Is LIC a State under Article 12 ?

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The Life Insurance Corporation of India (LIC) most people know it as LIC stands as one of the most trusted and largest life insurance companies in India. It is said that Life Insurance Corporation of India (LIC) or LIC is one of the most influential public sector organizations in the country, holding a significant place in the financial and insurance sectors. Given its prominence (fame, Popularity) and public ownership, a legal question frequently arises — "Is LIC a State under Article 12 of the Indian Constitution?" This article explores this query in detail, analyzing constitutional provisions, judicial pronouncements, and the implications of LIC being considered a 'State.' Or whether LIC is a state under article 12.

Yes, the Life Insurance Corporation of India (LIC) falls under the definition of "State" as per Article 12 of the Indian Constitution. This conclusion is based on judicial interpretations and the criteria (mentioned below) established by the Supreme Court to determine whether a body qualifies as a "State." Stay with us to know the reasons and key indicators of Why LIC is a State under article 12 of the Indian Constitution.

Also Read: Is Judiciary a State Under Article 12 of the Indian Constitution?

What is LIC ?

The Life Insurance Corporation of India (LIC) stands as a pillar of India's financial sector, widely recognized as the nation's largest and most trusted life insurance provider. Formed in 1956 by nationalizing 245 private insurers, the government owned LIC was tasked with expanding life insurance access, particularly in rural regions, and channeling public savings into national development. Headquartered in Mumbai, LIC commands a vast network across India, comprising thousands of branches and over a million agents. So as we know, it was created by nationalizing 245 private insurance companies, making LIC a government-owned and operated corporation. It functions under the administrative control of the Ministry of Finance, Government of India. Being a statutory corporation created by a special act of Parliament, LIC performs a public duty — providing life insurance services to the masses, especially in underserved regions.

Definition of State in Indian Constitution

The Definition of State in Indian Constitution under Article 12 is crucial and pivotal because it determines accountability for fundamental rights violations. So, what is State under Article 12? It encompasses:

The Government and Parliament of India,
The Government and Legislature of each State,
Local authorities, and
Other authorities under Article 12 within India’s territory or under the control of the Government of India.

अच्छा ! But what is State according to Article 12 when it comes to the LIC?

The phrase "other authorities" has been interpreted by courts to include entities that:

Perform public duties or functions of public importance
Are substantially financed or controlled by the government
Exercise statutory powers

Why LIC Is Considered a "State"

Statutory Creation:

You have to remember that, the LIC was established under the Life Insurance Corporation Act, 1956, which makes it a statutory body created by an Act of Parliament. Entities created by law to perform public functions are generally considered "State" under Article 12.

Government Control:

Also, the central government exercises significant control over LIC's functioning, including its policies, appointments, and financial decisions. This pervasive control is a key factor in classifying it as a "State."

Public Function:

Plus, LIC performs functions of public importance, such as providing life insurance services, which are considered essential for social welfare. Bodies performing public or governmental functions are often categorized as "State."

Financial Dependence:

Also to remember that, LIC operates with substantial government funding and is accountable to the government for its financial management. This financial dependence further supports its classification as a "State."

Judicial Precedents:

Lastly, In the light of the cases like Som Prakash Rekhi v. Union of India (1981), the Supreme Court held that LIC is an instrumentality of the State due to its statutory origin, public functions, and government control.

Tests Applied by Courts to Held - LIC a State:

The Supreme Court has outlined several tests in cases like Ajay Hasia v. Khalid Mujib Sehravardi (1981) to determine whether a body qualifies as a "State." LIC meets these criteria:

Financial Resources: Substantial funding from the government.
Pervasive Control: Deep and extensive control by the government over its operations.
Public Importance: Performance of functions that are integral to public welfare.
Statutory Basis: Created by an Act of Parliament.

Criteria to Determine ‘State’ under Article 12

The Supreme Court has laid down several criteria in cases like Ajay Hasia v. Khalid Mujib Sehravardi (1981) and Pradeep Kumar Biswas v. Indian Institute of Chemical Biology (2002) to determine whether a body is a State:

Function Test – Is the body performing a public or governmental function?
Financial Control – Is it funded entirely or substantially by the government?
Administrative Control – Does the government have deep and pervasive control?
Creation by Statute – Was the body created by a legislative act?

Applying these tests to LIC shows that:

It was created by the LIC Act.
The central government owns and controls it.
It performs a public function — offering life insurance to the citizens.
Its policy decisions are subject to government approval.

Thus, LIC satisfies all the criteria for being considered a 'State' under Article 12.

Why LIC’s Status Under Article 12 Matters

Here I have stated in short. It is said that classification of LIC as a State has significant constitutional and legal implications:

Accountability under Fundamental Rights: Any arbitrary action or policy by LIC can be challenged under Articles 14 (Right to Equality) and 21 (Right to Life and Personal Liberty).
Writ Jurisdiction: Aggrieved persons can file writ petitions against LIC in High Courts (Article 226) or the Supreme Court (Article 32).
Transparency and Public Responsibility: LIC must act in a fair, reasonable, and non-discriminatory manner in its dealings.
Impact on Privatization: As LIC moves toward partial privatization (after its 2022 IPO), questions may arise whether it retains its Article 12 status once government control reduces.

Conclusion

So, is LIC a State under Article 12 of the Indian Constitution? The answer is yes — as per prevailing judicial interpretations (which mentioned above), LIC is considered a State under Article 12. Also remember, this status ensures that LIC remains accountable to the public, especially in terms of upholding constitutional rights and legal standards.

*Note: Here, in this article title "Is LIC a State under Article 12 ? | LIC and Article 12 of Indian Constitution Explained", I have tried to explore and answer this mentioned below frequently asked queries:

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Is LIC a State under Article 12 ? | LIC and Article 12 of Indian Constitution Explained