CENTRAL INFORMATION COMMISSIONB- Wing, 2nd Floor,

August Kranti Bhavan, Bhikaji Cama Place,New Delhi - 110066

Complaint No. CIC/SM/C/2010/000435

Relevant Facts emerging from the Complaint:

Complainant : Mr. Madan Lal, M- 202, Anupam Apartment,

East Arjun Nagar, Shahdara, Delhi- 110032

Respondent : Deputy Manager, Hardicon Limited, D- 28, Flatted Factories Complex, Jhandewalan, New Delhi- 110055

RTI application filed on : 27/01/2010Reply received from Respondent : 25/02/2010 Complaint filed on : 22/03/2010

Information Sought:1. Statement of Income and Expenditure of Hardicon Limited (“Hardicon”) from

2000- 01 to 2008- 09 in the format given;2. Name of Managing Director(s), salary, perks, conveyance and taxi charges paid to

them during aforesaid period;3. Whether Hardicon had paid fees for consultancy work assigned to outside

person(s)/ ex- employees of Hardicon. If so, indicate the name(s) and amount paid to them during aforesaid period; and

4. Amount of grants received from Government/ IFCI and other stakeholders during last 15 years.

Reply received from Respondent: The Deputy Manager informed the Complainant that Hardicon did not come within the purview of the RTI Act.

Grounds for the Complaint:The information sought by the Complainant was denied to him on the basis that provisions of the RTI Act were not applicable to Hardicon.

Facts leading to Full Bench Hearing held on April 8, 2011:The matter was heard by the Single Bench of Mr. Satyananda Mishra, (present) Chief Information Commissioner on 29/10/2010. The hearing was inconclusive as the Respondent submitted that the matter be adjourned to another date so that it could provide its comments. In view of the legal issue involved whether the Respondent i.e.

Hardicon is a public authority under Section 2(h) of the RTI Act, a Full Bench comprising of Mr. Satyananda Mishra, Chief Information Commissioner, Mr. M. L. Sharma, Information Commissioner and Mr. Shailesh Gandhi, Information Commissioner was constituted to hear the matter on 23/12/2010.

However, the matter was postponed on two occasions i.e. 23/12/2010 and 28/03/2011. Subsequently, the matter was fixed for hearing on 08/04/2011. Relevant Facts emerging during Full Bench Hearing held on April 8, 2011: The following were present:Complainant: AbsentRespondent: Counsel for Hardicon Limited

The Counsel appearing on behalf of the Respondent contended that Hardicon was not a ‘public authority’ as defined under Section 2(h) of the RTI Act. He argued that Hardicon was neither controlled nor substantially financed by the appropriate Government. He stated that Hardicon was financed by its shareholders who were not the “appropriate Government” and therefore, Hardicon was not a ‘public authority’ as defined under Section 2 (h) of the RTI Act. In this regard, he relied on the decision of Muralidhar, J. of the High Court of Delhi (the “Delhi HC”) in Indian Institute of Banking and Finance v. Mukul Srivastava dated 27/07/2010 in W. P. (C) 1856/2010 and C. Ms. 3713, 5390, 5682/2010 and the decisions of the Commission in Manoj Kumar Kamra v. IL & FS CIC/AT/C/2007/00091 dated 15/02/2008 and Indubala Agarwal v. National Commodity & Derivatives Exchange Limited CIC/LS/C/2009/000575 dated 08/02/2010. The Counsel for the Respondent submitted written submissions along with copies of the decisions cited above to the Commission.

The decision was reserved during the hearing held on 08/04/2011. The majority decision comprises of Sayananda Mishra and Shri Shailesh Gandhi while the minority decision is by brother IC Shri M.L.Sharma.

Decision of the Majority as announced on 21st April, 2011:

Section 2(h) of the RTI Act provides as follows:

“2. In this Act, unless the context otherwise requires,- …

(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 Organisation substantially financed,

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directly or indirectly by funds provided by the appropriate Government;” (Emphasis Added)

On a bare reading of Section 2(h) of the RTI Act, the Commission noted that Hardicon, a company incorporated under the provisions of the Companies Act, 1956, clearly does not come within the scope of Subsection (a), (b), (c) and (d) of Section 2(h) of the RTI Act. Moreover, Hardicon is not a non- Governmental Organisation and therefore does not fall within the ambit of Section 2(h)(ii) of the RTI Act. Therefore, the main issue framed by the Commission is whether Hardicon is a ‘public authority’ as per Section 2(h)(i) of the RTI Act.

From a plain reading of Section 2(h)(i) of the RTI Act, it appears that to come within the purview of ‘public authority’ under Section 2(h) of the RTI Act, it must be established inter alia that the entity in question is substantially financed directly or indirectly by funds provided by the Appropriate Government, or controlled by the Appropriate Government. The word “financed” used in Section 2(h)(i) of the RTI Act is qualified by the word “substantially” indicating a degree of financing. The term “substantially financed” has not been defined in the RTI Act. However Parliament has stated that a body would be a Public authority if it is either owned, controlled or substantially financed, directly or indirectly by funds provided by the Appropriate Government. A body where any equity holder contributes over 50% equity is clearly owned by such equity holder. Hence a meaning has to given to the word ‘substantially financed.’ Since a body where over 50% equity is contributed by the appropriate Government would fall under the definition of a body ‘owned’ by Government, it stands to reason that equity finance of less than 50% would qualify to be considered as ‘substantially financed’ and the lower limit would be set at what may be considered to be not substantial. Thus it can be determined that a level of equity finance between 50% and a lower limit which would be determined would qualify as ‘substantial finance’.

In Indian Olympic Association v. Veeresh Mallik & Ors. W. P. (C) 876/2007, S. Ravindra Bhat, J., of the Delhi HC noted the dictionary meaning of the term “financing” viz. the Black’s Law Dictionary states that “Finance”, as a verb, means ‘to supply with funds, through the payment of cash or issuance of stocks, bonds, notes, or mortgages, to provide with capital or loan money as needed to carry on business’. It was observed that to discover the meaning of the expression(s), since it was undefined, the common parlance test, as well as the contextual setting (of the term(s)), having regard to the objects of the RTI Act, were to be examined. The expression “financing” has a wide import. It is not inhibited by considerations such as “revenue” or “capital" funding. An organization may be infused with public funds, the character of which is such that the vital functioning of the institution depends on it. It may also be the recipient of special attention, together with funds, which were otherwise unavailable to all organizations or institutions of a similar class. Likewise, the fact that financing is by way of a loan, is immaterial, if the conditions for such advance are not available to others or organizations involved in the same activity. S. Ravindra Bhat J., observed that public funds, for whatever reasons, retain their imprint or character as an obligation of fruition of the purposes for which the amounts are given. There is, therefore, the imperative in the value of ensuring transparency, to secure such ends. This judgment clearly recognizes ‘supply of funds…to provide with capital,’ as financing.

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The Delhi HC in the Indian Olympic Association Case held that what amounts to “substantial” financing cannot be straight- jacketed into a rigid formula of universal application and that each case would necessarily have to be examined on its own facts. This decision was relied upon by S. Muralidhar J., of the Delhi HC in Krishak Bharti Cooperative Limited v. Ramesh Chander Bawa W. P. (C) 6129/2007 in decision dated 14/05/2010 wherein while interpreting Section 2(h)(i) of the RTI Act, it was held that it must be shown that financing of a body by the Government is not insubstantial. It will depend on the facts and circumstances of the case. Reference was made to the dictionary meanings of the word “substantial” and it was noted that the word substantial is not synonymous with dominant or majority. It is closer to “material” or “important” or “of considerable value”. "Substantially" is closer to "essentially". Further, S. Muralidhar J., in IFCI Limited v. Ravinder Balwani W. P. (C) 4596/2007 in decision dated 17/08/2010 reiterated that in the context of the RTI Act it would be sufficient to demonstrate that the financing of the body to the extent of 23.6% by the Central Government through its agencies and instrumentalities is not insubstantial. The Hon’ble Judge held in para 32 therein as follows:

“Consequently, this Court finds merit in the contention that there is both "control" and "substantial financing" of the IFCI Ltd. by the Central Government and therefore answers the description of a 'public authority' under Section 2(h)(d)(i) of the RTI Act.”

At the hearing held before the Commission on 08/04/2011, the Counsel for the Respondent provided the shareholding pattern of Hardicon, which has been reproduced as follows:

S. No.

Name of the Shareholder Number of Shares

Value Percentage

1. IFCI Limited 2600 2,60,000 262. Small Industries Development Bank of

India1250 1,25,000 12.5

3. ICICI Bank Limited 1250 1,25,000 12.54. Haryana State Industrial & Infra.

Development Corporation Limited 800 80,000 8

5. Haryana Financial Corporation 800 80,000 86. Delhi Financial Corporation 800 80,000 87. Haryana State Small Industries & Export

Corporation Limited700 70,000 7

8. Punjab National Bank 650 65,000 6.59. Oriental Bank of Commerce 500 50,000 510. State Bank of India 250 25,000 2.511. Central Bank of India 100 10,000 112. UCO Bank 100 10,000 113. Bank of India 100 10,000 114. Union Bank of India 100 10,000 1

Total 10,000 1,000,000 100

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The Counsel for the Respondent submitted before the Commission that there was no direct financing by the appropriate Government in Hardicon, either by way of equity or otherwise. However, he stated that except 38.5% (which is held by IFCI Limited and ICICI Bank Limited), the remaining shares of Hardicon i.e. 61.5% (approximately) are held by public sector banks/ undertakings. He contended inter alia that Hardicon is not substantially financed by the appropriate Government and that it has never received any direct or indirect funding from the appropriate Government. Thus by the admission of the counsel 61.5% of the equity of Hardicon has been contributed by Government owned entities.

It was argued before the Commission that the Government in its sovereign functions creates a number of public authorities to engage in commercial and profitable business activities and such entities are ‘public authorities’ in terms of Section 2(h) of the RTI Act. However, when such public authorities, as part of their business activity create other commercial bodies or acquire stakes therein, the latter would be missing a key element which the former had and that is direct or indirect involvement of the appropriate Government. The business activity of a public authority (which is not appropriate Government), even if it results in creation of or participation in another commercial body or entity, will not qualify the latter as a ‘public authority’.

The Counsel for the Respondent placed reliance on Paragraph 22 of the decision of the Commission in Manoj Kumar Kamra v. IL & FS CIC/AT/C/2007/00091 dated 15/02/20. This decision was followed in Indubala Agarwal v. National Commodity & Derivatives Exchange Limited CIC/LS/C/2009/000575 vide order dated 08/02/2010. It was observed in the Manoj Kumar Kamra Case that business funding of a public authority created by an appropriate Government will not qualify to be indirect funding by an appropriate Government. The source of fund, whether direct or indirect, which results in the creation of a body owned, controlled or substantially financed must “directly” emanate from an appropriate Government and not from a public authority created by such appropriate Government. The presence of direct funding action by an appropriate Government- regardless of whether the funding is through direct means or indirect- has to be established before a commercial entity receiving such funds can be called a public authority under the RTI Act. On this bases, IL & FS was not held to be a ‘public authority’ under Section 2(h)(i) of the RTI Act in the Manoj Kumar Kamra Case. This rationale was relied upon in the Indubala Agarwal Case to hold that NCEDX was not a ‘public authority’ under Section 2(h)(i) of the RTI Act.

It will have to be seen whether Hardicon is a (i) body owned, controlled or substantially financed; directly or indirectly by funds provided by the appropriate government. Funding can be by way of providing a equity, or giving in kind land or concessions when an entity is being set up. Or it could be by way of giving annual grants or It is evident that the ‘appropriate government’ has not directly funded Hardicon. However Parliament has included the condition of indirect financing as distinct from direct financing. In the instant case twelve equity holders,- which are admittedly Government owned entities,- have contributed 61.5% of the equity of Hardicon, and this appears to meet the criteria of ‘indirect financing’ as defined in the law. At 61.5% there can be no doubt that this is substantial.

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If Government- owned entity or a group of such entities together substantially finance another body, then such financing must be considered as indirect substantial financing provided by the Appropriate Government under Section 2(h)(i) of the RTI Act. Therefore, where public sector banks, corporations, government companies, etc, which are Government- owned, make a substantial investment in another body, then such body may be a ‘public authority’ under Section 2(h)(i) of the RTI Act. If these public funds are then invested by this entity by way of business funding or creation of another body to a substantial extent, then such body ought to be accountable to the public since public funds/money is being utilized for the functioning of created entity. In other words, such a body comes into existence because of indirect substantially financing provided by the appropriate Government and may come within the purview of Section 2(h)(i) of the RTI Act.

There is a duty upon the Commission to ensure that entities wherein significant public funds/ money have been invested, whether directly or indirectly, are made accountable to the public, subject to the provisions of the RTI Act. Citizens have the fundamental right to know and obtain information regarding their funds and the manner in which they have been utilized. This is imperative for transparency. Any other interpretation would mean neglecting the words ‘indirectly’ which has been used by Parliament.

The Counsel for the Respondent has also cited decision dated 27/07/2010 of Muralidhar, J. of the Delhi HC in Indian Institute of Banking and Finance v. Mukul Srivastava W. P. (C) 1856/2010. S. Muralidhar, J. was faced with the question as to whether the IIBF is a public authority under the RTI Act or not. The Court decided the question in the negative and the relevant excerpts from the judgment maybe reproduced herein for the sake of clarity:

“12. What appears to have weighed with the CIC is that the subscription received by the Petitioner from its member banks and the fees collected by it from the candidates appearing in the examinations conducted by it tantamounts to "substantial financing directly or indirectly by the appropriate Government". Section 2(h)(d)(ii) of the RTI Act as it reads is unambiguous. The substantial financing of the Petitioner directly or indirectly has to be by "the appropriate Government" and not by any other public authority.

13. It is possible that the member banks, for instance, the State Bank of India ('SBI'), is itself a public authority. However, 'substantial financing' by the SBI would itself not make the Petitioner a 'public authority'. It would have to be shown that the appropriate Government itself directly or indirectly finances or has financed the Petitioner.”

Not surprisingly, it has been contested by the Respondent that merely because various public authorities (that is, the Public Sector Banks in the present case) are funding the Hardicon Company does not mean that Hardicon is a public authority. However, there are many reasons as to why such a contention needs to be rejected at the outset. Firstly, in that case, the IIBF used to get its funding from the fees collected from the candidates who took the examinations conducted by the IIBF. A majority of the candidates who appear in those examinations are from public sector banks. The member banks and financial

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institutions give an annual subscription to the Petitioner Institute (as in that case) and those appearing in the examinations pay fees to the Petitioner for the service that it provides. Thus, the very basis for the Delhi High Court in reaching its decision is diametrical as compared to the basis on which we have decided the present appeal before the Commission. Secondly, the factual matrix of the two cases is entirely different and to cherry-pick certain excerpts from the IIBF judgment (supra) would be a bad practice. Thirdly, it is noteworthy that both the IIBF and the IFCI judgments have been delivered by the same Hon’ble Judge and it is most respectfully believed that the Hon’ble Judge could not have taken two conflicting stands. The kink which may appear to an unreasonable reader shall be ironed out if he carefully notices that whilst the IFCI judgment dealt at length with Clause (i) of Section 2(h) of the RTI Act, the IIBF judgment was dealing with Clause (ii) of Section 2(h) which relates to “Non-Government organizations” only. Clearly, that is not the case in the present Complaint before us. Thus, the reliance of the Respondent on this case is meritless and tenuous.

It may be noted that the RTI Act itself contemplates a situation such as the present one and that is why the words “directly or indirectly” have been appended to “the funds provided by the appropriate government”. It is a conscious effort on part of the Legislature to have done so as the expression “directly or indirectly” is absent so far as the word “control” is concerned. Otherwise, any entity, body or institution having even the slightest of indirect or the remotest of control exercised by the appropriate government would have been amenable to the RTI Act.

In the instant case, the financing of Hardicon by the appropriate Government(s) indirectly is to the extent of 30.8% (approximately). Though 30.8% may not constitute dominant or majority financing but it is certainly a substantial sum. In view of the reasons described above, Hardicon is a ‘public authority’ under Section 2(h)(i) of the RTI Act.

The Complaint is allowed.

The Commission rules that Hardicon Limited is a Public authority as defined under Section 2 (h) of the RTI Act.

The Managing Director of Hardicon Limited is directed to appoint a PIO and First appellate authority as per RTI Act within 15 days of receipt of this order. The PIO so appointed is directed to provide the information sought by the appellant within 30 days The Managing Director will also ensure compliance with Section 4 of the RTI Act in all respects within 120 days of this order. .

Satyananda Mishra Shailesh Gandhi Chief Information Commissioner Information Commissioner Authenticated True Copies

Aakash Deep ChakravartiAdditional Registrar

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CENTRAL INFORMATION COMMISSIONRoom No. 308, B-Wing, August Kranti Bhawan, Bhikaji Cama Place, New Delhi-110066

File No.CIC/SM/C/2010/000435(Madan Lal –Vs- Hardicon Ltd.)

Dated : 26.8.2011

I have read, with respect, the detailed order passed by my learned colleagues Shri S.N. Mishra, CIC, and Shri Shailesh Gandhi, IC. I have tried hard to persuade myself to agree with them but, regrettably, without success. My learned colleagues have come to the conclusion that Hardicon is a “Public Authority’ u/s 2(h) of the RTI Act for the reason that it is indirectly financed by other public authorities which, in turn, have been financed by the “Appropriate Government”. I have my serious reservations about the view taken by my learned colleagues for the reasons briefly set out hereinafter.

2. It may be recalled that the appellant had sought certain informations such as income and expenditure statement of Hardicon Ltd. etc. This information was denied by ‘Hardicon’ on the footing that it was not a Public Authority. Thereupon, the appellant filed the present complaint.

3. The share-holding pattern of Hardicon has been depicted at page 04 of the majority order which reveals that shares are being held by the Central/State PSUs. Importantly, neither the Central Government nor any State Government is the share holder.

4. I agree with my learned colleagues that Hardicon does not fall in the mischief of sub clauses (a), (b), (c) & (d) of clause (h) of section 2. They have, however, held that Hardicon is substantially financed by the “Appropriate Government”. The real question is whether the PSUs mentioned in para 10 of the majority order can be construed as “Appropriate Government”.

5. Suffice it to say that the expression “Appropriate Government” means Central Government or the State Governments, or a Union Territory Administration as per section 2(a). It is incontrovertible that none of these entities has financed Hardicon directly.

6. The only question that is now left to determine is whether the ‘Appropriate Government’ has financed Hardicon “indirectly”. My learned colleagues have taken the view that as ‘Appropriate Government’ has pervasive control over its PSUs and the monies of these PSUs have gone into the share capital of Hardicon, it can be construed as ‘indirect’ financing of Hardicon by the “Appropriate Government”. I respectfully differ from this reasoning. A Government is a Government and no PSU, howsoever big, can fall into its shoes. A PSU cannot be a substitute for or analogous to the ‘Appropriate Government’ in the framework of the RTI Act. It is trite that investment by PSUs in the capital market is purely a commercial activity which is distinct and distinguishable from ‘financing’, as understood in common parlance. For Hardicon to qualify as public authority, financing – direct or indirect - has necessarily to come from an “Appropriate Government” but this is not the case. In the absence of judicial dicta as to the true

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meaning of ‘indirect’ financing by the ‘Appropriate Government’, I deem it expedient to go by the common sense meaning of the expression ‘indirect financing’ which, to my mind, is that the Government money should bring to life an entity. To illustrate, if a Ministry or Department of the Central Government finances an entity directly, it would be a case of direct financing. However, if the funds of the Central Government are availed of by an entity through an instrumentality of the Central Government, say, Director of a Central Government sponsored project, it would be a case of indirect financing. This would hold good for the State Government and its instrumentalities also. The monies invested by the PSUs in the share capital cannot be construed as indirect Financing by the ‘Appropriate Government’; it is a commercial activity. For this simple reason, it is difficult for me to hold that Hardicon is a public authority in terms of section 2(h) of the RTI Act.

7. In this context, I would also like to rely on the decision of my learned retired colleague Shri A.N. Tewari who in file No. CIC/AT/C/2007/00091(Manoj Kumar Kamra –Vs- M/s IL&FS), has held that regardless of the fact that the Government of India was holding 46% of the total share-holding of IL&FS, it could not be designated as Public Authority. Paras 17, 18 & 19 of the decision are extracted below :-

“17. A plain reading of this sub-section shows that the key element in the creation of public authority in all the 3 situations and the prime-mover in all three, is “appropriate government.” That is to say, unless it was proved – in respect of Section 2(h) (i) – that a commercial entity was owned, controlled or substantially financed by such “appropriate government”, such entity could not be called a public authority. The direct or the indirect presence of an appropriate government as the key component of the share-holding of such commercial entity and without the presence of an appropriate government it ceases to be a public authority.

18. It is common knowledge that government in its sovereign functions creates a number of public authorities to engage in commercial and even profitable business activities. Such entities are doubtless pubic authorities in terms of Section 2(h). But when such public authorities as part of their business activity create other commercial bodies or gain stakes therein, the latter would be missing a key element which the former had and that is direct or indirect involvement of an appropriate government. The respondents were entirely correct in pointing out that business activity of a public authority (which is not a appropriate government) even if it results in creation of or participation in another commercial body or entity, will not qualify the latter to be a public authority.

19. By the same logic, an NGO will qualify to be a public authority only if it receives direct or indirect financing from the appropriate government. There are several ways of ascertaining whether the finance received by an NGO is directly or indirectly from the government or it is

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not. But since the present appeal/complaint has not raised any such point, the Commission will not go into it.”

8. I may also add that relying on the above decision, in File No. CIC/LS/C/2009/000575 (Smt. Induwala Aggarwal –Vs- National Commodities and Derrivatives Exchange Ltd.), I had held that NCDEX was not a Public Authority. I have no reason to deviate from the line of reasoning adopted by Shri Tewari in Kamra case and by me in Smt. Induwala Aggarwal case. I, therefore, respectfully disagree with my colleagues and hold that Hardicon is not a Public authority in terms of section 2(h) of the RTI Act.

9. Before parting with this matter, I would also like to mention that in the majority order, reliance has been placed on the Delhi High Court judgment dated 17.08.2010 (IFCI Ltd. –Vs- Ravinder Balwani) wherein it has been held that IFCI is a Public Authority. Suffice it to say that this case does not touch the core issue of whether holding of majority shares by PSUs of Central Government or State Government can be construed as ‘indirect’ financing by the “Appropriate Government”. The ratio of this judgment, therefore, does not apply to the facts of the present case.

(M.L. Sharma)Central Information Commissioner

Authenticated true copy. Additional copies of orders shall be supplied against application and payment of the charges, prescribed under the Act, to the CPIO of this Commission.

(Aakash Deep Chakravarti)Additional Registrar

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