A) ABSTRACT / HEADNOTE

Indian Council of Social Science Research (ICSSR) v. Neetu Gaur & Ors., [2025] 3 S.C.R. 850 : 2025 INSC 374 (Supreme Court, 20 March 2025) examines the limits of control exercised by a funder-authority over a recipient autonomous society and the lawful exercise of grant-withholding powers where the beneficiary has been found to flout conditions attached to grants.

The Court upheld ICSSR’s discretion to withhold recurring grant-in-aid where independent enquiry reports found systemic irregularities at the recipient institution, Centre for Research in Rural and Industrial Development (CRRID), including appointments on dubious qualifications, irregular promotions and misuse of grant funds.

The High Court’s conclusion that ICSSR exercised “deep and pervasive” control over CRRID thereby imposing on ICSSR an obligation to pay employee salaries was rejected. The Supreme Court held that:

(i) the mere nomination of ICSSR representatives on CRRID’s governing body and the fact of financial dependency does not convert CRRID into a State instrumentality under Article 12;

(ii) grant-in-aid under ICSSR Rules is discretionary and conditional, and compliance failures permit withholding and refund actions; and

(iii) employer-employee liabilities rest with CRRID, not ICSSR.

The Court directed CRRID to pay withheld salaries from its own resources, allowed ICSSR to continue withholding further grants if CRRID failed, and ordered release of sums deposited in Court to ICSSR.

Keywords: grant-in-aid, discretionary grants, deep and pervasive control, Article 12, autonomous society, ICSSR Grant-in-Aid Rules, employer liability, withholding of grants

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

ICSSR is a society registered under the Societies Registration Act, 1860, functioning under the administrative and financial aegis of the Ministry of Education, Government of India, and tasked with sponsoring and administering grants for social science research. CRRID is an autonomous charitable research society established in 1978 and governed by its own Rules and a Governing Body (maximum 12 members).

CRRID historically depended for funding on recurring grants: 45% from ICSSR, 45% from the State of Punjab, and 10% own resources. Between 2015–2017 complaints exposed alleged malpractices at CRRID including appointments based on fake or dubious degrees, promotions contrary to norms, nonmaintenance of records and misuse of funds.

ICSSR constituted an enquiry committee (report dated 29.05.2017), followed by subsequent fact-finding and high-level committees. The committees collectively recorded noncompliance and evasive responses by CRRID and recommended corrective measures and recoveries; one committee endorsed withholding certain past grants as punitive while recommending release of future grants to protect ongoing research/Ph.D. scholars. CRRID did not adequately or promptly comply; ICSSR withheld recurring grant from April 2021 to March 2023.

Seventeen ad hoc employees filed writ petitions before the Punjab & Haryana High Court seeking salaries; the High Court held ICSSR exercised deep and pervasive control (by virtue of ICSSR nominees on the Governing Body) and directed release of grants to pay salaries.

ICSSR appealed. The Supreme Court allowed ICSSR’s appeals and reversed the High Court, analyzing the nature and degree of control required to attract Article 12 and affirming ICSSR’s discretionary conditional grant powers under its own Grant-in-Aid Rules.

D) FACTS OF THE CASE

The facts derived from enquiry reports and subsequent correspondence show recurring alleged irregularities at CRRID during 2015–2017: recruitment/promotion of staff on the basis of fake degrees; elevation to higher grades contrary to norms; incorrect records submitted for 6th CPC implementation; violation of service rules (including retirement age); audit objections; alleged nepotism and misuse of office, including purposeless official visits; alleged building bye-law violations. ICSSR convened an enquiry committee (report 29.05.2017) identifying these deficiencies and recommending recovery of excess payments, remedial action and reforms.

Between 2017–2021 ICSSR repeatedly asked CRRID for corrective steps; CRRID’s responses were judged evasive. A fact-finding committee found non-cooperation. Consequently ICSSR stopped grant releases from April 2021; Punjab Government followed.

Employees claimed CRRID could not pay salaries without ICSSR funds and filed writs. ICSSR later formed a high-level committee (Jan 2023) which found misuse of ICSSR’s faith and recommended not releasing certain withheld amounts as punitive while recommending future grants to protect scholars and staff engaged in research.

High Court ordered ICSSR to disburse; Supreme Court considered whether ICSSR’s nominee presence and funding dependence amounted to deep and pervasive control and whether grant-withholding was justified.

CRRID also possessed other receipts and admitted funds from other assignments; audited accounts showed funds that could be used to pay employees. CRRID never legally challenged the initial 2021 withholding decision.

E) LEGAL ISSUES RAISED

i. Whether the presence of ICSSR nominees on CRRID’s Governing Body and financial dependence of CRRID converts CRRID into a State instrumentality attracting Article 12?
ii. Whether ICSSR was justified in withholding grant-in-aid to CRRID after enquiry reports found irregularities?
iii. Whether ICSSR (or the State) can be directed to pay salaries of CRRID employees where CRRID is the employer and has other funds?
iv. What is the scope of discretion under ICSSR Grant-in-Aid Rules and when can withholding/refund be lawfully exercised?
v. Whether High Court’s finding of deep and pervasive control and consequent directions to ICSSR were sustainable?

F) PETITIONER / APPELLANT’S ARGUMENTS

i. The learned ASG and counsel for ICSSR submitted that grants are discretionary under ICSSR Rules and conditioned upon compliance; ICSSR had the statutory/regulatory power to withhold grants where eligibility conditions or conditions of assistance were breached.
ii. The presence of one or two nominees on a twelve-member governing body does not amount to deep and pervasive State control converting CRRID into an instrumentality of the State under Article 12.
iii. There is no employer-employee relationship between ICSSR and CRRID staff; liability to pay salaries rests with CRRID as the private employer. ICSSR cannot be compelled to pay salaries of employees of an autonomous society.
iv. ICSSR’s enquiries, fact-finding and high-level committee reports formed a sufficient factual basis to withhold grants; CRRID failed to challenge withholding decision and did not comply with corrective directions.

G) RESPONDENT’S ARGUMENTS

i. The employees (respondents nos.1–17) and CRRID argued that in practice governing decisions (including appointments/promotions) were taken by a Governing Body where ICSSR nominees played central roles; thus ICSSR’s control was deep and pervasive and it should be obliged to ensure payment of salaries.
ii. The writs sought protection for employees who were innocent of institutional malpractices and who faced immediate hardship; direction to release grants was thus warranted to secure salaries and preserve ongoing research.
iii. CRRID contended that past irregularities occurred under a former Director and that subsequent corrective steps had been taken; withheld grants should be released.

H) JUDGMENT 

The Court reversed the High Court orders. It reasoned in three linked strands:

First, on Article 12 and the degree of control: the Court emphasized that mere financing, regulatory conditions, or the presence of one or two nominees on a governing body does not amount to deep and pervasive State control. The judgment relied upon established precedent delineating instrumentality tests and observed that CRRID’s Rules allow the Governing Body to reject nominees, reinforcing institutional autonomy.

The Court held that ICSSR is an authority under Article 12, but CRRID is not thereby converted into State instrumentalities merely because it receives grants. Cases cited by the High Court were considered but distinguished on factual intensity of control. Deep and pervasive control requires administrative, functional and day-to-day interference far above conditional regulatory oversight.

Second, on discretionary power to withhold grants: the Court closely read ICSSR Grant-in-Aid Rules (notably Rules 3, 4, 6, 11, 16 and 17) and highlighted express language that grants are discretionary and conditional and may be stopped where conditions are breached. Rule 6 permits withdrawal of assistance where conditions are not met and Rule 16 empowers ICSSR to demand refund and stop further grants.

The committees’ findings enquiry, fact-finding and high-level established persistent noncompliance; CRRID was repeatedly given opportunities to remedy defects but remained evasive. The Court found the withholding from April 2021 to March 2023 justified and even suggested by the high-level committee as punitive. CRRID never legally challenged the 2021 withholding.

Third, on liability to pay salaries: the Court rejected the High Court’s compassionate but legally unsustainable directive that ICSSR must release grants to pay salaries. It reiterated that employment liability rests with CRRID, which had other funds in its accounts and was obliged to prioritize salary payments.

The Court therefore directed CRRID to pay withheld salaries from its own resources within three weeks and authorized ICSSR to continue withholding further grants should CRRID fail; the Court also ordered release to ICSSR of amounts deposited in Court. The decision balances remedial administrative power of the funding authority with preservation of institutional autonomy and clarifies that State-like control is a high-threshold concept.

a. RATIO DECIDENDI

The operative legal ratio is threefold:

(1) The presence of limited nominees and receipt of conditional grants, without pervasive administrative or day-to-day control, does not render a recipient society an instrumentality of the State under Article 12.

(2) ICSSR’s Grant-in-Aid Rules confer clear discretion and conditionality; where committees find persistent breaches and evasive compliance, withholding of grants is lawful and may be punitive or corrective.

(3) Employer obligations to pay salaries remain with the autonomous society; third-party funders cannot be compelled to discharge employer liabilities except where the recipient is demonstrably a State instrumentality exercising functions of the State.

These ratios are grounded on the text of ICSSR Rules and precedent on the instrumentality doctrine.

The Court observed compassion for employees who may be innocent of institutional malpractice but noted that judicial relief cannot rewrite statutory employer obligations. It suggested institutional best practice: prompt internal recovery proceedings, transparent action against culpable officials, and proactive use of internal funds to protect employees.

The Court also commented that administrative bodies exercising grant powers should deploy clear remedial frameworks balancing research continuity with accountability. These observations, while persuasive, are not binding.

c. GUIDELINES

1. Granting authorities must ensure enquiries into alleged misuses are fair, documented and the findings communicated with clear timelines for remediation.

2. Beneficiary societies must implement recommended corrective measures promptly, maintain transparent records and initiate recovery/proceedings where excess payments occurred.

3. Courts should be cautious before treating a grant-dependent autonomous society as a State instrumentality; the test requires deep, pervasive, day-to-day control.

4. Where withholding of grants is lawful, beneficiary institutions must be directed to use other available funds to protect employee salaries and ongoing research to avoid collateral hardship.

5. Funding conditions and the scope of nominees’ powers must be clearly recorded in governing rules to avoid ambiguity about control.

I) CONCLUSION & COMMENTS

The judgment reinforces the legal distinction between conditional funding and State instrumentality. It clarifies that Article 12 analysis is contextual and fact-sensitive; financial dependency and limited nominee presence do not ipso facto make a recipient an arm of the State. Administratively, the case underscores the need for recipient institutions to keep robust governance and for grantors to exercise conditionality transparently.

For employees, the ruling is a caution: the judicial sympathy for salary claims does not override the basic contract/employment law principle that the employer (here, CRRID) bears salary liability. The Court’s practical direction to compel CRRID to pay from own resources within a prescribed time and to allow ICSSR to withhold future funds if CRRID fails strikes a pragmatic balance between enforcing accountability and protecting ongoing research functions.

The decision will guide future disputes where public authorities fund private autonomous bodies and where the line between regulatory oversight and operational control is contested.

J) REFERENCES

a. Important Cases Referred

1. Indian Council of Social Science Research v. Neetu Gaur & Ors., [2025] 3 S.C.R. 850 : 2025 INSC 374 (Supreme Court, 20 Mar. 2025).

2. S.S. Rana v. Registrar Coop. Societies and Anr., [2006] Supp. 1 SCR 311 : (2006) 11 SCC 634.

3. Chander Mohan Khanna v. NCERT, [1991] Supp. 1 SCR 165 : (1991) 4 SCC 578.

4. Balmer Lawrie & Co. Ltd. v. Partha Sarathi Sen Roy, [2013] 4 SCR 1018 : (2013) 8 SCC 345.

b. Important Statutes / Rules Referred

1. Constitution of India (Article 12).

2. Societies Registration Act, 1860.

3. ICSSR’s Rules of Grant-in-Aid to Societies and Institutions Doing Research in the field of Social Sciences (notably Rules 3, 4, 6, 11, 16, 17).

4. Rules and Regulations of Centre for Research in Rural and Industrial Development (CRRID) (notably Rules 17, 22(a)(i), 22(d)).