Impact of Liberalisation and Privatisation on Article 12
With economic liberalisation in 1991, India shifted from a state-controlled economy to a
market-driven economy. This transition led to the privatisation of public sector undertakings
(PSUs) and an increased role of private entities in providing essential services such as
healthcare, education, telecommunications, and transportation. As a result, courts had to address
whether such private entities should be considered "State" under Article 12 and thus be held
accountable for fundamental rights violations.
The impact of liberalisation and privatisation on Article 12 can be analysed under the
following heads:
1. Narrowing the Scope of "State" Under Article 12
Before liberalisation, public sector enterprises (PSEs) and statutory corporations were the
primary providers of essential services. Since these entities were controlled by the government,
they were classified as "State" under Article 12, making them subject to fundamental rights
enforcement.
However, post-1991, many government-owned enterprises were disinvested or privatised.
Courts had to decide whether privatised companies and new private players performing
essential functions should be treated as "State."
In Zee Telefilms Ltd. v. Union of India (2005), the Supreme Court held that BCCI was
not "State" under Article 12 since the government did not exercise deep control over it,
even though it performed a public function (cricket administration).
This ruling indicated that merely performing a public function is not enough to bring an
entity under Article 12—deep control by the government is necessary.
This decision showed that privatised entities may escape fundamental rights obligations,
limiting the scope of Article 12.
2. Increased Reliance on Article 226 for Accountability
As many private entities began performing essential services previously delivered by the State,
courts had to find alternative ways to hold them accountable. Even if a body did not qualify as
"State" under Article 12, courts started using Article 226 to issue writs against them.
In Binny Ltd. v. V. Sadasivan (2005), the Supreme Court ruled that private entities
performing public duties could be subjected to judicial review under Article 226,
even if they were not "State" under Article 12.
In BCCI v. Cricket Association of Bihar (2015), the Supreme Court held that BCCI
was not State under Article 12 but could still be subjected to writ jurisdiction as it
performed a public function.
Thus, even though liberalisation limited the scope of Article 12, courts expanded the scope of
Article 226 to ensure that private entities performing public functions remained
accountable.
3. Erosion of Fundamental Rights Protection in Privatised
Sectors
Privatisation has raised concerns about reduced constitutional accountability in essential
service sectors like education, healthcare, and transportation.
Public sector universities and hospitals were traditionally covered under Article 12,
ensuring compliance with fundamental rights.
With privatisation, private universities, hospitals, and corporations may not be
directly bound by fundamental rights, leading to concerns over arbitrary practices,
fee hikes, and lack of equal access.
For example:
In T.M.A. Pai Foundation v. State of Karnataka (2002), the Supreme Court held that
private educational institutions had autonomy over admissions and fee structures,
reducing state intervention and limiting constitutional safeguards.
This ruling highlighted how privatisation weakened constitutional accountability in the
education sector.
4. Government's Strategic Use of Private Entities to Escape
Accountability
Post-liberalisation, governments increasingly outsource essential services to private
contractors, NGOs, and corporate bodies. This allows the government to indirectly perform
functions without making those entities subject to Article 12.
For example:
If the government outsources public transport or water supply to a private company,
that company may not be held accountable under fundamental rights, even though it
provides an essential service.
This creates a loophole where constitutional protections are diluted, and citizens lose their
ability to challenge violations of fundamental rights.
5. Need for a Re-Evaluation of Article 12 in the Context of
Privatisation
The judiciary has acknowledged the growing role of private entities in governance and the
need to extend constitutional accountability beyond traditional State entities.
Some legal scholars argue for broadening Article 12 to include private bodies that
perform public functions or hold monopolistic power.
Others suggest a functional approach, where any entity performing a State-like
function should be subjected to fundamental rights obligations.
This debate continues, as courts seek to balance economic liberalisation with constitutional
protections.
Conclusion
Liberalisation and privatisation have significantly impacted the interpretation of Article 12,
limiting its direct application to purely government-controlled entities. However, the judiciary
has responded by expanding the scope of Article 226, ensuring that private entities
performing public duties remain accountable.
Despite these judicial efforts, privatisation has weakened constitutional safeguards,
particularly in education, healthcare, and essential services. There is an urgent need for a re-
evaluation of Article 12 to ensure that private players performing public functions do not
evade fundamental rights obligations.
The challenge for the future is to strike a balance between economic efficiency and
constitutional accountability, ensuring that citizens' rights are protected in a privatised
economy.
