Aided Colleges / schools fall under the ambit of the RTI is well-settled law, despite this, the DAV College Trust and Management Society running aided schools and Colleges chose to take the position that they are not covered under  S.2(h) of the RTI Act 2005 on the principle ground that the Act did not contemplate non – government organisations as being public authorities. The matter finally reached the Supreme Court (SC) in the form of an appeal which was disposed in September 2019 with a significant judgment. Interestingly, the appellant was the Society/Trust running the Colleges/Schools and not the Schools and Colleges themselves. Other similar matters were also pooled alongside these matters and a common judgment was passed by the SC on September 17, 2019, by the Bench of Justice Deepak Gupta and Justice Aniruddha Bose.

According to the Appellant Society, the objective of the Act was to cover only the Government and its instrumentalities which are accountable to the Government. It was also urged that the words ‘public authority’ meant any authority or body or institution of self-government and such body or institution must be constituted under the Constitution, or by any law of Parliament, or by any law made by the State Legislature or by a notification issued or order made by the appropriate Government.

The broad question before the SC

The broad question before the SC was whether non-governmental organisations substantially financed by the appropriate Government fall within the ambit of public authority under Section 2(h) of the Right to Information Act, 2005?

Section 2(h) contemplates only four categories: argument rejected

The Appellant Society contended that the objective of the Act was to cover only the Government and its instrumentalities which are accountable to the Government and that the Society/Schools/Colleges were neither government-owned or controlled nor its instrumentality.

Appellant Society urged that they do not fall under any of the 4 categories of public authorities i.e. those set up (a) under the Constitution, (b) by an Act of Parliament, (c) by any law made by the State Legislature, or (d) by notification issued or order made by the appropriate Government and that no other authority can be considered as a public authority except these. The 4 categories of the Act u/s 2(h) are as follows:

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 organisation substantially financed, directly or indirectly by funds provided by the appropriate Government;

The Appellant Society contended that the categories (a) to (d) were the four categories and that 2(h)(i) & (ii) did not mean separate categories. The argument was that the definition included the terms ‘means’ and ‘includes’, meaning exhaustion of all categories.

The SC admitted that the Appellant Society did not fall under categories (a) to (d) as none of them is either a body or institution of self-government, established or constituted under the Constitution, by law made by Parliament, by law made by the State Legislature or by way of a notification issued or made by the appropriate Government.

The SC took the view that Section 2(h) deals with six different categories and the two additional categories being the ones mentioned in sub-clauses (i) and (ii). The SC further held that any other interpretation would make sub-clauses (i) and (ii) redundant and would mean that an NGO could never be covered under the Act; finally concluding that an NGO which is substantially financed, whether directly or indirectly by the appropriate government would be a public authority. The SC further held that 2(h)(i) & (ii) meant separate categories (4) & (5) holding that when the definition clause contains the words ‘means’ and ‘includes’ then both these words must be given the emphasis required and one word cannot override the other. The SC further held that since the words ‘means’ and ‘includes’ have not been used together they cannot be interpreted to mean an exhaustive definition. Resorting to purposive interpretation, the SC concluded that Section 2(h) deals with six different categories and that the two additional categories are mentioned in sub-clauses (i) and (ii). The SC relied on the Thalappalam case (2013) 16 SCC 82, where it had held that apart from the four categories, S.2(h)(i) & (ii) meant two more categories (5) and (6).

Declaration of public authority requires a notification: argument not taken

The Appellants also contended that only those authority or body or institution of self – governance constituted under the Constitution or by any law of Parliament, or by any law made by the State Legislature or by a notification issued or order made by the appropriate Government would mean a public authority. The SC rejected this contention by holding that the (a) authorities; (b) bodies; and (c) institutions of self-government meant three distinct categories and all the categories did not mean self – governing units. The third category, (c) institutions of self-government, means a distinct category, and category (a) and (b) did not mean the same.

The contention of the Appellants that in terms of clause (d), no body or institution outside the ambit of sub-clauses (a) to (c) of Section 2(h) can be deemed to be public authority unless a specific notification is issued was rejected holding that the notification contemplated in clause (d) is a notification relating to the establishment or constitution of the body and has nothing to do with the Act.

The term NGO defined for the first time

The SC observed that the term NGO is not defined and further carved out a definition of the term, as an international body which is legally constituted and non – governmental in nature. The SC brought civil society organisations into the definition of NGO’s. The only test being ‘substantial’ funding, direct or indirect by the appropriate government, and nothing else in the Act would hinder the holding of these bodies as ‘public authority’ u/s 2(h).

How much funding is ‘substantial’?

After settling the issue that NGO’s are covered under S.2(h)(ii), the SC further dealt with the question of ‘substantial’ funding. While dealing with the question of substantial funding the SC relied on its judgment in the Thalapallam case where it interpreted the term ’substantial’, extensively. The SC elaborated on the issue of ‘substantial’ by citing examples to explain as to how much funds could be held as substantial. Significantly the SC also noted that no hard and fast rule can be laid down to decide the issue and would depend on the relativity of the funds with respect to the total funds/expenditure and only the volume of funds received cannot be the only criterion to decide whether funds are substantial.

The SC held that while deciding the issue of substantial funding, indirect funding should also be taken into consideration which would include the value of the land on the date when the question of determination of substantial funding is raised.

Apart from this, the SC laid one more test which would determine whether the funding would be substantial and that is to look into the fact that whether the NGO can carry on its activities effectively without getting finance from the Government. The SC further analyzed the funds received by the Appellant institutions from the government in recent times and found that the Appellant institutions received funds which amounted to more than 40% of the total expenditure and which the SC held as ‘substantial’.

While looking into the funds of the appellant institutions the SC noted that the funds received made up 95% of the salary of the teaching and non-teaching staff of the College and further observed that the other expenditure of auditorium, hostels, etc. which was shown were not essential expenses as the expenditure on the salaries. Based on these findings the SC held that the appellant institutions could be safely termed as substantially financed.

The relevant paras read,

‘26. In our view, substantial means a large portion. It does not necessarily have to mean a major portion or more than 50%. No hard-and-fast rule can be laid down in this regard. Substantial financing can be both direct or indirect. To give an example, if a land in a city is given free of cost or on heavy discount to hospitals, educational institutions or such other body, this in itself could also be substantial financing. The very establishment of such an institution, if it is dependent on the largesse of the State in getting the land at a cheap price, would mean that it is substantially financed. Merely because financial contribution of the State comes down during the actual funding, will not by itself mean that the indirect finance given is not to be taken into consideration. The value of the land will have to be evaluated not only on the date of allotment but even on the date when the question arises as to whether the said body or NGO is substantially financed.’

27. Whether an NGO or body is substantially financed by the Government is a question of fact which has to be determined on the facts of each case. There may be cases where the finance is more than 50% but still may not be called substantially financed. Supposing a small NGO which has a total capital of Rs 10,000 gets a grant of Rs 5000 from the Government, though this grant may be 50%, it cannot be termed to be substantial contribution. On the other hand, if a body or an NGO gets hundreds of crores of rupees as grant but that amount is less than 50%, the same can still be termed to be substantially financed.

28. Another aspect for determining substantial finance is whether the body, authority or NGO can carry on its activities effectively without getting finance from the Government. If its functioning is dependent on the finances of the Government then there can be no manner of doubt that it has to be termed as substantially financed.

The ratio in a nutshell:

Non – Government Organisations (NGO’s) fulfill the definition of a public authority u/s 2(h)(ii) if substantially financed by the government.

Civil society organisations, if substantially funded by the appropriate government are public authorities under RTI.

There was no requirement of declaration of public authority via a notification if substantially funded by the appropriate government.

The issue of whether funds are ‘substantial’ would depend on case to case.

The volume of the funding should be considered relatively to decide ‘substantial funding’ rather than as a percentage with respect to the total expenditure.

When dealing with the issue of whether funding is substantial, indirect funds should be carefully considered.

If any land is given to an NGO, then the present value of the land to be considered when deciding whether funds are ’substantial’.

In the case of educational institutions the salary grants to be weighed independently of the other expenditures against hostels, auditoriums, etc.

Will this mean that Societies/Trust will fall under the ambit of the Act if substantially financed?

Para 24 of the judgment reads,

’24. A society which may not be owned or controlled by the Government, may be an NGO but if it is substantially financed directly or indirectly by the Government it would fall within the ambit of sub-clause (ii).’

This para is significant as it holds that a Society would fall under the ambit of clause (ii) if it receives substantial funding from the government. The Appellant DAV College Trust and Management Society which runs various schools and Colleges has been held as an NGO. Extrapolating from the ratio, it can be safely concluded that the NGO Societies substantially funded directly or indirectly would be public authorities under the Act.

While defining NGO’s, the SC has used the term ‘legally constituted’ which can only mean a body registered as a Society under the Societies Registration Act 1860, Public Trust Acts or Company Act or formed under any other relevant State Act, if receives substantial funding from the appropriate government is a public authority u/s 2(h)(ii). The conclusion that such bodies are public authorities is inescapable if para 23 and 24 of the judgment are carefully perused.

However, the current legal position is that Societies registered under the Societies Registration Act 1860 and Trusts registered under the Public Trusts Act like the Bombay Public Trusts Act 1950 are not held as public authorities. The judgment is bound to reverse this position. This would be a game-changer as majority of government-funded educational institutions / hospitals / charitable institutions are run by Societies and Trusts and would go a long way in bringing in more transparency and accountability in the administration of these bodies/institutions.