Court case(2002) 5 SCC 111

Employees of the Indian Institute of Chemical Biology, a unit of the Council of Scientific and Industrial Research (CSIR), were terminated. Their writ petition was dismissed on the strength of Sabhajit Tewary v. Union of India (1975), where a Constitution Bench had held that CSIR, being a registered society, was not 'State'. The question whether Sabhajit Tewary remained good law after R.D. Shetty and Ajay Hasia was referred to a seven-judge Bench.

By a majority of five to two, Ruma Pal J held that CSIR is 'State' and overruled Sabhajit Tewary. The Court restated the law: the Ajay Hasia tests are not a rigid set of principles so that a body must satisfy all of them; the question in each case is whether, in the light of the cumulative facts, the body is financially, functionally and administratively dominated by or under the control of the government. Such control must be particular to the body and pervasive; if it is merely regulatory, whether under statute or otherwise, the body is not 'State'. CSIR was formed by government, its governing body was headed by the Prime Minister, its funds came overwhelmingly from government, and its rules required government approval. Lahoti J, dissenting, would have retained Sabhajit Tewary.