Nature of the Litigation: The case involved a dispute between the Indian Council of Social Science Research (ICSSR) and Centre for Research in Rural and Industrial Development (CRRID) over the withholding of grants by ICSSR due to alleged malpractices in CRRID’s functioning. Respondents 1 to 17, employees of CRRID, filed a writ petition in the High Court of Punjab and Haryana seeking the release of their unpaid salaries, which were dependent on the grants from ICSSR.

Question of Law: Whether ICSSR, as a funding body, exercises “deep and pervasive control” over CRRID, making it liable for the salaries of CRRID employees. Whether the withholding of grants by ICSSR was justified under the ICSSR Grant-in-Aid Rules.

Facts: CRRID is an autonomous research institute receiving 45% of its funding from ICSSR and 45% from the State of Punjab. In 2015-2016, ICSSR received complaints about malpractices in CRRID, including irregular appointments, promotions, and misuse of funds. An enquiry committee in 2017 found CRRID guilty of various irregularities, including appointing unqualified staff and violating ICSSR’s Grant-in-Aid Rules. Despite repeated directives from ICSSR, CRRID failed to take corrective measures, leading ICSSR to stop releasing grants from April 2021.
The High Court ruled in favor of the employees, holding that ICSSR had “deep and pervasive control” over CRRID and was thus obligated to release the grants for salary payments.

“Deep and pervasive control” requires more than just financial dependency or regulatory oversight. It involves administrative, financial, and functional control over the day-to-day operations of an institution. Grants-in-aid are discretionary and subject to conditions. Institutions cannot claim grants as a matter of right. The employer-employee relationship is crucial in determining liability for unpaid salaries. A funding body like ICSSR cannot be held responsible for the salaries of employees of a grantee institution.

The Supreme Court held that ICSSR does not exercise “deep and pervasive control” over CRRID. The presence of ICSSR nominees in CRRID’s Governing Body does not amount to such control. The Court ruled that grants are discretionary and can be withheld if the recipient institution violates the conditions of the grant. ICSSR was not liable for the salaries of CRRID employees, as the responsibility to pay salaries lies with CRRID, not the funding body. The Court directed CRRID to pay the withheld salaries from its own resources within three weeks, failing which ICSSR could withhold further grants.

Submissions/Arguments:
ICSSR argued that it had no employer-employee relationship with CRRID’s staff and that the grants were discretionary, not a matter of right.
CRRID contended that it had rectified past irregularities and that ICSSR was obligated to release the withheld grants.
The employees argued that their salaries were dependent on ICSSR’s grants, and withholding the grants amounted to withholding their salaries.

Major Acts:

1. Constitution of India (COI), Article 12 – Definition of “State” and its instrumentalities.

2. Societies Registration Act, 1860 – Governance of societies like ICSSR and CRRID.

3. ICSSR Grant-in-Aid Rules – Conditions for granting and withholding financial aid to research institutions.

Subjects:

Deep and pervasive control – Discretionary grants – Employer-employee relationship – Grant-in-Aid Rules – ICSSR – CRRID – Salary liability – Autonomous institutions – Societies Registration Act.