Air Force Group Insurance Society is ‘State’ Under Article 12: Supreme Court

The Supreme Court recently held that the Air Force Group Insurance Society (AFGIS), a welfare and insurance body for Indian Air Force personnel, is 'State' under Article 12 of the Constitution. [Ravi Khokhar v. Union of India]

In a judgment delivered on March 12, a Bench of Justices Sanjay Karol and Vipul M Pancholi found that the government exercises deep and pervasive control over AFGIS.

It noted that the society was established with the sanction of the President of India and that its governing body consists of serving Indian Air Force officers.

"Consequent to the above discussion, AFGIS would be ‘State’ under Article 12. The writ petition before the High Court accordingly, maintainable. The said writ petition on the grievance of the appellants is restored. The High Court is requested to decide the same expeditiously keeping in view the fact that the same has been filed in the year 2017. Appeal is allowed,” the Court said.

The Bench observed that the nature of the functions performed by the society is public in nature since it provides insurance protection and welfare support to defence personnel.

“We are of the considered view that AFGIS does indeed perform a public duty. The protection and welfare of armed forces personnel is a core government function,” the judgment stated.

The Court was hearing appeals filed by employees of AFGIS challenging a ruling of the Delhi High Court which had held that the society was not 'State' and that writ petitions against it were therefore not maintainable.

The dispute arose after the Board of Trustees of AFGIS initially resolved to revise employees’ pay scales in accordance with the Sixth Central Pay Commission, but later decided to delink its pay structures from Central government pay commissions and asked employees to accept revised service terms.

Aggrieved employees approached the Delhi High Court seeking enforcement of pay parity and other service benefits.

In February 2023, the High Court dismissed the petitions, observing that AFGIS is a society registered under the Societies Registration Act, funded through member contributions and governed by its own rules

The High Court held that the presence of Air Force officers on its governing body did not amount to deep or pervasive governmental control.

Challenging this ruling, the employees approached the Supreme Court.

The top court held that the facts of the case demonstrated deep and pervasive governmental control over AFGIS, bringing it within the ambit of 'State' under Article 12.

It noted that the President of India had sanctioned the establishment of AFGIS and approved its deputation rules. It also observed that the Principal Director of AFGIS is required to regularly apprise the Assistant Chief of Air Staff regarding the society’s cash flow, ensuring monitoring by the Indian Air Force.

"In our view, a perusal of the documents extracted supra make out a case for AFGIS to be considered ‘State’ within the meaning of Article 12. For the aspect of deep and pervasive control, we observe that the Hon’ble President of India granted sanction for AFGIS to be established and also specifically approved the deputation Rules; the Principal Director (AFGIS), every month is to apprise the Assistant Chief of Air Staff regarding the cash flow of AFGIS which ensures monitoring by a core member of the IAF on the activities of AFGIS; the membership and deductions arising therefrom are a compulsory aspect of serving in the IAF, meaning thereby that there is no choice of the individual officer in that matter and instead is a mandate from the employer," the Court said.

It further observed that the Board of Trustees and the Managing Committee consist entirely of serving Air Force officers deputed to the society, meaning that its administration remains in the hands of government servants.

While the appellants argued that financial control existed because insurance contributions were deducted from salaries paid out of the Consolidated Fund of India, the Bench rejected this contention.

"We are unable to accept this contention. It may be that in so far as financial aspects of AFGIS are concerned, the Government may not have a direct role however for a body to be held to be a ‘State’ it is the cumulative effect and impact of deep and pervasive control, financial and administrative control along with other factors such as carrying out of public duty,” the judgment stated.

The Bench also noted that AFGIS had earlier described itself as a government entity while seeking exemption from service tax on the ground that it was under the control of the Ministry of Defence.

“In effect, by opposing the challenge of the appellants, AFGIS has resiled from its own statement. We fail to understand an organisation can be ‘Government’ for one purpose and not be, for another purpose,”the Court remarked.

The Court thus set aside the High Court ruling and sent the matter back to the High Court asking it to decide the case expeditiously.

Senior Advocate Shoeb Alam and advocates Sourav Roy, Udai Khanna appeared for the Air Force Group Insurance Society

[Read Judgment]