental rights violation by any authority which is a state. The definition is always in discussion before the courts to decide if a particular organization is under Article 12 or not. One of such incidents surfaced recently when Delhi High Court had to decide if World Bank is a government agency under the State definition of Article 12.

The issue arose when North Delhi Municipal Corporation rejected A2ZInfra Services Company’s bid virtue to a clause that debarred any re-tendering by a company that is debarred by the government or any government agency. The petitioner company approached Delhi High Court praying to quash and set aside the rejection by NDMC. They contended that debarment from World Bank cannot be made a ground for not allowing them to bid a World Bank is not a government agency. The contention on behalf of NDMC was such that as World Bank has Indian representatives as Finance Minister on their body, it is a government agency. They also referred to the voting rights of India in the World Bank.

These contentions were countered by the petitioner company which cited the case of Philip W. Sedgwick vs. Merit Systems Protection Board in which the American Supreme Court had refused to hold World Bank as a Federal agency disregarding the fact that 25% of World Bank’s stake is American. The petitioners also referred to M/s GVR Infra Projects Limited vs. Union of India & Anr., in which the court had rejected similar contentions of NHAI and rejected the idea of holding World Bank as a government agency. Reliance was placed on this case, as the petitioner submitted that by no stretch, World Bank can be considered as a government agency or any entity controlled by Government.

The court having heard both the parties held that World Bank or any international body cannot be considered as State or government agency. The division bench observed that agency means an extended limb. Hence, a government agency would mean an extended limb of the Indian government. To hold any organization a government agency, there must be a “pervasive and actual control” of the Indian Government. The court proceeds to comment that as there is no control of the government of India over the World Bank, by no stretch of the imagination, the organization can be regarded as an extended limb or agency of the government of India. For the same reasons, such international bodies are held not amenable to writ jurisdiction of the High Court, the bench commented.

The court finally concluded that Petitioner Company cannot be stopped from bidding under these terms and conditions. However, the NDMC is free to amend its clauses to reject such bidding applications by specifically barring the companies who have been barred by any international organization.

It is important to give the readers a window into the definition of a state. In Sukhdev v. Bhagatram, it was held that the existence of deep and pervasive State control indicates State agency and execution of any important public function would also bring any organization under State. However, as international bodies like World Bank do not run on Indian Govt. instructions, they cannot be said to be under State. International bodies like World Bank are not bound by the directions issued by GOI and the Government of India does not exercise control over, actual or pervasive, their affairs. Therefore, we are of the view that World Bank or any other international bodies cannot be considered as a Government agency.

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