Supreme Court Holds Withholding of Grants by Funding Body Valid; Directs Research Institute to Pay Salaries From Own Funds

A Bench of Justices Sudhanshu Dhulia and K. Vinod Chandran heard appeals by the Indian Council of Social Science Research (ICSSR) challenging the Division Bench order of the Punjab & Haryana High Court dated 16.05.2024, which had directed ICSSR to release withheld grants so that seventeen employees of the Centre for Research in Rural and Industrial Development (CRRID) could be paid their salaries. The appeals raised the question whether the presence of ICSSR nominees in CRRID’s Governing Body amounted to “deep and pervasive” State control under Article 12 and whether ICSSR was justified in withholding grants in view of alleged irregularities.

The Court allowed the appeals, set aside the High Court orders of 17.10.2023 and 16.05.2024 and clarified that the mere nomination of representatives on a governing body and provision of grants did not, by itself, constitute “deep and pervasive” State control. The Court held that ICSSR’s decision to withhold grants between April 2021 and March 2023 was lawful in the facts of the case where multiple inquiries had found anomalies in CRRID’s functioning, and that grants under ICSSR’s Grant in Aid Rules were discretionary. The Court observed that “the presence of one or even two members of ICSSR in a Governing Body of twelve does not amount to ‘deep and pervasive’ control.” The Court, in its reasoning, observed: "We have no doubt in our mind that ICSSR is indeed an 'authority', within the purview of Article 12 of the Constitution of India. It also controls CRRID to an extent inasmuch as CRRID depends on the funds released by ICSSR as grants. But this itself cannot be called a 'deep and pervasive' control. A 'deep and pervasive' control would require much more than just financing an institution or a body. Even guiding, controlling or regulating affairs of an institution will not be called a 'deep and pervasive' control. The 'deep and pervasive' control requires administrative, financial and functional control of such a body to a much higher degree including interference into its day to day working, and mere regulatory control cannot mean 'deep and pervasive' control." The Court further relied on the Grant in Aid Rules, noting that "all grants under these rules are discretionary and cannot be claimed as a matter of right."

Background ICSSR, a society under the administrative control of the Ministry of Education, provided recurring grants to CRRID, an autonomous society in Chandigarh which received roughly 45% of its funding from ICSSR and 45% from the State of Punjab. Between 2015–16 and 2017 multiple complaints prompted ICSSR to constitute inquiry, fact-finding and high-level committees which reported irregularities in CRRID’s appointments, promotions, misuse of funds and non-maintenance of records. ICSSR repeatedly sought corrective action; on perceived non-compliance it withheld grants from April 2021.

Seventeen CRRID employees filed writ petitions in July 2022 for salary release, asserting that salaries depended on ICSSR grants. A Single Judge of the High Court allowed the petitions and ordered release of funds; a Division Bench upheld that decision on 16.05.2024. ICSSR appealed to the Supreme Court.

The Supreme Court held that CRRID was an autonomous private society and that ICSSR’s limited control via grant conditions and nominee representation did not amount to the degree of State control contemplated by Article 12. The Court found that CRRID did not satisfactorily address the inquiry findings and that ICSSR was entitled to withhold grants under Rules 6, 11, 16 and 17 of its Grant in Aid Rules. The Court set aside the High Court orders but directed CRRID to pay withheld salaries for April 2021 to March 2023 from its own resources within three weeks and to file a compliance report before ICSSR. The Court further directed that, in case of CRRID’s failure, ICSSR may withhold further grants. The Registry was ordered to release to ICSSR the amount deposited by it in the Court, with interest, within a week. The Court noted that ICSSR and the State of Punjab remained at liberty to seek recovery of any sums deposited before the High Court in light of this decision.

Case Details: Case No.: Civil Appeal No. of 2025 (@ SLP(C) No.17595 of 2024) Case Title: Indian Council of Social Science Research (ICSSR) v. Neetu Gaur & Ors. Appearances: For the Petitioner(s): Mr. K. M. Nataraj, Additional Solicitor General; Mr. Ranbir Singh Thakur, Advocate For the Respondent(s): Mr. Narender Hooda, Senior Advocate; Mr. Sanjeev Sharma, Senior Advocate (for State of Punjab); Ms. Ana Upadhyay, Advocate