-

S.C.R. SUPREME COURT REPORTS

CHIRANJIT LAL CHOWDHURI

v.

THE UNION OF INDIA AND OTHERS.

869

[SHRI HARILAL KANIA, C.J., SAIYID FAZL ALI,

PATANJALI SASTRI, MuKHERJEA and DAS JJ.]

Sholapllr Spinning and Weaving Company (Emergency Pro·

<isions) Act (XXVIII of 1950)-Act dismissing managing agents of

a company, removing its directors, a~ahorising Government to

appoint new dir<ctors, and «irtuiling !"lghts of shareholders in the

matter of voting, etc.-Validity-Wliether infringes fundamental

rights-Right not to be de~rived of property save by attthority of

law-Right to acqiiire, hold and dispose of property-Right to equal

protection of law-Constit,.tion of India, Arts. 14, 19 (1) (!), 19(5),

31, 32-" Deprivation of properly",

11

Property"," acqiiisitio1z",

''taking possession",

11

eqital protection'', meanings of-Right to

apply under Art. 32-Corporntwn's right to apply-Shareholders'

··ight.

The Governor-General of India, finding that on account of

mismanagement and neglect a situation had arirsen in the affairs

of the Sholapur Spinning and Weaving Company Ltd., which had

prejudicially affected the production

of

an essential commodity

and bad caused serious unemployment amongst a certain section of

the community, and that au emergency had thereby a.risen which

rendered it necessary to make special provision for the proper

management and adminietration of the said company, promulgat­

ed an Ordinance, which was subsequently re-enacted in the form

of an Act of the Legislature called the Sholapur Spinning and

Weaving Company (Emergency Provisions) Act, 1950, the net

result of which was that the Managing .~gents of the said com­

pany were dismissed, the directors holding office at the time

automatically vacated their

office, the Government was authorised

to appoint new directors,

the'.rights of the shareholders of the com·

pany were curtailed in the matters of voting, appointment of

directors, passing of resolutions and applying for winding up, anJ

power was also given to the Government to further modify the

Indian Companies Act in its application to the company; and in

accordance with the provisions of the Ordinance new directors

were appointed by the Government. A shareholder of the com­

pany made an application under Art. 32 of the Constitution for

a declaratior. that the Act was void and for enforcement of his

fundamental rights by a writ of mandamus against the Central

Government, the Government of Bombay and the directors res·

training them from exercising any powers under the Act and

from interfering with the management of the company, on the

ground that the Act was not within the Legislative competence

1950

Deo. 4.

1950

ChiranjitlaZ

Chowdhuri

v.

The Union of

India and

Other a.

870 SUPREME COURT REPORTS [1950)

of the Parliament and infringed his fundamental rights goaran·

teed by Arts. 19 (1) ), 31 and 14 of the Constitution and was

consequently void under Art. 13. The company was mado a

respondent and opposed the petition.

Held per KANIA C.J., FAZL ALI, MUKHERJEA and DAS JJ.­

(i) that the impugned Act did not infringe any fundamental right

of the petitioner under Art. 31 (1), as it did nGt deprive the com.

pany or the petitioner of any property save under authority of

law;

(ii) that the impu~ned Act did not infringe any fundamental

right guaranteed by Art. 31 (2) inasmuch as it did not authorise

the ''acquisition" of any property of the company or of the share­

holders or '' the taking possession " of the property of the peti­

tioner, namely, the shares which he held in the company, though

he wag disabled from exercising some of the rights which &n

ordinary shareholder in a. company could exercise in respect of

his shares, such as the right to vote, to appoint directors, and to

apply for winding up; and, if the Act had anthorised the "taking

possession" of the proper~y of the company, the petitioner was

not entitled to any relief on that score under Art. 32;

(iii) that, as the Act did not impose any restrictions on the

petitioner's right "to acquire, hold and dispose of'' his shares,

there was no infringement of Art. 19 (1) (f); and assuming that

the restrictions imposed on the right of voting etc. were restric­

tions on the right to acquire, hold or dispose of property within

Art. 19 (1) (f), such restrictions were reasonable restrictions im­

posed in the interests of the public, namely, to secure the supply

of a. commodity essential to the community and to prevent serious

unemployment amongst a section of the people, a.nd were there­

fore completely protected by cl. (5) of Art. 19.

Held .also per KANIA C.J., FAZL ALI, and MUKI!ERJEA JJ.

(PATANJALI SASTRI AND DAS JJ. dissenting).-that though the

Legislature ha.a proceeded against one ccmpany only and its

shareholders, inasmuch as even one corporation or a. group of per­

sons can be taken to be a class by itself for the purposes of legis­

lation, provided there is sufficient basis or reason for it and there

is a. strong presumption in favour of the constitutionality of an

enactment, the burden was on the petitioner to prove that there

were also other companies similarly situated a.nd this company

alone had been discriminated against, and as he had failed to

discharge this burden the impugned Act cannot be held to have

donied to the petitioner the right to equal protection of the laws

referred to in Art. 14 and the petitioner was not therefore entitled

to any relief under Art. 32.

Per PATANJALI SASTRIJ.-As the impugned Act plainly denied

to the shareholders of this particular company the protections of

the law relating to incorporated Joint Stock Companies as em­

bodied in the Indian Comp•nies Act, it wu.s prima facie within

S.C.R. SUPREME COURT REPORTS 871

the inhibition of Art. 14 ; and, even though when ~ law is made

applicable

to a class of

persons or things and the classification ie

based on differentia having a rational relation to the object

sought to

be attained, it can be no objection to its

constitutio1Jal

validity that its aJiplication is found to affect only one person 01·

thing, since the impugned Act selected a particular company and

imposed upon

it and its shareholders burdens and disabilities on

the ground of mis1nanagement and neglect of duty on the part of those charged with the conduct of its undertaking no question of

reasonable classification arose and the Act was plainly discrimina­

tory

in character and within the constitutional inhibition of

Art.

14. Whilst all reasonable presumptions must undoubtedly

be made in favour of the constitutional validity of a law ruade by

a competent legislature, no such presumption could be raised in

this case as on the face of it the Act was discriminatory and the

petitioner could not

be called upon to prove that similar

misma­

nagement existed in other companies. The issue was not whether

the impugned Act was ill-ad vised or not justified by the facts

on which

it was based but whether it

tramgressed the explicit

constitutional restriction on legislative power imposed by Art. 14.

Per DAS J.-The impugned Act, ex facie, is nothing but an

arbitrary selection of a particular company and its shareholders

for discriminating and hostile treatment, and, read

by

iteelf, is

palpably an infringement of Art. 14 of the Constitution. Assum­

ing that mismanagement and neglect in conducting the affairs of

a company can be a basis of classification and that such a

classification would bear a reasonable relation to the conduct of

a.11 delinquent companies and shareholders and may therefore

crea.te no inequality, a distinction cannot be made

between the

delinquent companies

inter se or between shareholders of equally

delinquent companies, and one set cannot be punished for its

delinquency while another set is permitted to continue, or become,

in like manner, delinquent without any punishment unless there

be some other apparent difference in their respective obligations

and unless there

be some cogent reason why prevention of mis·

management is more irnperative in one instance than in the other.

The argument that the presumption being in favour of the Legis­

lature, the onus is on the petitioner to show that there are other

individuals or companies equally guilty of mismanagement pre·

judicially affecting the production of an essential commodity and

causing serious unemployment amongst a certain section of the

community does not, in such circumstances, arise, for the simple

reason that here there has been no classification at all and, in

any case, the basis of classification by its very nature is muob

wider and cannot, in its application, be limited only to this com­

pany and its shareholders; and that being so, there is no reason

to throw on the petitioner the almost impossible burden of prov­

ing that there are other compa.nies which are in fact precisely and

in ~JI particulars similarly situated. In any event, the petitioner,

1950

Chiranjitfal

Chawdhurt

v.

The Union of

Ind<ia and

Other

a,

1950

Chiranjitlal

Chowdhiu·~

v.

The Union of

Ind-ia and

Others.

872 SUPREME COURT REPORTS (1950]

may well claim to have. discharged the onus of showing that this

company and its shareholders bn.ve been singled out for discrimi­

nating treatment by showing that the Act, on the face of it, ha•

adopted a basis of clai::sification which. by its very nature, cannot

be exclusively applicable to this company and its shareholders

but which

may be equally applicable to other companies and their

shareholders

ttncl has r>enalised this particular con1pany and its

shareholders, leaving out other companies and their shareholders

who may be equally guilty of the alleged vice of mismanagement

and neglect

of the type referred to in the preamble in the Ordinance.

Per PATANJALI SASTRI, MUKHERJEA and DAS JJ. (KANIA, C.J.,

d1tbitante).-In so far as the petitioner's rights as a shareholder

were curtailed be was entitled

to apply for relief under Art. 32 in

bis own right on the ground that the Act denied to him the equal

protection of the laws and therefore contravened Art. 14 even tboush the other shareholders did not join him in the application.

Per MUKRERJEA J .-The fundamental rights guamnteed by

the Constitution are available not merely

to individual citizens

but to

corpol'ate bo:lies as well except where tho language of the

provision or the nature of the right compels the inference that

they are applicable only to natural persons. An incorporated

company, therefore, can come up to the Supreme Court for en­

forcement ol its fundamental rights and so may the individual

shareholders

to enforce their own; but as the company and its shareholilers are in law separate entities, it \Yould not b9 open to

an individual shareholder to complain of a law which affects the

fundamental right

of the company except to the extent that it

constitutes an infraction of his own rights

as well. Io order to

redress a wrong to the company the action should prima facie be

brought

by the company itself.

Article

32 of the

Constitution is not directly concerned with

the determination of the constitutional validity of particular

enactments, what it aims at is the enforcement of funda~en~al

rights guaranteed by the Constitution and to make out a case

under

the Article it is incumbent on the petitioner to establish

not merely

that the law complained of is beyond the competence

of the Legislature but that it affects or invades his fundamental

rights guaranteed by the Constitution, o( which he could seek en­

forcement by a.n appropriate writ or order.

Under Art. 32 the Su1Jreme Court has a. very wlde discretion

in the matter of framing \Vrits to suit the exigencies of particular

cases and an application under the article cannot be thrown out

simply on the grnund that the proper writ or direction has not

been

prayed for.

In the context in which

th9 word

11

a.cquisitio:i '' is used in

Art. 31 .2) it means and implies the acquiring o( the entire title

of the expropriated owner whatever the nature or extent of that

right might be.

S.C.R. SUPREME COURT REPORTS 873

The guarantee against the denial of equal protection or the

laws does not mean

that identically the

same rules of law should

be made applicable to all persons within the territory of India in

spite of differences of circumstances and conditions. It means

only that there should be no rliscrimination between one person

and another if as regards the subject-matter of the legislation

their position is the same.

Quaere: Whether the word" property" in Art. 31 means the

totality of the rights which the ownership of the property con­

notes, and whether clause

(1) of Art.

31 contemplates only codis­

cation or destruction of property in exercise of what are known

as police powers in American law for which no compensation is

necessary.

DAS J.-Tbe question whether an Act has deprived a person

of his "property" must depend on whether it has taken away the

substantial bulk of the rights constituting his property. Where

the most important rights possessed by the shareholders of a

com­pany are still preserved hy a:i Act even though corhin pridleges

incidental to the ownership of the shares have been put in abey­

ance, the sba,reholders cannot be said to have been deprived of

their

"property'' in the sense in which

tl..ia.t word is used in

Art. 19(1) (f) and Art. 31.

If on the face of the Jaw there is no classification at all, or at

any rate, none on the basis of any nppnrent difference specially

peculiar to the individual or class affected by the law, it is only

an instance of an arbitrary selection of an individual or class for

rliscrirninating and hostile legislation and, therefore, no presump­

tion can, in such circumstances, arise at all. Assuming, however,

that even

in such

a case the onus is thrown on the complainant,

there can be nothing to prevent him from proving, if he can, from

the text of the law itself, that it is actually and palpably un­

reasonable and arbitrary and thereby discharging the initial onus.

The right to vote,

to elect directors, to pass resolutions and

to present

an application for winding up, are privileges incidental

to the ownership of a share, but they are not by themselves, apart

from the share, " property" within the meaning of Art. 19 \1) (f)

and Art. 31; and even assuming that they are "property" such rights

cannot be said to have been acquired or taken posBession of by

the Government in this case within Art. 31 (2). The language of

clause

(1) of Art. 31 is wider than that of clause (2), for

d<priva­

tion of proporty may well be brought about otherwise than by

acquiring or taking possession of it and in such a case no question

of payment of compensation arises.

FAZL ALI, MOKHERJEA and DAS JJ.-Except in the matter

of writs in the nature of h'beas corpils no one but those whose

rights are directly affected

by

a law can raise the question of the

constitutionality of • law and claim relief under Art. 32. A car·

poration being • different entity from tbe shareholders,. I.

ll~

1950

Chiranj1tlal

OhowdhuTi

v.

'1.'he Union Of

India and

Other&.

1%0

Chiranjitlal

Chowdhuri

v.

The Union of

India and

Others.

874 SUPREME COURT REPORTS (1950]

share-bolder cannot complain on the ground that the rights of the

company

under Arts. 19 (1) (f) or 31 are infringed. FAZL ALI J.-A classification which is arbitrary and which

is made without any basis is no clas::;i:fication and a proper classi~

£.cation must al\vays rest upon some difference and must bear a

reasonable and just relation to the things in re8pect of which it is

proposed.

But the presumption is always in

favour of the consti•

tutionality of an enactn1ent and the burden is upon bim who

attacks

it to show that there has been a clear

tra.nsgressfon of

constitutional principles. Though Art. 14 lays down an import­

ant fundamental 'right, which should be closely and vigilantly

guarded, a doctrinaire approach which might choke all beneficial

legislation should not be ail.opted, in construing it. i

A. K. Gopalan, v. The State ([1950] S.C.R. 87), Minist'T of State

for the Army v. Dalziel (68 C.L.R. 26 l), Yick Wo v. Hopkins ( 118

U.S. 356), Southern Railway Co. v. Greene I 216 U.S. 400), Gulf

C. it S. F. Co. v. Ellis (165 U.S. 150), Middleton v. Texa• Power

and Light it Co. (249 U.S. 152), Ranice v. N'w York (%4 U.S. 294),

Pennsylvania Coal Co. v. Mahon (260 U.S. 393), McCnb' v. Atchi·

son (235 U.S. 151), Jeffrey Maniifict<tring Co. v. Blcing (235 U.S.

571), Newark Natural Gas and p,,,z Co. V· Oity of Nework (242

U.S. 403), Trnax V· Baich 1239 U.S. 33), B1tchanan V· Wnrley

(245 U.S. 60), Darnell v. The State of Iwliana (226 u.s. 388),

Lindely v. Natural Carbonic Gas Co. (220 u.s. 618', and Barbier

v. Connolly (113 U .s. 27) referre'1 to.

ORIGINAL JURISDICTION: Petition No. 72 of 1950.

Petition under article 32 of the Constitution of

India for a writ of mandamus.

V. K. T. Chari, ]. S. Dawdo, Alladi Kuppuswami,

and C. R. Pattabhi Raman, for the petitioner.

M. C. Setalvad, Attorney.General for India (G. N.

Joshi

with him) for opposite party Nos. 1 and 2.

G.N. Joshi, for opposite party Nos. 3 to 5 and 7 to

10.

1950. December 4. The Court delivered Judgment

as follows.

Kania a. J. KANIA C.J .-This is an application by the holder of

one ordinary share of the Sholapur Spinning and

Weaving Company Ltd. for a writ of mandamus and

certain other reliefs under article 32

of the

Constitution

of India. The authorized capital of the company is

Rs. 48 lakhs and the paid-up capital is Rs. 32 lakhs

half of which is made up

of fully paid ordinary

share~

of Rs. 1,000 each.

S.C.R. SUPREME COURT REPORTS 875

I have read the judgment prepared by Mr. Justice

Mukherjea. In respect of the arguments advanced to

challenge the validity of the impugned Act under

articles

31 and 19 of the Constitution of India, I agree

with his line of reasoning and conclusion and have

nothing more to add.

On the question whether the impugned Act infringes

article

14, two points have to be considered. The first

is whether one individual shareholder can, under the

circumstances of

the case and particularly when one of

the respondents

is the company which opposes the

petition, challenge the validity of

the Act on the

ground

that it is a piece of discriminatory legislation,

creates inequality before the

law and violates the prin­

cipie of equal protection of the laws under article

14

of the

Constitution of India. The second is whether in

fact the petitioner has shown that the Act runs contrary

to article

14 of the Constitution. In this case having

regard to my

conclu.sion on the second point, I do not

think it is necessary to pronounce a definite opinion on

the first point. I agree with the line of reasoning and

the conclusion of

Mr. Justice Mukherjea as regards the

second point relating to the invalidity of

the Act on

the ground

that it infringes article 14 of the

Constitu­

tion and have nothing more to add.

In my opinion therefore this petition fails and is

dismissed with costs.

FAZL Au J.-I am strongly of the opinion that this

petition should be dismissed with costs.

The facts urged in the petition and the points raised

on behalf of the petitioner before us are fully set forth

in the judgments of

my brethren,

Sastri, Mukherjea

and Das

JJ., and I do not wish to repeat them here.

It is sufficient to say that

the main grounds on which

the Sholapur Spinning and 'Neaving Company

(Emergency Provisions) Act, 1950 (Act No. XX VIII of

1950), which will hereinafter be referred to as "the

Act", has been assailed, is that it infringes three funda­

mental rights, these being:-

1950

Ohiranjttlal

Ohowdhuri

v.

The union of

India and

Other&.

Kania 0. J.

Fael Ali J,

!IMO

Chiranjitlal

Chowdhur$

..

'J?he: Union of

India a11d

Qthef'JJ.

Fa~I Ali J.

876 SUPREME COURT REPORTS [1950]

(1) the right to property secured by article 31 of

the Constitution ;

(2) the right to acquire, hold and

·dispose of pro.

perty, guaranteed to every citizen

by article 19 (l} (f);

and

(3) the right to equal protection of the laws,

guaranteed

by article 14.

It has been held in a number of cases in the

United

States of America that no one except those whose

rights are directly affected

by a

law can raise the

question of the constitutionality

of that law. This

principle has been very clearly

stated by Hughes J.

in

McCabe v. Atchison('), in these words :-"It is an

elementary principle

that in order to justify the

grant­

ing of this extraordinary relief, the complainant's need

of it and the absence of an adequate remedy at law

must clearly appear. The complainant cannot succeed

because someone else

may be hurt. Nor does it make

any difference that other persons who may

be injured

are persons of the same race or occupation.

It is the

fact, clearly established, of injury to the complainant

-not to others-which justifies judicial interference."

On this statement of the law, with which I entirely

agree, the scope of

the discussion on this petition is

greatly restricted

at least in regard to the first two

fundamental rights. The company

and the shareholders

are

in

law separate entities, and if the allegation is

made

that any property belonging to the company has

been taken possession of without compensation or the

right enjoyed by the company under article 19 (1) (f)

has been infringed, it would be for the company to

come forward to assert or vindicate its own rights

and

not for any individual shareholder to do so. In this

view, the only question which has to be answered is

whether the petitioner has succeeded in showing

that

there has been an infringement of his rights as a

share·

holder under articles 31 and 19 (1) (f) of the Constitu­

tion. This question has been so elaborately dealt with

by Mukherjea J., that I do not wish to add anything

to what he has said in his judgment, and all that is

necessary for me to say is that I adopt his conclusions,

11) 235 U.S. 151.

--.

S.C.R. SUPREME COURT REPORTS 877

without committing myself to the acceptance of all his

reasonings.

The only serious point, which in

my opinion, arises

in

the case is whether article 14 of the

Constitution is

in any way infringed by the impugned Act. This

article corresponds to the equal protection clause of the

Fourteenth Amendment of the Constitution of the

United States of America, which declares

that

"no

State shall deny to any person within its jurisdiction

the equal protection of the laws". Professor Willis

dealing with this clause sums up the law as prevailing

in the United States in regard to it in these words:-

"Meaning and effect of the guaranty-The guaranty

of the equal protection of the laws means the protec­

tion of equal laws.

It forbids class legislation, but

does not forbid classification which rests upon reason­

able grounds of distinction.

It does not prohibit

legislation, which

is limited either in the objects to

which

it is directed or by the territory within which

it is to operate. 'It merely requires that all persons

subjected to such legislation shall be treated alike

under like circumstances

and conditions both in the

privileges conferred and in the liabilities imposed.'

'The inhibition of the amendment . . . . was designed

to prevent any person or class of persons from being

singled out as a special subject

for discriminating and

hostile legislation'.

It does not take from the states the

power to classify either

in the adoption of police laws,

or

tax laws, or eminent domain laws, but permits to

them

the exercise of a wide scope of discretion, and

nullifies what they

do only when it is without any

reasonable basis. Mathematical nicety and perfect

equality are not required.

Similarity, not identity of

treatment, is enough.

If any state of facts can

reason­

ably be conceived to sustain a classification, the exist­

ence of

that state of facts must be assumed.

One who

assails a classification must carry the burden of showing

that it does not rest upon any reasonable

basis."(')

Having summed up the law in this way, the same

learned author adds :-"Many different classifications

(I) Conslilutlon•I Law bJ Pm!. Willis, (lat Edition), p. 679,

1960

Chiranjitlal

Ohowdhurt

••

The UnWn of

India and

Otheri.

Fail AH J.

1950

Chirarijitlal

Chowdhuri

v.

"The Union of

India ancl

Others.

Fa1Z AH J.

878 . SUPREME COURT REPORTS [1950)

of persons have been upheld as constitutional. A law

applying to one person or one class of persons is

constitutional if there is sufficient basis or reason

for it." There can be no doubt that article 14

provides one of the most valuable and important

guarantees in the Constitution which should not be

allowed to be whittled down, and, while accepting the

statement of Professor \Villis as a correct exposition

of the principles underlying this guarantee, I wish to

lay particular emphasis on the principle enunciated

by

him that any classification which is arbitrary and

which is made without any basis is no classification

and a proper classification must always rest upon

some difference

and must bear a reasonable and just

relation to the things in respect

of which it is pro­

posed.

The petitioner's case is

that the shareholders of the

Sholapur company have been subjected to discrimina­

tion

vis a vis the shareholders of other companies, inas­

much as section

13 of the Act subjects them to the

following disabilities which the shareholders of other

companies governed

by the Indian

Companies Act are

not subject to : -

" (a) It shall not be lawful for the shareholders

of the company or any other person to nominate or

appoint any person to be a director of the company.

(b) No resolution passed at any meeting of the

shareholders of the company shall be given effect to

unless approved

by the

Central Government.

(c) No proceeding for the winding up of the com­

pany or for the appointment of a receiver in respect

thereof shall lie in any court unless by or with

the

sanction of the

Central Government."

Prima f acie, the argument appears to be a plausible

one,

but it requires a careful examination, and, while

examining it, two principles have to

be borne in

mind

:--(1) that a law may be constitutional even

though

it relates to a single individual, in those cases

where on account of some special circumstances

or

reasons applicable to him and not applicable to others,

~---~

•

-

S.C.R. SUPREME COURT REPORTS 879

that single individual may be treated as a class by

himself ;

(2) that it is the accepted doctrine of the

American courts, which I consider

to be well-founded

on principle,

that the presumption is always in favour

of the constitutionality of an enactment, and the burden

is upon him who attacks

it to show that there has

been a clear transgression of the constitutional

principles. A clear enunciation of this latter doctrine

is to

be found in Middleton v. Texas

Power and Light

Company('), in which the relevant passage runs as

follows:-

"It must be presumed that a legislature under­

stands and correctly appreciates the need of its

own

people, that its laws are directed to problems made

manifest by experience and that its discriminations are

based upon adequate

grounds."

The onus is therefore on the petitioner to show that

the legislation which is impugned is arbitrary and

unreasonable and there are other companies in

the

country which should have been subjected to the

same disabilities, because the reasons which led the

Legislature

to impose

State control upon the Sholapur

company are equally applicable to them. So far as

article

14 is concerned, the case of the shareholders is

dependent upon the case of the company and if

if

could be held that the company has been legitimately

subjected to such control as the Act provides without

violation of

the article, that would be a complete

answer to the petitioner's complaint.

Now, the petitioner has made

no attempt to dis­

charge

the burden of proof to which I have referred,

and we are merely asked to presume that there must

necessarily be other companies also which would

be

open

to the charge of mismanagement and negligence.

The question cannot in my opinion be treated

so

lightly.

On the other hand, how important the doctrine

of burden of proof

is and how much harm can be

caused by ignoring it or tinkering with it, will be fully

illustrated, by referring to the proceedings in the Parliament in connection with the enactment of the

111 2iB u.a. ia2, 1s7.

1950

Chiranjitlal

Chowdhuri

India and

Other a.

IJ'ai! Ali J.

1950

Chiranjitlai

Chawdhuri

v.

The Union of

India an.cl

Other a.

Fazl Ali J.

880 SUPREME COURT REPORTS [1950]

Act, where the circumstances which necessitated it are

clearly set out. I

am aware that legislative proceed­

ings cannot be referred to for

the purpose of construing

an Act or

any of its provisions, but I believe that they

are relevant for the proper understanding of the

circumstances

under which it was passed and the

reasons which necessitated it.

A reference to

the Parliamentary proceedings shows

that some time ago, a representation was made on

behalf

of a section of the shareholders of the

Sholapur

company to the Registrar of Joint Stock Companies

in Bombay, against the conduct of the managing

agents,

and the Government of Bombay was moved

to order a special inquiry into the affairs of the com­

pany.

For the purpose of this inquiry, two special

inspectors were

appointed by the Bombay Government

and their report revealed

"certain astounding facts"

and showed that the mill had been grossly mismanag­

ed

by the Board of Directors and the managing agents.

It also revealed that the persons who were responsible

for the mismanagement were guilty of certain acts

and

omissions which brought them under the purview of

the law. The Bombay Government accepted the

report of the inspectors and instructed the

Advocate­

'General of Bombay to take legal proceedings against

certain persons connected

with the management of the

company. Thereafter, the Government of

India was

approached by

the Provincial Government and request­

ed to take special action in order

to secure the early

opening of the mill. The Government of

India found

that they had no power to take over the management

of a particular mill, unless its working could be ensured

through

the existing management acting under the

direction of a

Controller appointed under the Essential

Supplies Act, but they also found that a peculiar situa­

tion

had been created in this case by the managing

agents themselves being unable or unwilling

to

con­

duct the affairs of the company in a satisfactory and

efficient manner. The Government of India, as a

matter of precaution and lest it should be said that

they were going to interfere unnecessarily in the affairs

S.C.R. SUPREME COURT REPORTS 881

of the company and were not allowing the existing

provisions of

the law to take their own course,

con­

sulted other interests and placed the matter before the

Standing Committee of the Industrial Advisory Council

where a large number of leading industrialists of the

country

were present, and ultimately it was realized

that this was a case where the Government could

rightly and properly intervene and there would

be no

occasion for any criticism coming from any quarter.

It appears

fro!ll the discussion on the floor of the

House

that the total number of weaving and spinning

mills which were closed down for one reason or other

was about 35 in number.

Some of them are said to

have closed for want of cotton, some due to overstocks,

some for want of capital and some on account of mis­

management. The Minister for Industry, who spon­

sored the Bill, in explaining what distingnished the

case of the Sholapur mill from the other mills against

whom there might

be charges of mismanagement, made

it clear iu the course of the debate

that

"certain con­

ditions had to be fulfilled before the Government can

and should intervene", and he set out these conditions

as follows

:- " (1) The undertaking must relate to an industry

which

is of national importance. Not each and every

undertaking which may have to close down can be

taken charge of temporarily by Government.

(2) The undertaking must be an economic unit. If

it appears that it is completely uneconomic and cannot

be managed

at all, there

i> no sense in Government

taking charge of it.

If anything, it will mean the

Government will have to waste money which belongs

to the taxpayer on an uneconomic unit.

(3) There must be a technical report as regards the

condition

of the plants, machinery, etc. which either

as they stand, or after necessary repairs and

recondi­

tioning can be properly utilised.

(4) Lastly ,-and this is of considerable importance­

there must be a proper enquiry held before Govern­

ment take any action. The enquiry should show that

\lS

1960

Chiranjitlal

Chowdhi•ri

v.

The Unio11 of

India and

Oth~rs.

Fa1:l Ali J.

1950

Chiranjitlal

Chowdhuri

v.

Th~ Un.ion of

India and

Ot/~er!.

882 SUPREME COURT REPORTS [1950)

managing agents have so misbehaved that they are no

longer fit and proper persons to remain in charge of

such an important undertaking."(')

It appears from the same proceedings that the

Sholapur mill is one of the largest mills in Asia and

employs 13,000 workers. Per shift, it is capable of

producing

25 to 30 thousand pounds of yarn, and also

one lakh yards

of cloth. It was working two shifts

when

it was closed down on the 29th August, 1949.

The closure of

the mill meant a loss of 25 lakhs yards

of cloth

and one and a half lakhs pounds of yarn per

month. Prior

to 1947, the highest dividend paid

by the company was

l~s. 525 per share and the lowest

Rs. 100, and, in 1948, when the management was

taken over

by the managing agents

who have been

removed by

the impugned Act, the accounts showed a

loss of Rs. 30 lakhs, while other textile companies

had been able to show very _substantial profits during

the same period.

Another fact which

is brought out in the proceed­

ings

is that the managing agents had acquired control

over the majority of the shares of the company

and a

large number of shareholders who were dissatisfied with

the management

had been rendered powerless and they

could not make their voice heard.

By reason of the

preponderance of their strength, the managing agents

made

it impossible for a controller under the Essential

Supplies Act to function and they also made it diffi­

cult for the company to run smoothly under

the

normal law.

It was against. this background that the Act was

passed, and

it is evident that the facts which were

placed before the Legislature with regard to. the

Shola­

pur mill were of an extraordinary character, and fully

justified the company being treated as a class by itself.

There were undoubtedly other mills which were open to

the charge of mismanagement, but the criteria adopted

by the Government which, in my opinion,

cann;it be

said to be

arbitrary or unreasonable, is not applicable

(l)

Parlia.ments.ry DebateA, Volume III, Nn. 14~ 31st March lO:SO,

pp, 2894.5.

·~

·-

S.C.R. SUPREME COURT REPORTS 883

to any of them. As we have seen, one of the criteria was

that a mere allegation of mismanagement should not

be enough and

no drastic step such as is envisaged in

the Act should

be taken without there being a complete

enquiry.

In the case of the

Sholapur mill, a complete

enquiry had been made

and the revelations which were

made as a result

of such enquiry were startling.

\Ve are familiar with the expression "police power"

which is in vogue in the United States of America.

This expression simply denotes

that in special cases

the

State can step in where its intervention seems·

necessary and impose special burdens for general bene­

fit. As one of the judges has pointed out, " the regu­

lations may press with more or less weight upon one

than upon another, but they are designed not to

impose unequal or unnecessary restrictions upon any­

one, but to promote, with as little individual incon­

venience as possible, the general good."(') It need

not

be emphasized that the princi

pies underlying what

is known as police power in

the United

States of

America arc not peculiar to

that country, but are

recognized

in every modern civilized State. Professor

Willis dealing with the question of classification

in

exercise of police power makes the following

observa­

tions:

"There is no rule for determining when classifica­

tion for the police power is reasonable. It is a matter

for judicial determination,

but in determining the

question of reasonableness the

Courts must find some

economic, political or other social interest to be secured,

and some relation of the classification

to the objects

sought to

be accomplished. In doing this the

Courts

may consider matters of common knowledge, matters

of common report,

the history of the times, and to

sustain it they will assume every state of facts which

can be conceived of as existing

at the time of

legisla­

tion. The fact that only one person or one object or

one business

or one locality is affected is not proof of

denial of the equal protection of the laws. For such

(I)

Per Field J, in Barbier v. Connolly. 118 US. 27,

19CO

Chiranjit1al

Chowdhurt

v.

The Union of

India and

Other a.

Fa•l .Iii J.

1950

Chirn.njitlai

Chowdhurt

v,

Ths Uoiion. of

India and

Othsra,

FIUl Ali J.

884 SUPREME COURT REPORTS [1950)

proof

it must be

shown that there is no reasonable basis

for the classification."(')

In this particular case, the Government initially

took control

of the

Sholapur Company by means of an

Ordinance (Ordinance

No. II of

1950), of which the

preamble runs as

follows:-".Whereas on account of mismanagement and neglect

a situation has arisen in the affairs of the Sholapur

Spinning and Weaving Company, Limited, which has

prejudicially affected the production

of an essential · commocjity and has caused serious unemployment

amongst a certain section

of the community;

And whereas an emergency has arisen which renders

it necessary to

·make special provision for the proper

management

and administration of the aforesaid

Com­

pany;

Now, therefore, ........................ "

In the course of the Parliamentary debate, reference

was made to

the fact that the country was facing an

acute cloth shortage, and one of the reasons which

apparently influenced the promulgation of

the

Ordi­

nance and the passing of the Act was that the

mismanagement of

the company had gravely affected

the production of an essential commodity. The facts

relating to

the mismanagement of this mill were care­

fully collected

and the mischief caused by the sudden

closing of the mill to the shareholders as well as to the

general public were fully taken into consideration.

Therefore, it seems to me

that to say that one

parti­

cular mill has been arbitrarily and unreasonably

selected

and subjected to discriminatory treatment,

would be

an entirely wrong proposition.

Article

14 of the

Constitution, as already stated, lays

down

an important fundamental right, which should

be closely and vigilantly guarded,

but, in construing

it, we should not adopt a doctrinaire approach which

might choke all beneficial legislation.

The facts to which I have referred are to be found in

a public document, and, though some of them may

(1)

Constitutional La.w by Prof. Willis (1st Edition) p. 580.

S.C.R. SUPREME COURT REPORTS 885

require

further investigation forming as they do part

of a

OJ:ie-sided version, yet they furnish good prima

facie grounds for the exercise of the utmost caution in

deciding this case and for not departing from the

ordinary rule as to the burden of proof.

In the last

resort, this petition can be disposed of

on the simple

ground

that the petitioner has not discharged the onus

which lies upon him, and I am quite prepared to rest

my judgment on this ground alone.

I think

that the petitioner has faiied to make out

any case for granting the writs or directions asked

for,

and the petition should therefore be dismissed with

costs.

PATANJALI

SASTRI J.-This is an application under

article 32 of the Constitution seeking relief against

alleged infringement of certain fundamental rights

of

the petitioner.

The petitioner

is a shareholder of the Sholapur

Spinning and Weaving

Company, Limited, Sholapur,

in the State of Bombay, (hereinafter referred to as

"the Company"). The authorised share capital of

the Company consisted of 1590 fully paid up ordinary

shares of Rs. 1,000 each, 20 fully paid up ordinary

shares of Rs. 500 each and 32,000 partly paid up

redeemable cumulative preference shares of Rs. 100

each, of which Rs. 50 only was paid up. Of these,

the petitioner held one ordinary share in his own name

and 80 preference shares which, however, having been

pledged with the Bank

of Baroda

Ltd., now stand

registered

in the Bank's name.

The company was doing flourishing business

till

dis­

putes arose recently between the management and the

employees, and in or about August,

1949, the mills

were temporarily closed and

the company, which was

one of the largest producers of cotton textiles, ceased

production. Thereupon, the Governor-General

inter­

vened by p110mulgating on the 9th January, 1950, an

Ordinance called the Sholapur Spinning and Weaving

Company (Emergency Provisions) Ordinance (No. II of

1950), which empowered the Government of India to

1950

ChiranfitlaE

Chowdhuri

v.

The Uiiio'I of

I11d1a al'ld

Others.

Fad Ali J,

Patanfa.ti

Bastri J,

1950

Ohira>i;'itlal

Chow,lhu.ri

v.

The U•ii'ln of

India a-id

Others.

Patri.njali

Sastrt

J.

SSS SUPREME COURT REPORTS [1950]

take over the control and management of the company

and its properties

and effects by appointing their own

Directors and to delegate all or any of their powers to

the Provincial Government.

In exercise of the powers

thus delegated, the Government

of Bombay appointed

respondents 3 to 9

as Directors to take charge of the

management and administration of the properties and

affairs of the company.

Subsequently, on 10th April,

1950, the Ordinance was repealed and was replaced by

an Act of Parliament containing similar provisions,

namely the Sholapur Spinning

and Weaving

Company

(Emergency Provisions) Act (No. XXVllI of 1950)

(hereinafter referred to as the "impugned Act").

The petitioner complains that the impugned Act and

the action of the Government of Bombay pursuant

thereto have infringed the fundamental rights confer­

red on him by articles 14, 19 and 31 of the Constitution

with the result that the enactment is unconstitutional

and void, and the interference by the Government in

the affairs of the company is unauthorised

and illegal.

He accordingly seeks relief

by way of injunction and

mandamus against the

Union of India and the State of

Bombay impleaded as respondents 1 and 2 respective.

l y in these proceedings

and against respondents 3 to

9 who are now in management as already stated.

The company is impleaded

pro forma as the

10th

respondent.

Before discussing the issues involved, it is necessary

to examine

the relevant provisions of the impugned

Act

in order to see in what manner and to what

extent the petitioner's rights have been affected

thereby. The preamble to the repealed Ordinance

stated that

"on account of mismanagement and

neglect a situation has arisen in

the affairs of the

Sholapur Spinning and Weaving

Company, Limit.

ed, which has prejudicially affected the production

of an essential commodity and has caused serious

unemployment amongst a certain section of the

community

and that an emergency has arisen which

renders

it necessary to make special

provision for the

proper management and administration

of the aforesaid

•

'

S.C.R. SUPREME COURT REPORTS 887

Company." This preamble was not reproduced in the

impugned Act. Section 3 empowers the Central

Government to appoint as many persons as it thinks

fit to be directors

of the company

"for the purpose of

taking over its management and administration."

Section 4 states the effect of the order appointing

directors to

be that (1) the old directors shall be deemed

to

have vacated their office, (2) the contract with the

managing agents shall be deemed

to have been

termi­

nated, (3) that the properties and effects of the

company shall be deemed to be in

the custody of the

new directors who are

to be

" for all purposes " the

directors of the company and "shall alone be entitled

to exercise

all the powers of the directors of the

com­

pany whether such powers are derived from the

Companies Act or from the memorandum or articles

of ·association or otherwise." Section 5 defines the

powers of the new directors. They are to manage the

business of

the company

"subject to the control of

the Central Government" and shall have the power to

raise funds offering such security as

they think fit, to

carry out necessary repairs to the machinery or other.

property in

their custody and to employ the necessary

persons

and define the necessary conditions of their

service.

Section 12 provides for the restoration of the

management to directors nominated

by the

share­

holrlers when the purpose of the Government's inter­

vention has been fulfilled. Section 13 is important

and reads thus: " 13. Application of the Companies

Act.-(I) Notwithstanding anything contained in the

Companies Act or in the memorand11m or articles of

association

of the company (a) it shall not be lawful

for

the

sharehrilders of the company or any other

person

to nominate or appoint any person to be a

director

of the company; (b) no resolution passed at

any meeting of the shareholders of the company shall

be given effect to unless approved

by the

Central

Government; (c) no proceeding for the winding up of

the company or for

the appointment of a receiver in

respect thereof shall lie in any

Court unless by or \ith

the sanction of the Central Government. (2) Subject

'

1950

Chirt't•njitlal

Chowdhurt

v.

The Union of

Ind a and

Others,

Pa.lan;ali

Sastri J.

1960

Chiranjit7al

ChowdhurS

v.

The Union of

India and

Othera.

Patanjali

Sastri J.

888 SUPREME COURT REPORTS (1950)

to the provisions contained in sub-section (1) and to

the other provisions of this Act, and subject to such

exceptions, restrictions

and limitations as the

Central

Government may, by notified order, specify, the Com­

panies Act shall continue to apply to the company in

the same manner as

it applied thereto before the issue

of the notified order under section

3." By section 14

the provisions of the Act are to have effect "notwith­

standing anything inconsistent therewith contained in

any other law or in any instrument having effect by

virtue

of any law other than this

Act." Section 16

provides for delegation of powers to the Government

of Bombay

to be exercised subject to the directions of

the

Central Government, and section 17 bars suits or

other proceedings against the Central Government or

the Government of Bum bay or any director "for any

damage caused or likely to be caused by anything

which is in good faith done or intended to be done in

pursuance of this Act."

As a result of these provisions all the properties and

. effects

of the company passed into the absolute power

and control of the

Central Government or its delegate

the Government of Bombay, and the normal function­

ing of the company as a corporate body came

to an

end. The shareholders have been reduced to the

position of interested, if helpless, onlookers while the business is carried on against their will and, may be,

to their disadvantage by the Government's nominees.

The declared purpose of this arrangement was, accord.

ing to the

Preamble of the repealed Ordinance to keep

up the production

of an essential commodity and to

avert serious unemployment amongst a certain section

of

the community.

The question accordingly arises whether the

im­

pugned Act, which thus affects the petitioner and his

co-shareholders, while leaving untouched the share­

holders of all

other companies, including those engaged

in the production of essential commodities, denies to

the petitioner the equal protection of the laws under

article 14 of the Constitution. The correct approach to

-·

S.C.R. SUPREME COURT REPORTS 889

this question is first

to see what rights have been confer.

red or protection extended to persons similarly situated.

The relevant protection is to

be found in

the provisions

of the

Indian

Companies Act which regulates the rights

and obligations

of the shareholders of incorporated

companies in India.

Section 21 of the Act assures to

the shareholders the protection of the stipulations

contained in the memorandum

and articles of

associa­

ticn by constituting them a binding contract, so that

neither the company nor the shareholders have the

power of doing anything inconsistent therewith. The

basic right of the shareholders to have their under­

taking managed and conducted by the directors of

their own choice is ensured by section 83B. Their .

right to exercise control and supervision over the

management by the directors by passing resolutions J

at their general meeting is regulated by various pro­

visions of the Act. The important safeguard of winding

up

the company in certain unfavourable circumstances

either through court or by the shareholders themselves

voluntarily is provided for in sections 162

and 203. All

these

rights and safeguards, on the faith of which the

shareholders embark their money in their undertaking,

are abrogated

by the impugned Act in the case of the shareholrlers of this company alone. In fact, the

Central Government is empowered to exclude, restrict

or

limit the operation of any of the provisions of the Companies Act in relation to this company. It is thus

plain that the impugned Act denies to the shareholders

of

this particular

company the protection of the law

relating to incorporated joint stock companies in this

country as embodied in the Companies Act and is

primafacie within the inhibition of article 14.

It is argued, however, that article 14 does not make

it incumbent on 1he Legislature always to make

laws applicable to all persons generally,

and that it is

open to the Legislature

to classify persons and things

and subject them to the operation of a particular law

according to

the aims and objects which that law is

designed to secure.

In the present case, Parliament,

114

1950

OhiranJ1tlal

Chowdhuri

v.

The Union of

India and

Others.

Patanjali

Sastri J,

1950

Ohiranfit1al

Chowdhuri

·-The Union

of

India and

Other a,

Pala~.iali

Sastri J,

890 SUPREME COURT REPORTS [1950]

it was said, came to the conclusion, on the materials

placed before theni,

that the affairs of the company

were being grossly mismanaged so as

to result in the

cessation of production of an essential commodity

and

serious unemployment amongst a section of the

com­

munity. In view of the detriment thus caused to

public economy,

it was competent for Parliament to

enact a measure applicable to this company and its

shareholders alone,

and Parliament must be the judge

as to whether the evil which the impugned Act was

designed

to remedy prevailed to such an extent in this

companv as to call for special legislation. Reliance

was

pl::tced in support of this argument on certain

American decisions dealing

with the equal protection

clause of the Fourteenth Amendment of the Federal Constitution. It is, however, unnecessary to discuss

those decisions here, for

it is undeniable that equal

protection of

the laws cannot mean that all laws must

be quite general in their character and application.

A legislature empowered

to make laws on a wide range

of subjects

must of necessity have the power

qf making

special laws to attain particular objects and must. for

that purpose, possess large powers of distinguishing

and classifying the persons or things to be brought

under the operation of such laws, provided the basis

of such classification has a

just and reasonable relation

to the object which the legislature has in view. While,

for instance, a classification in a law regulating

labour

in mines or factories may be

based on age or sex, it

may not be based on the colour of one's skin. It is

also

true that the class of persons to whom a law is

made applicable may be large or small, and the degree

of

harm which has prompted the enactment of a

particular law is a

matter within the discretion of the

law-makers. It is not the province of the court to

canvass

the legislative judgment in such matters. But

the issue here is not whether the impugned Act was

ill-advised

or not justified by the facts on which it

was based, but whether - it transgresses the explicit

constitutional

re:;triction on legislative power imposed

by arti<;le 14.

••

S.C.R. SUPREME COURT REPORTS 891

It is obvious that the legislation is directed solely

against a particular company and shareholders and not

against any class or category of companies and

no

question, therefore, of reasonable legislative classifica­

tion arises.

If a law is made applicable to a class of

persons or things and the classification is based upon

differentia having a rational relation to

the object

sought to

be attained, it can be no objection to its

constitutional validity

that its application is found to

affect only one person

or thing. For instance, a law

may be passed imposing certain restrictions and

burdens on joint stock companies with a share capital

of, say, Rs.

IO crores and upwards, and it may be

found

that there is only one such company for the

time being

to which the Jaw could be applied. If other

such companies are brought into existence in future

the law would apply to

them also, and no discrimina.

tion would thus be involved.

But the impugned Act,

which selects this particular company and imposes

upon

it and its shareholders burdens and disabilities

on the

graund of mismanagement and neglect of duty

on the

part of those charged with the conduct of its

undertaking. is plain! y discriminatory in character and

is, in my judgment, within the constitutional inhibition

of article 14. Legislation based upon mismar.agement

or other misconduct as the differentia and made appli­

cable to a specified individual or corporate body is not

far removed from the notorious parliamentary proced­

ure formerly employed in Britain of punishing

individual delinquents by passing bills

of attainder, and

should not,

I think, receive judicial encouragement.

It was next urged that the burden of proving that

t~e impugned Act is unconstitutional lay on the peti­

tioner, and that, inasmuch as he has failed to adduce

any evidence to show

that the selection of this com­

pany and its shareholders for special treatment under

the impugned Act was arbitrary, tlie application must

fail. Whilst all

reasonable presumption must

undoubtedly be made in support of the constitutional

v.alidity of a law made

by a competent legislature, the

circumstances of the present case would

seem, .to my

1950

Ohiranjitlal

Chowdhuri'

v.

Ths Union of

India and

Others.

Patanjali

Sastri J.

1950

Cki1'anjitla!

Chowdhuri

v,

The Uriion of

I11d1a and

Others.

Patarija!i

Sastri J,

892 SUPREME COURT REPORTS [1950]

mind to exclude such presumption. Hostile discdmina.

tion is writ large over the fate of the impugned Act

and it discloses no grounds for such legislative interven­

tion. For all that appears no compelling public interests

were involved.

Even the preamble to the original

Ordinance was omitted. Nor did respondents 1

and 2

file any counter-statement in this proceeding explaining

the circumstances which led

to the enactment of such

an extraordinary measure. There is

thus nothing in

the record even by way of allegation which the petitioner

need take steps to rebut.

Supp"sing, however, that the

impugned Act was passed

on the same grounds as were

mentioned in

the preamble to the repealed Ordinance,

namely, mismanagement

and neglect prejudicially

affecting the production

of an essential commodity and

causing serious unemployment amongst a section of

the community, the petitioner could hardly be expected

to assume the burden of showing, not that the company's

affairs were properly managed, for

that is not his case,

but that there were also other companies similarly

mismanaged, for

that is what, according to the

respond­

ents, he should prove in order to rebut the presump.

tion of constitutionality.

In other words, he should be

called upon to establish

that this company and its

shareholders were

arbitrarily singled out for the

im­

position of the statutory disabilities. How could the

. petitioner discharge such a burden? Was he to ask for

an investigation by the Court of the affairs of other

industrial concerns in

India where also there were

strikes

and lock outs resulting in unemployment and

cessation of production of essential commodities?

\Vould those companies be willing to

submit to such an

investigation

? And even so, how is it possible to

prove

that the mismanagement and neglect which is

said to have prompted the legislation in regard to this

company was prevalent in the same degree in other

companies

? In such circumstances, to cast upon the

petitioner a burden of proof which

it is as needless for

him to assume as it is impracticable to discharge is to

lose

sight of the realities of the case.

'

S.C.R. SUPREME COURT REPORTS 893

Lastly,

it was argued that the constitutionality of a

statute could not be impugned under article

32 except

by a person whose rights

were infringed by the enact.

ment, and

that, inasmuch as there was no infringement

of

the individual right of a shareholder, even assuming

that there was an injury to the company as a corporate

body, the petitioner was not entitled to apply for relief

under

that article. Whatever validity the argument

may have in relation to the petitioner's claim

based on

the alleged invasion of his right of property under

article 31, there can be little doubt that, so far as his

claim based on the contravention of article

14 is

concerned, the petitioner

is entitled to relief in his own

right.

As has been pointed out already, the impugned

Act deprives

the shareholders of the company of

im-

portant rights and safeguards which are enjoyed by

the shareholders of other joint stock companies in

India un·Jer the Indian Companies Act. The petitioner

is thus denied the equJ1l protection of the laws in his

capacity as a shareholder, and none the less

so because

the other shareholders of the company are also similarly

affected. The petitioner is therefore entitled to seek

relief under article 32 of

the

Constitution.

In this view it becomes unnecessary to consider the

questions raised under articles

19 and 31 of the

Con­

stitution.

In the result, I would allow the application.

1950

'Chiranjitlai

Chowdhuri

••

The Unio11 of

Ind1a and

Other I.

Palattjali

Sastr' J.

MuKHERJEA ].-This is an application presented by Mukhorj,. J.

one Chiranjitlal Chowdhuri, a shareholder of the

Sholapur Spinning and \Veaving Company Limited

(hereinafter referred to as the company), praying for a

writ of mandamus

and certain other reliefs under

article 32 of the

Constitution. The company, which

has its registered

office within the

State of Bombay and

is governed

by

the-provisions of the Indian Companies

Act, was incorporated with an authorised capital of

Rs. 48 lakhs divided into 1590, fully paid up ordinary

shares of Rs. 100 each, 20 fully paid up ordinary

shares of Rs. 500 each and 32,000 partly paid up

t\\m\\\'d\\'J~ }.)!~kr~nce shares of Rs. 100 each. The

1950

Chiranjitlal•

Chawdhuri

v.

The U>iion of

India and

Others.

Mukherjea J.

894 SUPREME COURT REPORTS [1951)

present paid up capital of the company is Rs. 32 lakhs

half of which is represented by the fully

paid up

ordinary shares

and the other half by the partly paid

up cumulative preference shares. The

petitioner states

in his petition

that he holds in his own right three

ordinary shares

and eighty preference

shares in the

company, though according to his own admission the

preference shares do not stand in his name

but have

been registered in the name of the Baroda Bank Limited

with which the shares are pledged. According

to the

respondents, the petitioner is the registered holder of

one single ordinary share in

the company.

It appears that on July 27, 1949, the directors of the

company gave a notice to the workers

that the mills

would be closed,

and pursuant to that notice, the

mills·

were in fact closed on the 27th of August following.

On January 9, 1950, the Governor-General of lnd1a

promulgated

an Ordinance which purported to make

special

provisions for the proper management and

administration of the company. It was stated in the

preamble to

the Ordinance that

"on account of mis­

management and neglect, a situation has arisen in the

affairs of the Sholapur Spinning and Weaving Company

Limited which has prejudicially affected the produc­

tion of an essential commodity and has caused serious

unemployment amongst a certain section

of the

com­

munity ", and it was on account of the emergency

arising from

this situation that the promulgation of the

Ordinance was necessary. The provisions of the

Ordinance, so far as

they are material for our present

purpose, may be summarised as follows :

Under section 3 of the Ordinance, the

Central Govern­

ment may, at any time, by notified order, appoint as

many persons as

it thinks fit, to be directors of the

company for the purpose of taking over its management

and administration and may appoint one of such

directors to be the

Chairman. Section 4 provides that

on the issue of a notified order under section 3 all the

directors of the company holding

office as such

imme­

diately before the issue of the order shall be deemed

to have vacated

their offices, and any existing

l

S.C.R. SUPREME COURT REPORTS 895

contract of management between the company and any

managing agent thereof shall be deemed to have

terminated. The directors thus appointed shall be for

all purposes the directors of the company duly consti­

tuted under the Companies Act and shall alone be

entitled to exercise all the powers of the directors

of the

company. The powers and the duties of the directors

are specified in section 5 and

thiS section inter alia

empowers the directors to vary or cancel, with the

previous sanction of the Central Government, any con­

tract or agreement entered into between the company

and any other person if they are satisfied that such

contract or agreement

is rletrimental to the interests of

the company.

Section 10 lays down that no compen­

sation for premature termination of any contract could

be claimed

by the managing agent or any other

con­

tracting party. It is provided by section 12 that so

long as the management by the. statutory directors

continues, the shareholders would be precluded from

nominating or appointing any person to be a director

of

the company and any resolution passed by them

will not be effective

unless it is approved by the

Central Government. This section Jays down further

that during this period no proceeding for winding up

of the company, or for appointment of a recei,·er in

respect thereof could be instituted in any court, unless

it is sanctioned by the Central Government, ancl the

Central Government would be competent to impose any

restrictions

or limitations as regards application of the

provisions of the Indian

Companie3 Act to the affairs

of the comµany. The only other material provision is

that contained in section 15, under which the

Central

Government may, by no.lilied order, direct that all or

any

of the

powers exercisable by it under this Ordin

ance may be exercised by the Government of

Bombay.

In accordance with the provisions of section 15

men~ion~d above, the Central Government, by noti­

ficat10n issued on the same day that the Ordinance

was promulgated, delegated ail its powers exercisable

Q.nder the Ordinance to the Government of Bombay.

1950

ChiraJJjitlaZ

Chowdhurt

v.

The Unioti of

Indin and

Oth~ra.

Mukherjea J.

1950

Chiranj1tlal

Chowdhuri

••

The U11ion of

India and

Others.

Mukherjea J.

896 SUPREME COURT REPORTS [1950]

On th.e next day, the Government of Bombay appofnt­

ed respondents 3 to 7 as directors of

the company in

terms of section 3 of the Ordinance.

On the 2nd of

March, 1950, the respondent No. 9 was appointed a

director

and respondent No. 5 having resigned his

office in

the meantime, the respondent No. 8 was

appointed in his place.

On the 7th of April, 1950, the

Ordinance was repealed and

an Act was

passed by the

Parliament of India, known as the Sholapur Spinning

and Weaving Company (Emergency Provisions) Act

which re-enacted almost in identical terms all

the pro­

visions

of the Ordinance and provided further that all

actions

taken and orders made under the Ordinance

shall be deemed to have been taken or made

under the

corresponding provisions of the Act. The preamble

to the Ordinance was not however reproduced in the

Act.

The petitioner in his petition has challenged

the

constitutional validity of both the Ordinance and the

Act. As the Ordinance is no longer in force and all

its provisions have been incorporated in the Act,

it

will not be

nece8sary to deal with or refer to the

enactments separately. Both the Ordinance and the

Act have been attacked on identical grounds and it is

only necessary

to enumerate briefly what these

grounds are.

The main ground put forward

by the petitioner is

that the pith and substance of the enactments is to

take possession of and control over the mills of the

company which are its valuable assets and such taking

of possession of property is entirely beyond

the powers

of the Legislature. The provisions of

the Act, it is

said, amount

to deprivation of property of the share­

holders as well as of

the company within the meaning

of article

31 of the

Constitution and the restrictions

imposed

on the rights of the shareholders in respect to

the shares held by them constitute an unjustifiable

interference with their rights to hold property

and as

such are void under article

19 (1) (f). It is urged that

there was no public purpose for which the Legislature

<;ould authorise the taking pcissession or acqubition of

r

. ,,,)

S.C.R. SUPREME COURT REPORTS 897

property and such acquisition or taking of possession

without payment of compensation

is in violation

of the fundamental rights guaranteed by article 31 (2)

of the Constitution. It is said further that the enact­

ment denies to the company and its shareholders

equality before the law, and equal protection of laws

and thus offends against the provisions of article

14 of

the Constitution. The only other material point raised

is that the legislation is beyond the legislative compe­

tency of the Parliament and

is not covered by any of

the items in the legislative lists.

On these allegations, the petitioner prays, in the

first instance,

that it may be declared that both the

Act and the Ordinance are

ultra vires and void and an

injunction may be issued restraining the respondents

from exercising any of

the powers conferred upon

them by

the enactments. The third and the material

prayer is for issuing a writ of mandamus,

"restraining

the respondents 1 to 9 from exercising or purporting

to exercise any powers under the said Ordinance or

Act and from in any manner interfering with the

management or affairs

of the company under colour of

or any purported exercise of any powers under the

Ordinance or the

Act." The other prayers are not

material for our purpose.

Before I address myself to the merits of this

application

it will be necessary to clear up two

preliminary matters in respect to which arguments

were

advanc~d at some length from the Bar. The

first point relates to the scope

of our enquiry in the prese11t case and raises the question as to what precisely

are the matters

that h_ave to be investigated and

determined

on this application of the petitioner. The

second point relates to the form of relief

that can be

prayed for and granted in a case of this description.

Article. 32

(1) of the Constitution guarantees to

everybody

the right to move this court, by

appropri­

ate proceeding, for enforcement of the fundamental·

rights which are enumerated in Part III of the Con­

stitution. Clause (2) of the article lays down that the

11~

195"

Chirari.jitlal

Chowdhuri

v.

Tho Union of

Indill and

Other a.

Mukherjea J.

898 SUPREME COURT REPORTS [1950]

1900 Supreme Court shall have the power to issue directions

or orders or _writs including writs in the nature

of

CMranjitlal h 'b

Chowdhuri habeas corpus, mandamus, pro i ition, quo warranto

v.

The Union of

India and

OthtJrs.

and certi:orari whichever may be appropriate for the

enforcement of any of the rights conferred by this

part.

Thus anybody who complains of infraction of any of

Mukherjeo J. the fundamental rights guaranteed by the Constitution

is at liberty to move the Supreme Court for the

enforcement of such rights

and this court has been

given the power to make orders and issue directions or

writs similar in nature to the prerogative writs of

English law as might be considered appropriate in

particular cases. The fundamental rights guaranteed

by the Constitution are available not merely to ~ individual citizens but to corporate bodies as well

except where the language of the provision or the

nature

of the right compels the inference that they are

applicable only to natural persons.

An incorporated

company, therefore, can come

up to this court for

enforcement

of its fundamental rights and so may the

individual shareholders to enforce their

own; but it

would not be open to an individual shareholder to

complain

of an Act which affects the fundamental

rights

of the company except to the extent that it

constitutes an infraction of his own rights as well.

This follows logically from the rule of law

that a

cor­

poration has a distinct legal personality of its own

with rights

and capacities, duties and obligations

separate from those

of its individual members. As the

~ rights are different and inhere in different legal entities,

it is not competent to one person to seek

to enforce the

rights of another except

where the Jaw permits him to

do so. A well known illustration

of such exception is

furnished

by the procedure that is sanctioned in an

application for a writ of habeas corpus. Not only the

man who is imprisoned

or detained in confinement

but any person, provided he is not an absolute

• jstranger, can institute proceedings to obtain a writ. of

'habeas corpus for the purpose of liberating another

from an illegal imprisonment,

S.C.R. . SUPREME COURT REPORTS 899

1950

Chiranj1tlal

Ohowdhu,.t

v.

The Union of

India and

Other».

The application before us under article 32 of the

Constitution is on behalf of an individual shareholder

of

the company. Article 32, as its provisions show,

is not directlv concerned with the determination of

constitutional validity of particular legislative enact.

ments. What it aims

at is the enforcing of

funda­

mental rights guaranteed by the Constitution, no

matter whether the necessity for such enforcement

arises out of an action of the executive or of

the

legis­

lature.· To make out a case under this article, it is"

incumbent upon the petitioner to establish not merely

that the law complained of is beyond the competence

of the particular legislature as not being covered by

any of the items in the legislative lists,

but that

it•

affects or invades his fundamental rights guaranteed.

by the Constitution, of which he could seek enforce­

ment by an appropriate writ or order. The rights

that could be enforced under article 32 must ordinarily

be the rights of the petitioner himself who complains

of infraction of such rights and approaches the court

for relief. This being the position, the proper subject~

of our investigation would be what rights, if any, of

the petitioner as a shareholder of the company have

been violated

by the impugned legislation. A

discus­

sion of the fundamental rights of the company as such

would

be outside the purview of our enquiry. It is

settled law that in order to redress a wrong done to

the company, the action should prima jacie be brought

by the company itself. It cannot be said that this

course

is not possible in the circumstances of th

present case. As the law is alleged to be

uncon­

stitutional, it is open to the old directors of the com

pany who have been ousted from their position b

reason o~ t~e enactment to maintain that they are dir

ect?rs. still m the

eye of law, and on that footing the maionty of shareholders can also assert the rights of

the company as such. None of them, however, have

come forward to institute any proceeding on behalf of

the company. Neither in form nor in substance

does the present application purport to

be one

made by the company itself. Indeed, the company

Mukherjea J.

1950

Chiranjitlai

Chowdhuri

v.

The Uriion of

[,1dia and

Others,

A1ukheriea J,

900 SUPREME COURT REPORTS (1950]

is -one of the respondents, and opposes the peti­

tion.

As regards the other point,

it would appear

from the

language

of article 32 of the Constitution that. the

sole object of the article is the enforcement of funda­

mental rights guaranteed

by the Constitution. A

proceeding under

this article cannot really have

any affinity to what is known as a declaratory

suit. The first prayer made in the petition seeks

relief in the shape of a declaration

that the Act

is invalid and is apparently inappropriate

to an appli­

cation

under article 32; while the second purports to

be framed for a relief by way

of injunction consequent

upon the first.

As regards the third prayer, it has

been contended

·by Mr. Joshi, who appears for one of

the respondents, that having regard to the nature of

the case and the allegations made by the petitioner

himself, the

prayer for a writ of mandamus, in the

form in which

it has been made, is not tenable. What

is argued is that a writ of mandamus can be prayed

for, for enforcement

of statutory duties or to compel a

person holding a public

office to do or forbear from

doing something which is incumbent upon

him to do

or forbear from doing

under the provisions of any law.

Assuming

that the respondents in the present case are

public servants,

it is said that the statutory duties

which

it is incumbent upon them to discharge are pre­

cisely

the duties which are laid down in the impugned

Act itself. There is no legal obligation on

their

part to abstain from exercising the powers conferred

upon

them by the impeached

~mactment which

the court can be called upon to enforce. There

is really not much substance in

this argument, for

according

to the petitioner the impugned Act is not

valid

at all and consequently the respondents cannot

take their

stand on this very Act to defeat the applica­

tion for a writ in the nature of a mandamus. Any

way, article 32 of the Constitution gives us very wide

discretion in

the matter of framing our writs to suit the

exigencies of particular cases,

and the application of

the petitioner cannot be thrown out simply on the

S.C.R. SUPREME COURT REPORTS 90 I

ground that the proper writ or direction has not been

prayed for.

Proceeding now to the merits of the case, the first

contention

that has been pressed before us by the

learned

Counsel for the petitioner is that the effect of

the Sholapur Spinning and· Weaving Company Limited

(Emergency Provisions) Act, has been to take away

from

the company and its shareholders, possession of

property and other interests in commercial undertaking

and vest the same in certain persons who are appointed

_ by the State, and the exercise of whose powers cannot be

-.-~~irected or co.ntrolled in any way by the shareholders.

"'\As the taking of possession is not for any public pur­

ose and no provision for compensation has been made

l'1y the law which authorises it, such law, it is said,

+iolates the fundamental rights guaranteed under

:lrticle 31 of the Constitution.

· _ / To appreciate the contention, it would be convenient

· / first of all to advert to the provisions of the first two

/ clauses of article 31 of the Constitution. The first

/ clause of article 31 lays down that "no person shall be

· deprived of his property save by authority of law".

The second clause provides : "No property, movable

or immovable, including any interest in, or in any

company owning, any commercial or industrial under­

taking, shall be taken possession

of or acquired for

public purposes under

any law authorising the taking

of such possession or such acquisition, unless the law

provides

for compensation for the property taken pos­

sesion

of or acquired and either fixes the amount of

the compensation, or specifies the principles on which,

and the manner in which, the compensation is to be

determined and

given."

It is a right inherent in every sovereign to take and

appropriate private property belonging to individual

citizens for public use. This right, which

is described

as

eminent domain in American law, is like the power

?I taxation, an offspring of political necessity, and it

1s supposed to be based upon an implied reservation

by Government that private property acquired by its

1950

Chiranjitlal

Chowdhuri

v.

The Union of

India and

Others

Mukherjea J.

...

1950

Ohiranjitlal

Chowdhu.ri

v.

The Union of

India and

Others.

Mukheriea J.

902 SUPREME COURT REPORTS [1950]

c:itizens under its protection may be taken or its use

controlled for public benefit irrespective of the wishes of

the owner. Article 31 (2) of the

Constitution prescribes

a two-fold limit within which such superior right of

the State should be exercised.·

One limitation imposed

upon acquisition or taking possession

of private

pro­

perty which is implied in the clause is that such

taking must be for public purpose. The other condi­

tion is that no property can be taken, unless the law

which authorises such appropriation contains a pro­

vision for payment of compensation in the manner laid

down in the clause. So far as article

31 (2) is

con­

cerned, the substantial question for our consideration

is whether the impugned legislation authorises

any act amounting to acquisition or taking posses­

sion of private property within the meaning of the

clause.

It cannot be disputed that. acquisition means and

implies the acquiring of the entire title of the

expro­

priated owner, whatever the nature or extent of that

title might be. The entire bundle of rights which

were vested in the original holder would pass on acqui­

sition to the acquirer leaving nothing in the former.

In taking possession on the other hand, the title to the

property admittedly remains

in the original holder,

though he

is excluded from possession or enjoyment

of the property. Article

31 (2) of the

Constitution

itself makes a clear distinction between acquisition of

property and taking possession of it for a public pur­

pose, though it places both of them on the same foot­

ing in the sense that a legislation authorising either of

these acts must make provision

for payment of

com­

pensation to the displaced or expropriated holder of the

property.

In the context in which the word

"acquisi­

tion" appears in article 31 (2), it can only mean and

refer to acquisition of the entire interest of the previous

holder

by transfer of title and I have no hesitation in

holding

that there is no such acquisition either as

regards

the property of the company or of the

share­

holders in the present case. The question, therefore,

narrows down to this

as to whether the legislation in

•

•

S.C.R. SUPREME COURT REPORTS 903

question has authorised the taking of possession of

any property or interest belonging to the petitioner.

1950

Ckiranjitlal

It is argued by the learned Attorney-General that the Chowdhuri

v taking of possession as contemplated by article 31 (2)

means the taking of possession of the entire bundle of The Union of

rights which the previous holder had, by excluding India and

him from every part or item thereof. If the original Other•.

holder is still left to exercise his possession with regard Mukheriea

1

.

to some of the rights which were within the folds of

his title, it would not amount to taking possession of

the property for purposes of article 31 (2) of the Con.

stitution. Having laid down this proposition of law,

the learned Attorney-General has taken us through the

various provisions of the impugned Act and the

contention ·advanced by him substantially is that~

neither the company nor the shareholders have been

dispossessed from their property by reason of the

enactment. As regards the properties of the company! I

the directors, who have been given the custody of the

property, effects and actionable claims

of the

company,·

are, it is said, to exercise their powers not in their own ;

right but as agents of the companv. whose beneficial

intertst in al.Lita-a£sets-ffils-not-bee1i_toui;,hed_gr_JaJ,:en

away at all. No doubt the affairs of the company are

tObe managed by a body of directors appointed by

the State and not by the company, but this, it is

argued, would not amount to taking possession of any

property or interest within the meaning of article 31

(2). Mr. Chari, on the other hand, has contended on

behalf of the petitioner

that after the management is

taken over by the statutory directors,

it cannot be said

that the company still retains possession or control

over its property and assets. Assuming

that this

State

management was imposed in the interests of the share.

holders themselves and

that the statutory

directors

are acting as the agents of the company, the posses-

sion of

the statutory directors could not, it is argued,

be regarded in law as possession of the company so long

as they are bound to act

in obedience to the dictates of

the

Central Government and not of the company itself

in tile aclministration of its affairs. Possession of an

1950"

Ohiranjit!al

Ohowdhuri

v.

The Union of

Ind1a and

Othera.

Mukherjea J.

904 SUPREME COURT REPORTS [1950)

agent, it is said, cannot juridically be the possession

of the principal, if the agent is to act not according

to the commands or dictates of the principal, but

under the direction of an exterior authority.

There can be no doubt that there is force in this

contention,

but as I have indicated at the outset, we

are not concerned in this case with the larger question

as

to how far the inter. position of this statutory

management and control amounts to taking possession

of the property and assets belonging to the company.

The point for

our consideration is a short one and that

is whether by virtue of the impugned legislation any

l

'property or interest of the petitioner himself, as a

shareholder

of the company, has been taken possession

. of

by the

State or an authority appointed under it, as

contemplated

by article 31 (2) of the

Constitution.

The petitioner as a shareholder has undoubtedly

Ian interest in the company. His interest is represented

by the share he holds and the share is movable

property according to the Indian Companies Act with

iall the incidence of such property attached to it.

Ordinarily, he is

entitled to enjoy the income arising

from

the shares in the shape of dividends; the share

like

any other marketable commodity can be sold or

transferred

by way of mortgage or pledge. The holding

of the share in his name gives him the right to vote at

the election of directors and thereby take a part,

though indirectly, in the management of the company's

affairs.

If the majority of shareholders sides with

him, he can have a resolution passed which would be

binding on

the company, and lastly, he can institute

proceedings for winding

up of the company which may

result in a distribution of

the net assets among the

shareholders.

It cannot be disputed that the petitioner has not

been dispossessed

in any sense of the term of the

shares he holds. Nobody has taken the shares away

from him.

His legal and beneficial interest in respect

to

the shares he holds is left intact. If the company

declares dividend, he would be entitled to the same.

He can sell or otherwise dispose of the shares at any

. -·-

~.

S.C.R. SUPREME COURT REPORTS 905

time at his option. The impugned Act has affected

him in this way

that his right of voting at the election

of directors has

been kept in abeyance so long as the

management by the statutory director continues; and

as a result of that, his right to participate

in the

management of the company has been abridged to

that

extent. His rights to pass resolutions or to institute

winding

up proceedings have also been restricted

though they are not wholly gone; these rights can be

exercised only with the consent or sanction of the

Central Government. In my opinion, from the facts

stated above, it cannot be held that the petitioner has

been dispossessed

from the property owned by him.

I

may apply the test which Mr.

Chari himself formu­

lated.

If somebody had taken possession of the

petitioner's shares and was clothed with the authority

to exercise all the powers which could be exercised by

the holder

of the shares under law, then even if he

purported to act as the petitioner's agent and exercise

these powers for his benefit, the possession of such

person would not have been the petitioner's possession

if he was bound to act not under the directions

of the

petitioner or in obedience to his commands

but under

the directions of some other person or authority. There

is no doubt whatsoever that that is not the position in

the present case. The

State has not usurped the

shareholders' right to vote or vested

it in any other

authority. The

State appoints directors of its own

choice but that it does, not in exercise of the share­

holders' right to vote

but in exercise of the powers

vested in it by the impugned Act. Thus there has

been no dispossession of the shareholders from their

right of voting

at all. The same reasoning applies to

the other rights of the shareholders spoken of above,

namely, their right of passing resolutions and

of

presenting winding up petition. These rights have

been restricted undoubtedly and may not be capable

of being exercised to the fullest extent as long as the

management

by the

State continues. \¥hether the

restrictions are such

as would bring the case within

11~

1950

Chiranjitlal

Ohowdhurt

v.

The Union of

India and

Other&.

Mukherjea .J.

19~0

Chiranjitla!

Ghowdhuri

v.

The Union of

India and

Others.

Mukherjea J.

906 SUPREME COURT REPORTS [1950)

the mischief of article 19 (1) (f) of the Constitution,

I will examine presently ; but I have no hesitation in

holding

that they do not amount to dispossession of

the shareholders from these rights in the sense that

the rights have been usurped by other people who are

exercising them in place of

the displaced shareholders.

In the view that I have taken it is not necessary to

discuss whether

we can accept as sound the contention

put forward by the learned Attorney-General that the

word

" property " as used in article 31 of the Con.

stitution connotes the entire property, that is to say

the totality of the rights which the ownership of the

object connotes. According

to Mr. Setalvad, if a

shareholder is not deprived of the

entirety of his rights

which he is entitled to exercise by reason of his being

the owner or holder of the share and some rights,

however insignificant they

might be, still remain in

him, there cannot be any dispossession as

contem­

plated by article 31(2). It is difficult, in my opinion,

to accept the contention formulated in such broad

terms. The test would certainly be as to whether

the

owner has been dispossessed substantially from the

rights held by him or the loss is only with regard to

some minor ingredients of the proprietory right. It is

relevant to refer in this connection to an observation

made

by Rich J. in a Full Bench decision of the High

Court of Australia,(') where the question arose as to

whether the taking of exclusive possession of a property

for an indefinite period of

time by the

Commonwealth

of Australia under Reg. 54 of the National Security

Regulation amounted

to acquisition of property within

the meaning of placitum 31, section 51, of the

Com.

monwealth Constitution. The majority of the Full

Bench answered the question in the affirmative and

the main reason upon which the majority decision was

based is

thus expressed in the language of Rich J.-" Property, in relation to land, is a bundle of rights

exercisable with respect to the land. The tenant of

an unencumbered estate in fee simple in possession has

the largest possible bundle. But there is nothing in

(1) See Miniater of State for the Army v. Dalziel, 68 C L.R. {>. 261.

S.C.R. SUPREME COURT REPORTS 907

the placitum to suggest that the legislature was intend­

ed to be at liberty to free itself from the restrictive

provisions of the· placitum by taking care to seize

something short of the whole bundle owned

by the

person whom it was

expropriating."

. It is not, however, necessary for my purpose to

pursue the matter any further, as in my opinion there

has been

no dispossession of the rights of a shareholder

in the present case.

Mr. Chari in course of his opening relied exclusively

on clause

(2) of article 31 of the

Constitution. During

his reply, however,

he laid some stress on clause (1) of

the article

as

well, and his contention seems to be that

there was deprivation of property in the present case

in contravention of the terms of this clause.

It is

difficult to see what exactly

is the contention of the

learned Counsel and in which way it assists him for

purposes

of the present case. It has been argued by

the learned Attorney-General

that clause (1) of article

31 relates to a power different from that dealt with

under clause

(2). According to him, what clause (1)

contemplates is confiscation er destruction of property

in exercise of what are known as ' police powers '

in

American law, for which no payment of compensation

is necessary. I do not think it proper for purposes of

the present case to enter into a discussion on this

some­

what debatable point which has been raised by the

learned Attorney-General.

In interpreting the provisions

of our Constitution,

we should go by the plain words

used

by the Constitution.makers and the importing of

expressions like ' police

power', which is a term of

variable and indefinite connotation in American law

can only make

the task of interpretation more difficult.

It is also not necessary to express any opinion as to

whether clauses

(1) and (2) of article 31 relate to exercise

of different kinds

of powers or they are to be taken as

cumulative provisions in relation to the same

subject­

matter, namely, compulsory acquisition of property.

If the word "deprived" as used in clause (1) connotes

the idea of 'destruction or confiscation of property,

obviously

no such thing has happened in the present

1950

Chiranjtllai

ChowdhurS

v,

The Union of

India and

Othera.

.Mukherjea J.

1950

Ohiraajitlal

Chowdhuri

v.

The Union of

India and

Others.

Mukherjea J,

908 SUPREME COURT REPORTS [1950)

case. Again if clauses (1) and (2) of article 31 have to

be

read together and

" deprivation" in clause (1) is

given

the same meaning as compulsory acquisition in

clause (2), clause

(1), which speaks neither of

compen­

sation nor of public purpose, wonld not by itself, and

apart from clause (2), assist the petitioner in any way.

If the two clauses are read disjunctively, the only

question

that may arise in connection with clause (1)

is whether or not the deprivation of property is

authorised

by law. Mr.

Chari has raised a question

relating to the validity of

the legislation on the ground

of its not being covered by any of the items in the

legislative list

and to this question I would advert

later on; but apart from this, clause (1) of article 31

of the

Constitution seems to me to be altogether

irrelevant for purposes of

the petitioner's case.

This leads me to the consideration of

the next point

raised

by Mr.

Chari, namely, whether these restrictions

offend against

the provision of article 19(1)(f) of the Constitution.

Article 19(1) of the Constitution enumerates the

different forms

of individual liberty, the protection of

which is

guaranteed by the

Constitution. The remain­

ing clauses of the article prescribe the limits that may

be placed upon these liberties by law, so that they

may not conflict with public welfare or general

morality. Article

19( 1) (f) guarantees to all citizens

'the right to acquire, hold or dispose of property.'

Any infringement of this provision would

amount to

a violation of

the fundamental rights, unless it comes

within

the exceptions provided for in clause (5) of the

article. That clause permits the imposition of reasonable

restrictions upon

the exercise of such righ teither in the

interests of the general public or for the protection of

the interests

of any Scheduled Tribe. Two questions,

therefore, arise in this connection:

first, whether the

restrictions

that have been imposed upon the rights of

the petitioner as a shareholder in the company under

the Sholapur Act amount to infringement of his right

to acquire, hold or dispose of property within

the

meaning of article 19(l)(f) of the Constitution and

,_

--.

S.C.R. SUPREME COURT REPORTS 909

secondly, if they do interefere with such rights,

whether they are covered

by the exceptions laid down

in clause (5) of the article. So far as the first point is concerned, it is quite clear

that there is no restriction whatsoever upon the peti­

tioner's right to acquire and dispose

of any property.

The shares which he holds do remain his property and

his right to dispose

of them is not fettered in any way.

If to 'hold' a property means to possess it, there is no

infrin~ement of this right either, for, as I have stated

already, the acts complained of by the petitioner

do

not amount to dispossession of him from any property

in the eye

of law. It is argued that 'holding' includes

enjoyment

of all benefits that are ordinarily attached

to the ownership of a property. The enjoyment of the

fruits

of a property is undoubtedly an incident of

ownership. The pecuniary benefit, which a share_

holder derives from

the shares he holds, is the divi.

dend and there is

no !imitation on the petitioner's

right in this respect. The petitioner undoubtedly has

been precluded from exercising his right of voting

at

the election of directors so long as the statutory direc­

tors continue to manage the affairs of the company.

He cannot pass an effective resolution in concurrence

with the majority

of shareholders without the consent

or sanction of the

Central Government and without

such sanction, there is also a disability on him to insti­

tute any winding up proceedings in a court of law.

In my opinion, these are rights or privileges which

are appurtenant to or

flow from the ownership of

pro·

perty, but by themselves and taken independently,

they cannot be reckoned as property capable of being

acquired, held or disposed of as is contemplated by

article 19

(1) (f) of the

Constitution. r do not think

that there has been any restriction on the rights of a

shareholder to hold, acquire or dispose

of his share by

reason of the impugned enactment and consequently

article

19 (!) (f) of the

Constitution is of no assistance

to the petitioner.

In this view, the other point does

not arise

for consideration, but I may state here that

even if it is conceded for argument's sake that the

1960

Chiranjitlal

Ohowdhuri

v.

The Uniori of

India and

Others,

A1.ukherj~a. J.

1950

Chiran.jitlal

Chawdhur'

v.

The Union of

India and

Other ii

Mukherj('a J,

910 SUPREME COURT REPORTS [1950)

disabilities imposed by the impugned legislation

amount to restrictions on proprietory right, they may

very well be supported as reasonable restraints imposed

in the interests of the general public, viz., to secure

the supply of a

commodity essential to the commu­

nity and to prevent a serious unemployment amongst

a section of

the people. They are, therefore, protected

completely

by clause (5) of article 19. This disposes

of the second point raised

by Mr.

Chari.

The next point urged on behalf of the petitioner

raises an

important question of constitutional law

which

turns upon the construction of article 14 of the

Constitution.

It is urged by the learned

Counsel for

the petitioner that the Sholapur Act is a piece of dis­

criminatory legislation which offends against

the

pro­

vision of article 14 of the Constitution. Article 14

guarantees to all persons in the territory of India

equality before the law and equal protection of the

laws and its entire object, it is said, is to prevent any

person or class of persons from being singled out as a

special subject of discriminatory legislation.

It is

pointed out

that the law in this case has selected one

particular company and its shareholders and has

taken away from them the right to manage their own

affairs,

but the same treatment has not been meted

out to all other companies or shareholders situated in

an identical manner.

Article

14 of the

Constitution, it may be noted,

corresponds to

the equal protection clause in the Four­

teenth Amendment of

the American Constitution which

declares

that

"no State shall deny to any person within

its jurisdiction the equal protection of the laws." We

have been referred in course of

the arguments on this

point

by the learned

Counsel on both sides to quite

a number of cases decided

by the American

Supreme

Court, where questions turning upon the construction

of

the 'equal protection' clause in the American

Consti.

tution came up for consideration. A detailed examina­

tion of these reports is neither necessary nor profitable

for our present purpose

but we think we can cull a few

general principles from some of

the pronouncements of

S.C.R. SUPREME COURT REPORTS 911

the American Judges which might appear to us to be

consonant with reason and help us in determining the

true meaning and scope of article

14 of our

Con­

stitution.

I may state here that

so far as the violation of the

equality clause in the

Constitution is concerned, the

petitioner,

as a shareholder of the company, has as

much right to complain as the company itself, for his

complaint

is that apart from the discrimination

made against the company, the impugned legis­

lation has discriminated against him and the

other shareholders of the company as a group

vis a-vis the shareholders

of all other companies

governed by the Indian

Companies Act who have not

been treated in a similar way.

As the discriminatory

treatment has been in respect to the sharholders

of

this company alone, any one of the shareholders,

whose interests are thus vitally affected, has a right

to

complain and it is immaterial that there has been no­

discrimination inter se amongst the shareholders them.

selves.

It must be admitted that the guarantee againstthe

denial

of equal protection of the laws does not mean

that identically the same rules of law should be made

applicable to all persons within the territory of India

in spite of differences of circumstances and conditions.

As has been said by the Supreme

Court of America,

"equal protection of laws is a pledge of the protection

of equal laws(')," and this means "subjection to equal

laws applying alike to all in

the same

situation(')."

In other words, there should be no discrimination

between

one person and another if as regards the

subject-matter of the legislation their position

is the

same. I am unable to accept the argument of

Mr.

Chari

that a legislation relating to one individual or one

family or one body corporate would per se violate the

guarantee of the equal protection rule. There can

certainly

be a law applying to one person or to

one group of persons and it cannot be held to be

n) Yt('k Wo v. Hopkins, llA US .1t 269.

(2) Southern Railway Company v. Gr .. ne, 216 U.S. 4QO. 41'.

1960

Ohir11.njitlal

Chowdhuri

••

Th~ Union of

India and·

Others,

Mukherj~a J.

1950

Chiran}itlal

Chowdhuri

v.

Th6 Un.ion of

India anci

Other a.

Mukh~rjea J,

912 SUPREME COURT REPORTS [1950]

unconstitutional if

it is not discriminatory in its

character('). It would be bad law

"if it arbitrarily

selects one individual or a class of individuals, one

corporation or a class of corporations

and visits

a penalty upon them, which is not imposed upon others

guilty

of like

delinquency(')." The legislature un­

doubtedly has a wide field of choice in determining

and classifying the subject of its laws, and if the law

deals alike with all of a certain class,

it is normally not

obnoxious to

the charge of denial of equal protection;

but the classification should never be arbitrary. It

must always rest upon some real and substantial dis­

tinction bearing

a. reasonable and just relation to the

things in respect to which the classification is made;

and classification made without any substantial basis

should be regarded as invalid(').

The question is whether judged

by this test the

the impugned Act can be said to have contravened

the provision embodied in article 14 of the

Constitu­

tion. Obviously the Act purports to make provi­

sions which

are of a drastic character and against

the general law of the land as laid down in the

Indian

Companies Act, in regard to the admini­

stration and management of the affairs of one com­

pany in Indian territory. The Act itself gives no

reason for the legislation

but the Ordinance, which was

a precursor of

the Act, expressly stated why the legis­

lation was necessary.

It said that owing to mis­

management

and neglect, a situation had arisen in the

affairs of the company which prejudicially affected the

production

of_ an essential commodity and caused

serious unemployment amongst a

certain section of

the community. Mr.

Chari's contention in substance is

that there are various textile companies in India

situated in a similar manner as the Sholapurcompany,

against which the same charges could be brought and

for the control and regulation of which all the reasons

that are mentioned in the preamble to the Ordinance

O} Willis ronstitutional Law, p. 5flO.

121Gulf0. &! S. Ti'. R. Co. v. Ellis, 163 U.S. Ito, al 1r9,

\3) Southern Rallway Co. v. Greene, 216 U.S. 40J. nt 41'2.

S.C.R. SUPREME .COURT REPORTS 913

could

be applied. Yet, it is said, the legislation has

been passed with regard to this one company alone.

The argument seems plausible at first sight,

but on a

closer examination I

do not think that I can accept it

as sound. It must be conceded that the Legislature

has a wide discretion in determining the subject

matter of its laws. It is an accepted doctrine of the

American

Courts and which seems to me to be well

founded on principle, that the presumption is in

favour

of the constitutionality of an enactment and

the burden

is upon him who attacks it to show that

there has been a transgression of constitutional princi­

ples.

As was said by the Supreme

Court of America

in

Middleton v. Texas Power and Light Company('), "It must be presumed that a Legislature understands

and correctly appreciates the needs of its own

people, that its Ia ws are directed to problems

made manifest by experience and

that its

discri­

minations are based upon adequate grounds."

This being the position, it is for the petitioner

to establish facts whicb would prove that the

selection of this particular subject by the Legislature

is unreasonable and based upon arbitrary grounds.

No

allegations were made in the petition and no materials

were placed before us to show as to whether there are

other companies in

India which come precisely under

the same category as the Sholapur

Spinning and Weav­

ing Company and the reasons for imposing control

upon the latter as mentioned

in the preamble to the

Ordinance are applicable to them as well.

Mr. Chari

argues that these are matters of common knowledge of

which

we should take judicial notice. I do not think

that this is the correct line of approach. It is quite

true

that the Legislature has, in this instance,

proceed­

ed against one company only and its shareholders; but

even one corporation or a group of persons can be taken

as a class by itself

for the purpose of legislation,

pro­

vided it exhibits some exceptional features which are

not possessed by others. The courts should

prima f acie (II 219 U.S. 1.;2, alp. 157,

I !7

1950

Ohiranjttlal

Chowdhuri

v.

The Union of

India and

Other a.

Mukherjea J,

1960

Chiranjttlal

Ckowdhuri

v.

The Union of

Itidia and

Othera.

Mukhdrfea J.

914 SUPREME COURT REPORTS [1950]

lean in favour of constitutionality and should support

the legislation if

it is possible to do so on any

reason­

able ground, and it is for the party who attacks the

val.idity of the legislation to place all materials before

the court which would go

to show that the selection is

arbitrary and unsupportable. Throwing out of vague

hints

that there may be other instances of similar

nature is not enough for this purpose. We have not

even before us

any statement on oath by the petitioner

that what has been alleged against this particular

company may be said against other companies as well.

If there was any such statement, the respondents could

have placed before us the whole

string of events that

led up to the passing of this legislation. If we are to take

judicial notice

of the existence of similar other badly

managed companies, we must take notice also of the

facts which appear in the parliamentary proceedings

in connection with

this legislation which have been

referred

to by my learned brother, Fazl Ali J. in his

judgment and which would go to establish that the

facts connected

with this corporation are indeed

excep­

tional and the discrimination that has been made can be

supported on

just and reasonable grounds. I purposely

refrain from alluding to these facts or basing my

deci­

sion thereon as we had no opportunity of investigating

them properly during the course of the hearing. As

matters stand, no proper materials have been placed

before us

by either side and as I am unable to say

that the legislature cannot be supported on any

reason­

able ground, I think it to be extremely risky to over­

throw it on mere suspicion or vague conjectures. If

it is possible to imagine or think of cases of other

companies where similar

or identical conditions might

prevail, it is also not impossible to conceive of

some­

thing" peculiar" or " unusual" to this corporation

which led

the legislature to intervene in its affairs. As

has been laid down by the

Supreme Court of America,

'' The Legislature is free to recognise degrees of harm

and it may confine its restrictions to those cases where

the need is deemed to be the clearest"('). We should

(1) Radice v. Now York, 261 U.S. 291.

S.C.R. SUPREME COURT REPORTS 915

bear in mind that a corporation, which is engaged in

production of a commodity vitally essential to the

community, has a social character of its own,

and it

must

no.t be regarded as the concern primarily or only

of those who invest their money in it. If its possibilities

are large and

it had a prosperous and useful career for

a long period of time and

is about to collapse not for

any economic reason but through sheer perversity of

the controlling authority, one cannot say that the

legis­

lature has no authority to treat it as a class by itself

and make special legislation applicable to

it alone in

the interests of the community at large. The

combina·

tion of circumstances which are present here may be

of such unique character as could not

be existing in

any other institution. But all these, I must say, are

matters which require investigation on proper materials

which

we have not got before us in the present case.

In these circumstances I am constrained to hold that

the present application must fail on the simple ground

that the petitioner made no attempt to discharge the

prima facie burden that lay upon him and did not

place before us the materials upon which a proper

decision on the point could be arrived at. In my

opinion, therefore, the

attack on the legislation on the

gound of the denial of equal protection of law cannot

succeed.

The only other thing that requires to be considered

is the argument

of Mr. Chari that the law in question

is invalid as it is not covered by any of the items

. in the legislative list. In my opinion, this argument

has no substance. What the law has attempted to

do is

to regulate the affairs of this company by laying down

certain special rules for its management

and adminis­

tration. It is fully covered by item No. 43 of the

Union List which speaks inter alia of "incorporation,

regulation and winding up of trading corporations."

The result

is that the application fails and is

dis­

missed with costs.

DAS J.-As I have arrived at a conclusion different

from

that reached by the majority of this Court, I

Chiran.jitlal

Chowdhuri

..

The Union of

India and

Other a.

,.Wukherjea. J.

DaaJ.

1950

Chiranjitlal

Ohowdhuri

v.

The Union of

India and

Oth•r1.

DasJ.

916 SUPREME COURT REPORTS [1950)

consider it proper, out of my respect for the opinion

of

my learned colleagues, to state the reasons for my

conclusions in some detail.

On January 9, 1950, the Governor-General of India,

acting under section 42 of the Government of

India

Act, 1935, promulgated an Ordinance, being Ordinance

No.

II of

1950, concerning the Sholapur Spinning and

Weaving Company, Limited, (hereafter referred to as

the said company). The preambles and the provisions

of

the Ordinance have been referred to in the judgment

just delivered by Mukherjea J. and need not be

recapitulated

by me in detail. Suffice it to say that

the net result of the Ordinance was that the managing

agents of the

said company were dismissed, the

directors holding

office at the time automatically

vacated their

office, the Government was authorised to

nominate directors,

the rights of the shareholders of

this company were curtailed in that it was made

unlawful for them to nominate or appoint

any

director, no resolution passed by them could be given

effect

to without the sanction of the Government and

no proceeding for winding up could be taken by them

without such sanction, and power was given to the

Government

to further modify the provisions of the

Indian

Companies Act in its application to the said

company.

On the very day that the Ordinance was promulgat­

ed the Central Government acting under section 15

delegated all its powers to the Government of

Bombay. On January IO, 1950, the Government·

of Bombay appointed Respondents Nos. 3 to 7 as the

new directors. On March 2, 1950, Respondent No. 5

having resigned, Respondent No. 8 was appointed a

director in his place

and on the same day Respondent

No. 9 was also appointed as a director.

In the mean­

time the new

Constitution had come into force on

January 26, 1950. On February 7, 1950, the new

directors passed a resolution sanctioning a call for

H.s. SO on the preference shares. Thereupon a suit being

Suit No. 438 of 1950 was filed in the High Court of

S.C.R. SUPREME COURT REPOH.TS 917

Bombay by one Dwarkadas Shrinivas against the new

directors challenging the validity of the Ordinance

and the right of the new directors to make the call.

Bhagwati

J. who tried the suit held that the Ordinance

was valid and dismissed the suit.

An appeal (Appeal

No. 48 of 1950) was taken from that decision which

was dismissed

by a Division Bench

(Chagla C.J. and

Gajendragadkar J.) on August 29, 1950. In the mean­

time, on April

7, 1950, the Ordinance was replaced by

Act No.

XXVIII of 1950. The Act substantially

reproduced the provisions

of the Ordinance except that

the preambles to the Ordinance were omitted.

On

May 29, 1950, the present petition was filed by one

Chiranjitlal Chowdhuri.

The petitioner claims to be a shareholder of the said

company holding 80 preference shares and 3 ordinary

shares. The preference shares, according to him,

stand in the name of the Bank of Baroda to whom

they are said to have

been pledged. As those preference

shares are not registered in the name of the petitioner

he cannot assert any right as holder of those shares.

According

to. the respondents, the petitioner appears

oil the register as holder of only one fully paid up

ordinary share.

For the purposes of this application,

then, the petitioner's interest in the said company

must

be taken as limited to only one fully paid up ordinary

share. The respondents are the

Union of India, the

State of Bombay and the new directors besides the

company itself. The respondent

No. 5 having resigned,

he

is no longer a director and has been wrongly im­

pleaded as respondent. The reliefs prayed

for are that

the Ordinance and the Act are

itltra vires and void, that

the Central Government and the State Government and

the directors be restrained from exercising any powers

under the Ordinance or

the Act, that a writ of mand­

amus be issued restraining the

new directors from

exercising any powers under the Ordinance or the Act

or from in any manner interfering with the manage­

ment

of the affairs of the company under colour of or

in purported exercise of any powers under the said

Ordinance or

Act.

19~0

Chiranjitlal

Chowdhuri

v.

Tha Union of

India and

Other&.

DaaJ.

1950

Ohiranjitlal

Ohowdhuri

v.

The Union of

India and

Other a.

Das J,

918 SUPREME COURT REPORTS [1950)

The validity

of the Ordinance and the Act has been

challenged before us

on the following grounds :-(i)

that it was not within the legislative competence-(a)

of the Governor-General to promulgate the Ordinance,

or

(b) of the Parliament to enact the Act, and (ii) that

the Ordinance and the Act infringe the fundamental

rights of the shareholders as well as those

of the said

company

and are, therefore, void and inoperative under

article

13.

Re (i) -The present application has been made by

the petitioner under article 32 of the Constitution.

Sub-section

(1) of that article guarantees the right to

move this

Court by appropriate proceedings for the

enforcement of the rights conferred

by Part III of the

Constitution.

Sub-section (2) empowers this Court to

issue directions or orders or writs, including certain

specified writs, whichever may

be appropriate, for the

enforcement

of any of the rights conferred by that

Part. It is clear, therefore, that article 32 can only be

invoked for the purpose

of the enforcement of the

fundamental rights. Article 32 does not permit an

application merely for

the purpose of agitating the

competence

of the appropriate legislature in passing

any particular enactment unless the enactment also

infringes any of the fundamental rights.

In this case

the claim is that the fundamental rights have been

infringed and, therefore,

the question of legislative

competence may also be incidentally raised on this

application.

It does not appear to me, however, that

there is any substance in this point for, in my opinion,

entry

33 of List I of the Seventh Schedule to the

Government of

India Act, 1935, and the corresponding

entry 43 of the

Union List set out in the Seventh

Schedule to the Constitution clearly support these

pieces of legislation as far as the question of legislative

competency is concerned. Sections 83·A and 83-B

of the

Indian

Companies Act can only be supported

as valid on the ground

that they regulate the

manage­

ment of companies and are, therefore, within the said

entry. Likewise, the provisions

of the Ordinance and

the Act relating to the appointment of directors

by the

•

S.C.R. SUPREME COURT REPORTS 919

Government and the curtailment of the shareholders'

rights as rega.rds the election of directors, passing of

resolutions giving directions with respect to the

management

of the company and to present a wind­

ing up petition are matters touching

the

manage­

ment of the company and, as such, within the

legislative competence uf the appropriate legislative

authority.

In my judgment, the Ordinance and the

Act cannot be held to be invalid on

the ground of

legislative incompetency of the authority promulgat­

ing or passing the same.

Re

(ii)-The fundamental rights said to have been

infringed are the right

to acquire, hold and dispose of

property guaranteed to every citizen by Article 19(1)(f)

and the right to property secured by article 31. In

Gapalan' s case

(I) I pointed out that the rights con­

ferred

by article 19 (1) (a) to (e) and (g) would be

available

to the citizen until he was, under article 21,

.deprived of his life or personal liberty

accordin~ to

procedure established

by law and that the right to

property guaranteed by article

19 (1) (f) would like.

wise continue until the owner was, under article 31,

deprived of such property by authority

of law. There­

fore, it will be necessary to consider first whether the

shareholder or the company has been deprived

of his

or its property

by authority of law under Article 31

for, if he or it has been so deprived, then the question

of his or its fundamental right under article

19 (1) (f)

will not arise .

The relevant clauses

of article 31 run as follows :­

" 31. (1) No person shall be deprived of his pro­

perty save by authority of law.

(2) No property, movable or immovable, includ­

ing

any interest in, or in any company owning, any

commercial or industrial undertaking, shall be taken

possession

of or acquired for public purposes under

any law authorising the taking of such possession or

such acquisition, unless the law provides for compen­

sation for the property taken possession of or acquired

Ill {19SOJ 8.0,R. 86.

1950

Chirartjitlal

Chowdhuri

v.

The Union of

India and

Othera.

DasJ.

1950

Chiranjitlal

Ohowdhu.ri

v.

The Union of

India and

Other&,

Das J.

920 SUPREME COURT REPORTS [1950]

and either fixes the amount of the compensation, or

specifies the principles on which.

and the manner in

which,

the compensation is to be determined and

.

"

given.

Article 31 protects every person, whether such per­

son is a citizen or not, and

it is wide enough to cover a

natural person as well as an artificial person. Whether

or

not, having regard to the language used in article 5,

a corporation can be called a citizen

and as such

entitled to the rights guaranteed under article 19,

it is

quite clear

that the corporation is protected by article

31, for

that article protects every

"person" which ex­

pression certainly includes an artificial person.

The contention

of the petitioner is that the Ordinance

and the Act have infringed his fundamental right to

property as a shareholder in the said company. Article

31, like article 19(

I) (f), is concerned with

" property ".

Both the articles are in the same chapter and deal

with fundamental rights. Therefore,

it is reasonable

to

say that the

word" property" must be given the

same meaning in construing those two articles.

What,

then, is the meaning of the word

" property"? It

may mean either the bundle of rights which the owner

has over

or in respect of a thing, tangible or intangible,

or it may mean the thing itself over or in respect of

which the owner may exercise those rights.

It is quite

clear that the Ordinance or the Act has not deprived

the shareholder of his share itself. The share still

belongs to

the shareholder. He is still entitled to the

dividend that may be declared. He can deal with or

dispose

of the share as he pleases. The learned

Attorney-General contends

that even if the other

meaning of

the word

"property" is adopted, the

shareholder has not been deprived of his " property"

understood in that sense, that is to say he has not been

deprived

of the entire bundle of rights which put

together constitute his

"property". According to him

the" property" of the shareholder, besides and apart

from his right to elect directors, to pass resolutions

giving directions to

the directors and to present a

winding up petition, consists in his right to participate

'

-...... , ..•

S.C.R. SUPREME COURT REPORTS 821

in the dividends declared on the profits made by the

working of the company and, in case

of winding up,

to participate in the surplus that may be left after

meeting the winding up expenses and paying the

creditors. Those last mentioned rights, he points out,

have not been touched at all and the shareholder can

yet deal with or dispose

of his shares as he pleases and

is still entitled to dividends if and when declared.

There­

fore, concludes the learned Attorney-General, the share­

holder cannot complain

that he has been deprived of his "property", for the totality of his rights have not been

taken away. The argument thus formulated appears

to me to be somewhat too wide, for it will then permit

the legislature to authorise the State to acquire or

take possession, without any compensation, of almost

the entire rights of the owner leaving to him only a

few

subsidiary rights. This result could not, in my

opinion, have been intended by our

Constitution. As·

said by Rich J. in the Minister for State for the Army

v. Datziel (

1

) while dealing with section 31 (XXXI) of

the Australian Constitution-

" Property, in relation to land, is a bundle of rights

exercisable with respect to the land. The tenant of an

unencumbered estate

in fee simple in possession has

the largest possible bundle.

But there is nothing in

the placitum to suggest that the legislature was

intended

to be at liberty to free itself from the

restrictive provisions of the placitum

by taking care to

seize something short of the whole bundle owned by

the person whom it is

expropriating."

The learned Judge then concluded as follows at

p. 286:-

"lt would, in my opinion, be wholly inconsistent

with the language of the placitum to hold

that whilst

preventing the legislature from authorising

the

acquisition of a citizen's full title except upon just

terms,

it leaves it open to the legislature to seize pos­

session and enjoy the full fruits

of possession indefi­

nitely, on any terms

it chooses or upon no terms at

all."·

11). (1943-194,41 68 c.r •. R. 261.

118

1950

Ohiraajitlal

Ohowdkuri

v.

The Union of

India and

OtherJJ,

Das J.

1950

ChiranjiUal

Cf!owdhuri

v.

The Union of

India and

Others.

DasJ.

922 SUPREME COURT REPORTS [1950]

In my judgment the question whether the Ordinance

or

the Act has deprived the shareholder of his

"pro­

perty" must depend, for its answer, on whether it has

taken away the substantial bulk of the rights con­

stituting his "property". In other words, if the

rights taken away by the Ordinance or the Act are

such as would render

the rights left untouched illusory

and practically valueless, then there can be no ques­

tion

that in effect and substance the

"property" of

the shareholder has been taken away by the Ordinance

or the Act. Judged

by this test can it be said that

the right to dispose of the share and the right to

receive dividend,

if any, or to participate in the

surplus in the case of winding up that have been

left

to the shareholder are illusory or practically

valueless, because the right to control the manage­

ment

by directors elected by him, the right to pass

resolutions giving directions to

the directors and the

right to present a winding up petition have, for the

time being, been suspended? I think not. The right

still possessed by the shareholder are the most impor.

tant of the rights constituting his

"property", although

certain privileges incidental to the ownership have been

put in abeyance for the time being. It is, in my

opinion, impossible to say that the Ordinance or the

Act has deprived the shareholder of his '' property "

in the sense in which that word is used in article

19 (1) (f) and article 31. The curtailment of the

incidental privileges, namely, the right to elect direc­

tQrs,

to pass resolutions and to apply for winding up

may well be supported as a reasonable restraint on the

exercise and enjoyment of the shareholder's right of

property imposed in the interests of

the general public

under article 19 (5), namely, to secure the supply of

an essential commodity and to prevent unemployment.

Learned counsel for the petitioner, however, urges

that the Ordinance and the Act have infringed the

shareholder's

right to property in that he has been

deprived of his valuable

right to elect directors, to give

directions

by passing resolutions and, in case of appre­

hension

of loss, to present a petition for the winding

-

S.C.R. SUPREME COURT RE!'ORTS 923

up of the company. These rights, it is urged, are by

themselves " pwperty" and it is of this " property "

that the shareholder is said to have been deprived by

the State under a law which does not provide for

payment of compensation and which is, as such, an

infraction

of the shareholder's fundamental right to

property under article 31 (2). Two questions arise on

this argument. Are these

rights

" property" within

the meaning of the two articles I have mentioned?

These rights, as already

stated, are, no doubt, privileges

incidental to

the ownership of the share which itself is

property,

but it cannot, in my opinion, be said that

these rights, by themselves, and apart from the share

are" property" within the meaning of those articles,

for those articles only regard

that as

"property"

which can by itself be acquired, disposed of or taken

possession of. The right to vote for the election of

directors, the right to pass resolutions

and the right

to present a petition for winding up are personal

rights flowing from the ownership of the share and

cannot by themselves and apart from the share be

acquired. or disposed of or taken possession of as

contemplated

by those articles. The second

ques­

tion is, assuming that these rights are by themselves

"property", what is the effect of the Ordinance

and the Act on such "property". It is nobody's case

that the Ordinance or the Act has authorised any

acquisition by the State of this "property" of the

shareholder or

that there has in fact been any such

acquisition.

l The only question then is whether this

"property" of the shareholder, meaning thereby only

the

ngh ts mentioned above, has been taken possession

of

by the

State. It will be noticed that by the

Ordinance or

the Act these particular rights of the

shareholder have not been entirely taken away, for he

can still exercise these

rights subject of course, to the

sanction of the Government. Assuming, however,

that the fetters placed on tuese rights are tantamount

to the taking away of the rights altogetl1er, there is

nothing to indicate that the Ordinance or the Act has,

after taking away the rights from the shareholder,

!950

Chiranjitlal

Chowdhuri

v.

The Union of

India and

Others.

DasJ,

1950

Ohiranjitlai

Ghowdhuri

v.

The Union of

India and

Othera.

Das J.

924 SUPREME COURT REPORTS [1950]

vested them in the State or in any other person named

by it so as to enable the State or any other person

to exercise those rights of the shareholder. The

Government undoubtedly appoints directors under the

Act, but such appointment is made in exercise of the

the

powers vested in the Government by the Ordinance

or the Act and not in exercise of the shareholder's

right. As already indicated,

entry 43 in the

Union

List authorises Parliament to make laws with respect,

amongst other things,

to the regulation of trading

corporations. There was, therefore, nothing to prevent

Parliament from amending the

Companies Act or from

passing a new law regulating

the management of the

company

by providing that the directors, instead of

being elected

by the shareholders, should be appointed

by the Government. The new Jaw has undoubtedly

cut down the existing rights of the shareholder and

thereby deprived the shareholder of his unfettered

right to appoint directors or to pass resolutions giving

directions

or to present a winding up petition.

Such

deprivation, however, has not vested the rights in the

Government or its nominee. What has happened to

the rights of the shareholder is that such rights have

been temporarily destroyed or

kept in abeyance. The

result, therefore, has been

that although the

share·

holder has been for the time being deprived of his

"property", assuming these rights to be "property",

such "property" has not been acquired or taken pos­

session of

by the Government. If this be the result

brought about by the Ordinance and the Act, do they

offend against

the fundamental rights guaranteed by

article 31 ? Article 31 (1) formulates the fundamental

right in a

negative form prohibiting the deprivation

of property except by authority of law. It implies

that a person may be deprived of his property by

authority of law. Article 31 (2) prohibits the acquisi­

tion

or taking possession of property for a public

purpose under

any Jaw, unless such law provides for

payment of compensation. It is suggested that clauses

(1) and (2) of article 31 deal with the same topic,

namely, compulsory acquisition

or taking possession

S.C.R. SUPREME COURT REPORTS 925

of property, clause (2) being only an elaboration of

clause (1). There appear to me to be two objections

to this suggestion.

If that were the correct view, then

clause

(1) ;must be held to be wholly reduudant and

clause

(2), by itself, would have been sufficient. In the

next place, such a view would exclude deprivation of

property otherwise than

by acquisition or taking of

possession.

One can conceive of circumstances where

the State may have to deprive a person of his property

without acquiring or taking possession

of the same.

For example, in any emergency, in order to prevent a

fire spreading,

·the authorities may have to demolish an

intervening building. This deprivation of property

is

supported in the

United States of America as an

exercise of " police power". This deprivation of pro­

perty is different from acq llisition or taking of possession

of property which goes

by the name of

" eminent

domain " in the American Law. The construction

suggested implies

that our

Constitution has dealt with

only the law of "eminent domain ", but has not pro­

vided

for deprivation of property in exercise of' 'police powers". I am not prepared to adopt such construc­

tion, for I

do not feel pressed to do so by the language

used

in article 31.

On the contrary, the language of

clause (

1) of article 31 is wider than that of clause (2),

for deprivation of property may well be brought about

otherwise

than by acquiring or taking possession of it.

I think clause

(_ 1) enunciates the general principle

that no person shall be deprived of his property

except

by authority of law,

which, put in a positive

form, implies

that a person may be deprived of his

property, provided he

is so deprived by authority of law.

No question of compensation arises under clause (1).

The effect of clause (2) is that only certain kinds

of deprivation of property, namely those brought

about by acquisition or taking possession

of it, will not

be permissible under any law, unless such law provides

for payment

of compensation. If the deprivation of

property is brought about by means other than acqui­

sition or taking possession

of it, no compensation is

required, provided that such deprivation is by

1950

Chiranjitlal

GhowdhurS

v.

The Uniott ·of

India and

Othera,

Da.oJ.

1960

Chiran.iitlal

Chowdhuri

v.

Th~ Union of

India·and

Others.

Das J.

926 SUPREME COURT REPORTS [1950]

authority of law. In this case, as already stated,

although the shareholder has been deprived of certain

rights, such deprivation has been

by authority of law

passed

by a competent legislative authority. This

deprivation

having been brought about otherwise than

by acquisition or taking possession of such rights, no

question of compensation can arise and, therefore,

there can be no question

of the infraction of funda­

mental rights under article

31 (2). It is clear, there­

fore, that so far as the shareholder is concerned there

has been no infringement

of his fundamental rights

under article 19 (lJ (f) or article 31, and the shareholder

cannot question the constitutionality of the Ordinance

or the Act on this ground.

As regards

the company it is contended that the

Ordinance

and the Act by empowering the State to

dismiss the managing agent, to discharge

the directors

elected

by the shareholders and to appoint new

directors have in effect authorised the State to

take

possession of the undertaking and assets of the com­

pany through the new directors appointed by it with­

out paying any compensation and, therefore, such law

is repugnant

to article 31 (2) of our Constitution. It

is, however, urged by the learned Attorney-General

that the mills and all other assets now in the posses­

sion

and custody of the new directors who are only

servants or agents

of the said company are, in the eye

of the law, in the possession

and custody of the com­

pany and have not really been taken possession of by

the

State. This argument, however, overlooks the fact

that in order

that the possession of the servant or

agent may be juridically regarded as the possession of

the master or principal, the servant or agent must be

obedient to,

and amenable to the directions of, the

master or principal. If the master or principal has no

hand in the appointment of

the servant or agent or has

no control over

him or has no power to dismiss or dis­

charge him, as in

this case, the possession of such

servant or agent can hardly, in law, be regarded as the

possession of the company(l). In this view of the

\11 81:Jt:1 E.lemeutil ofL<1.w by Markby, 6th Editioo, Pa.ra. 071, p, 192.

S.C.R. SUPREME COURT REPORTS 927

matter there is great force in the argument that the

property

of the company has been taken possession of

by the

State through directors who have been appointed

by the State in exercise oi the powers conferred by the

Ordinance and the Act and who are under the direction

and control of the

State and this has been done

without payment

of any compensation. The appro­

priate legislative authority was

no doubt induced to

enact this law, because, as the preamble to the

Ordinance stated,

on account of mismanagement and

neglect, a situation

had arisen in the affairs of the

company which had prejudicially affected the produc­

tion of an essential commodity and

had caused serious

unemployment amongst a

certain section of the com.

ruunity, but, as

stated by Holmes]. in

Pennsylvania

Coal Company v. Mahon('), "A strong public desire

to improve the public condition is not enough to

warrant achieving the desire

by a shorter cut than the

constitutional way

of paying for the

change." Here,

therefore, it may well be argued

that the property of

the company having been taken possession of by the State in exercise of powers conferred by a law which

does not provide for payment of any compensation,

the fundamental right

of the company has, in the eye

of the law, been infringed.

If the fundamental right of the company has been

infringed,

at all, who can complain about such

infringe­

ment ? Prima f acie the company would be the proper

person to come forward in vindication of its own rights.

It is said that the directors having been dismissed, the

company cannot act. This, however,

is a

misappre­

hension, for if the Act be void on account of its being

unconstitutional, the directors appointed by the share­

holders have never in law been discharged and are still

in the eye

of the law the directors of the company,

and there was nothing to prevent them from taking

proceedings in the name

of the company at their own

risk as to costs. Seeing

that the directors have not

come forward to make the application

on behalf of the

company and in its name the question arises whether

(!)

l60 u,s. 393 •

•.

•

1950

Ohiranjitlal

Chowdhuri

v.

The Union of

Ttid1a and

Others.

Das J.

SUPREME COURT REPORTS [1950]

an individual shareholder can complain. It is well

settled in

the

United States that no one but those

Ohiranjit!al whose rights are directly· affected by a law can raise

Chowdhuri

v. the question of the constitutionality of that law.

1950

Tho Union of Thus in McCabe v. Atchison(') which arose out

India and of a suit filed by five Negros against five Railway

Others, Companies to restrain them from making any distinction

Das J,

in service on account of race pursuant to an Oklahoma

Act known as "The Separate Coach Law," in upholding

the dismissal of

the suit Hughes ]. observed :-" It is an elementary principle that in order to

justify

the granting of this extraordinary relief, the

complainants' need of it and the absence of an adequate

remedy

at law must clearly appear. The complaint

cannot succeed because someone else

may be hurt.

Nor does it make any difference that other persons

who

may be injured are persons of the same race or

(occupation. It is the fact, clearly established, of

injury to the complainant -not to others -which

Uustifies judicial interference."

In that case there was no allegation that anyone of

the plaintiffs had ever travelled on anyone of the rail

roads

or had requested any accommodation in any of

the sleeping cars or that such request was refused.

The same principle was laid down in ] effrey M

anu­

f acturing Company v. Blagg('), Hendrick v. Mary­

land(') and Newark Natural Gas and Fuel Company

v. The City of Newark('). In each of these cases the

Court declined to permit the person raising the ques-

) tion of constitutionality to do so on the ground that his

')rights were

not directly affected by the law or Ordinance

\.in question.

On the other hand, in Truax v. Raich(')

and in Buchanan v. W arley(

6

) the Court allowed the

plea because in both the cases the person raising it

was directly affected. In the first of the two last

mentioned cases

an Arizona Act of 1914 requiring

employers employing more

than five workers to employ

not less than eighty per cent. native born citizens was

(1)

235 U.S. In!.

(2) 235 U.S. 571.

13! 23.5 us. 610.

(4) 241 U.S. 403.

15) ng U.S. ~3.

\6) 245 u.s. 60.

v--

•

S.C.R. SUPREME COURT REPORTS 929

1950 challenged by an alien who had been employed as a

cook in a restaurant.

That statute made a violation

f h A

b 1

· h bl Th f Ohi,.anjitlaZ

o t e ct y an emp ayer pums a e. e act that Chowdhuri

the employment was at will or that the employer and v.

not the employee was subject to prosecution did not The Union of

prevent the employee from raising the question of Ind;• and

constitutionality because the statute, if enforced, would Others.

compel the employer to discharge the employee and,

therefore, the employee was directly affected

by the

statute. In the second of the two last mentioned cases a

city Ordinance prevented the occupation of a plot by

a coloured person in a block where a majority of the

residences were occupied

by white persons. A white

man sold his property in such a block to a Negro under

a contract which provided

that the purchaser should

not be required to accept a deed unless he would have

a right, under the laws

of the city, to occupy the same

as a residence. The vendor sued for specific perform-

ance and contended

that the Ordinance was uncon­

stitutional. Although the alleged denial

of constitu-

tional rights involved only the rights

of coloured

persons and the vendor was a white person

yet it was

held

that the vendor was directly affected, because the

Courts below, in view of the Ordinance, declined to

enforce his contract and thereby directly affected his

right to sell his property.

It is, therefore, clear that

......

the constitutional validity of a law can be challenged

only

by a person whose interest is directly affected by

the law. The question then arises whether the infringement of the company's rights so directly affects

its sha;~holders as to entitle any of its shareholders to

question the constitutional validity

of the law infring-

ing the company's rights. The question has been

answered

in the negative by the Supreme

Court of the

United States in Darnell v. The State of Indiana(').

In that case the owner of a share in a Tennessee corpo-

ration was not allowed to complain

that an Indiana

law discriminated against Tennessee corporations in

that it did not make any allowance, as it did in the

case of Indiana corporations, where the corporation

Ill 226 U.S. 388.

119

Das J.

1950

Ohiranjitlal

Ohowdhuri

v.

The Union of

Indi11 and

Oth~rs.

Das J.

930 SUPREME COURT REPORTS [1950)

had property taxed within the State. This is in

accord with

the well established legal principle that a

corporation is a legal entity capa.ble of holding

pro­

perty and of suing or being sued and the corporators

are not, in contemplation of law, the owners of

the

assets of the corporation. In all the cases referred to

above the question of constitutionality was raised in

connection with

the equal protection clause in the

Fourteenth Amendment of the American Federal

Con­

stitution. If such be the requirements of law

in connection with

the equal protection clause

which corresponds to our article 14,

it appears

to me

to follow that only a person who is the

owner of the property can raise the question of

constitutionality under article

31 of a law by

which he is so deprived of his property. If direct

interest is necessary to

permit a person to raise the

question of constitutionality under article 14, a direct

interest in

the property will, I apprehend, be necessary

to entitle a person to challenge a law which is

said to

infringe

the right to that property under article 31.

In my opinion, although a shareholder may, in a sense,

be interested

to see that the company of which he is a

shareholder is not deprived of

its property he cannot,

as held in

Darnell v. Indiana('), be heard to complain,

in his own name and on his own behalf, of the

in­

fringement of the fundamental right to property of the

company, for, in law, his own right to property has

not

been infringed as he is not the owner of the company's

properties. An interest in the company owning an

undertaking is not

an interest in the undertaking itself.

The interest in the company which owns an

under­

taking is the "property" of the shareholder under

article

31 (2), but the undertaking is the property of

the company and not that of the shareholder and the

latter cannot be said to have a direct interest in the

property

of the company. This is the inevitable result

of

attributin~ a legal personality to a corporation.

The proceedings for a writ in

the nature of a writ of

habeas corpus appear to be somewhat different for the

(1)

~26 U.S. 888,

S.C.R. SUPREME COURT REPORTS 931

rules governing those proceedings permit, besides the

person imprisoned, any person, provided he is not an

utter stranger, but is at least a friend or relation of the

imprisoned person, to apply for that particular writ.

But that special rule does not appear to be applicable

to the other writs which re_q_uirt;_a direct and tangible

interest in

the

app!icanl_ to ~port his application.

This

must also be the case where the

applicantseeks

to raise the question of the constitutionality of a law

under articles

14, 19 and 31.

For the reasons set out above the present peti­

tioner cannot raise

the question of constitutionality

of the impugned law under article 31. He can­

not complain of

any infringement of his own

rights as a shareholder, because his

" property "

has not been acquired or taken possession of by

the State although he has been deprived of his right

to vote and to present a winding up petition by author­

ity of law. Nor can he complain of an infringement of

the company's right to property because he is not, in

the eye of law, the owner ot the property in question

and accordingly not directly interested in it. In

certain exceptional cases where the company's pro­

perty is injured

by outsiders, a shareholder may,

under the English law, after making all endeavours to

induce the persons in charge

of the affairs of the com­

pany to take steps, file a

suit on behalf of himself and

other shareholders for redressing the wrong done to

the company, but that principle does not apply here

for this is nut a suit, nor has lt been shown that any

attempt was made by the petitioner to induce the old

directors to take steps nor do these proceedings pur­

port

to have been taken by the petitioner on behalf

of himself and the other shareholders of the.company.

The only other ground

on which the Ordinance and

the Act have been challenged is that they infringe the

the fundamental rights guaranteed by article 14 of the

Constitution. '·Equal protection of the laws", as

observed by Day

J. in

Southern Railway Company v.

Greene ll), "means subjection to equal laws, applying

\1) 216 U.S. 400.

1950

Ch.iranjitlal

Cliowdhuri

v.

TkiJ Union of

Ir.dia and

Others.

DasJ.

1950

Ohiranjitlal

Ohowdhuri

v.

The Union of

India and

Oth~rs.

DasJ.

932 SUPREME COURT REPORTS [1951]

alike to all in the same situation". The inhibition of

the article that the State shall not deny to any person

equality before the law or the equal protection of the

laws was designed to protect all persons against legisla­

tive discrimination amongst equals

and to prevent

any person or class of persons from being singled out

as a special subject for discriminating

and hostile

legislation.

It does not,

however, mean that every

law must have universal application, for all persons

are not,

by nature, attainment or circumstances, in the

same position. The varying needs of different classes

of persons often require separate treatment

and it is,

therefore, established

by judicial decisions that the

equal protection clause

of the Fourteenth Amendment

of the American

Constitution does not take away from

the State the power to classify persons for legislative

purposes. This classification may be on different

bases.

It may be geographical or according to objects

or occupations or the like.

If law deals equally with

all of a certain well-defined class

it is not obnoxious

and it is not open to the charge of a denial of equal

protection on the ground

that it has no applica­

tion

to other

per,ons, for the class for whom

the law has been made is different from other

persons and, therefore, there is

no discrimination

amongst equals.

It is plain that every classification

is in some degree likely to produce some inequality, but

mere production of inequality is not by itself enough.

The inequality produced, in order to encounter the chal­

lenge

of the

Constitution, must be " actually and

palpably unreasonable and arbitrary." Said Day J.

in Southern Railway Company v. Greene(') :-"While

reasonable classification is permitted, without doing

violence to the equal protection of

the laws, such classifi­

cation

must be based upon some real and substantial

distinction, bearing a reasonable

and just relation to

the things in respect to which such classification

is

imposed; and the classification cannot be arbitrarily

made without any substantial basis. Arbitrary

selection,

it has been said, cannot be justified by calling

it classification". Quite conceivably there may be a law

S.C.R. SUPREME COURT REPORTS 933

relating to a single individual if

it is made apparent

that, on account of some special reasons applicable

only to him

and inapplicable to anyone else, that

single individual is a class by himself. In

lvfid­

dleton v. Texas Power and Light Company(1) it

was pointed out that there was a strong pre·

sum ption that a legislature understood and correctly

appreciated the needs

of its own people, that its

laws were directed to problems made manifest by

experience

and that the discriminations were based

upon adequate grounds.

It was also pointed out in

that case that the burden was upon him who attacked

a law for unconstitutionality.

In Lindsley v. Natural

Carbonic

Gas

Company(') it was also said that one

who assailed the classification made in a law must carry

the burden of showing that it did not rest upon any

reasonable basis but was essentially arbitrary.

If

there is a classification, the

Court will not hold it in­

valid merely because the law might have been extended

to other persons who in some respects might resemble

the class for which the law was made, for the legislature

is the best judge of the needs of the particular classes

and to estimate the degree of evil so as to adjust its

legislation according to the exigency found to exist.

If,

however, there is, on the face of the statute, no

classifi­

cation at all or none on the basis of any apparent

difference specially peculiar to

any particular

indivi­

C.ual or class and not applicable to any other person

or class of persons and yet the law hits only the parti­

cular individual or class it is nothing but an attempt

to arbitrarily single out an individual or class for dis­

criminating and hostile legislation. The presumption in

favour of the legislature cannot in such a case be legi­

timately stretched

so as to throw the impossible onus

on

the complainant to prove affirmatively that there are

other individuals or class

of individuals who also possess

the precise amount

of the identical qualities which are

attributed to him so as to form a class with him. As

pointed out by Brewer J-in the Gulf, Colorado and

Santa Fe' Railway

v. W. H. Ellis ('), while good faith

(I/ 249 U.S. 152. (2) 220 U.S. 61. 131 165 U.S .. 150

1

1950

Ohiranjitlal

Chowdkuri

v.

Th~ Union of

India and

Others.

DaaJ.

1950

Chiranjitla.l

Chowdhuri

v.

The Union of

Indill and

Oth~rs,

Da3.T.

934 SUPREME COURT REPORTS [1950]

and a knowledge of existing conditions on the part of

a legislature was to be presumed,

yet to carry that

presumption to the extent

0f always holding that there

must be some undisclosed and unknown reason for

subjecting

certain individuals or corporations to hostile

and discriminating legislation was to

make the pro­

tecting clause a mere rope

of sand, in no manner res­

training

State action.

The complaint of the petitioner on

this head is

formulated

in paragraph 8 (iii) of the petition as fol­

lows

:-"The Ordinance denied to the company and

its shareholders equality before the law and equal

protection

of the laws and was thus a violation of arti­

cle 14 of the Constitution. The power to make

regulations relating to

trading corporations or the

control or production of industries was a power which

consistently with article

14 could be exercised only

generally or with reference to a class

and not with

reference to a single company or to shareholders of a

single

company." The Act is also challenged on the

same ground in paragraph ::1 of the petition. The

learned Attorney-General contends

that the petitioner

as

an individual shareholder cannot complain of dis­

crimination against the company.

It will be noticed

that it is not a case of a shareholder complaining only

about discrimination against the company or fighting

the battle of the company but it is a case of a share­

holder complaining

of discrimination against himself

and other shareholders of this company. It is true

that there is no complaint of discrimination inter se

the shareholders of this company but the complaint is

that the shareholders of this company, taken as a unit,

have been discriminated vis-a-vis the shareholders

of other companies. Therefore, the question as to the

right of the shareholder to question the validity of a

law infringing the right of

the company does not

aiise.

Here the shareholder is complaining of the infringement

of his own rights

and if such infringement can be esta­

blished I see no reason why

the shareholder cannot

come

within article 32 to vindicate his own rights.

The fact that these proceedings have been taken by

•

S.C.R. SUPREME COURT REPORTS 935

1950 one single shareholder holding only one single fully

paid up share does not appear

to me to make any the

Ohiranjitlal

least difference in principle. If this petitioner has, by Chowdhuri

the Ordinance or the Act, been di,criminated against

and denied equal protection of the law, his fundamental

right has been infringed and his right to approach this

Court for redress cannot be made dependent on the

readiness or willingness of other shareholders whose

rights have also been infringed to join him in these

p:oceedings or of the company to take substantive

proceedings.

To take an example, if any law discrimi-

v.

The

Union of

India'and

Oth,,ra,

nates against a class, say the Punjabis, any Punjabi

may question the constitutionality

uf the law, without

joining the whole Punjabi community or without

acting on behalf of all the Punjabis.

To insist on his

doing

so will be to put a fetter on his fundamental

right under article

02 which the Constitution has not

imposed

on him. Similarly, if any Jaw deprives a

particular shareholder or the shareholders

of a parti-

cular company of the ordina.ry rights

of share-

holders under the general law for reasons not parti-

cularly and specially applicable to him or them

but also applicable to other shareholders of other

companies, such law surely offends against article

14 and any one so denied the equal protection of

law may legitimately complain of the infringement

of his fundamental right

and is entitled as of right to

approach this

Court under article 32 to enforce his own

fundamental right under article

14, irrespective of

whether any other person joins him or not.

To the charge of denial of equal protection of the

laws

the respondents in the affidavit of Sri Vithal

N. Chandavarkar filed in opposition to the petition

make the following reply

:-"With reference to para­

graph 6 of the petition, I deny the soundness of the sub­

missions

that on or from the 26th January, 1950, when

the

Constitution of India came into force the said Ordi­

nance became void under article 13(1) of the Constitu­

tion or that the provisions thereof were inconsistent

with the provisions of Part III of the said Constitution

or for any of the other grounds mentioned in paragraph 8

Das J.

L

""

1950

Ohiranjitlal

Okowdhuri

v.

The Union of

India and

Others.

Das J.

936 SUPREME COURT REPORTS [1950]

of the said petition." In the whole of the affidavit in

opposition

there is no suggestion as to why the pro.

mulgation

of the Ordinance or the passing of the Act

was considered necessary

at all or on what principle or

basis either of them was founded. No attempt has

been made in the affidavit to show

that the Ordinance

or the Act was based upon

any principle of classifica­

tion

at all or even that the particular company and its

shareholders possess

any special qualities which are

not to be found in other companies

and their share­

holders

and which, therefore, render this particular

company and its shareholders a class by themselves.

Neither

the affidavit in opposition nor the learned

Attorney-General in course

of his arguments referred

to

the statement of the objects and reasons for

introducing

the bill which was eventually enacted or

the

Parliamentary debates as showing the reason why

and under what circumstances this Jaw was made and,

therefore,

apart from the question of their admissibility

in evidence,

the petitioner has had no opportunity to

deal with or rebut them and the same cannot be used

against

him.

The learned Attorney-General takes his stand on the

presumption

that the law was founded on a valid basis

of classification,

that its discriminations were based

upon adequate grounds

and that the law was passed

for safeguarding

the needs of the people and that,

therefore, the onus was upon the petitioner to allege

and prove that the classification which he challenged

did not rest upon any reasonable basis but was essen­

tially

arbitrary. I have already said that if on the face

of the law there is no classification

at all or, at any

rate, none on the basis of any apparent difference

specially peculiar to

the individual or class affected by

the law, it is only an instance of an arbitrary selection

of an individual or class for discriminating

and hostile

legislation and, therefore,

no presumption can, in such

circumstances, arise

at all. Assuming, however, that

even in such a case the onus is thrown on the com­

plainant, there

can be nothing to prevent

hiin from

proving, if l)e can, from the text of the law itself, that

•

-

S.C.R. SUPREME COURT REPORTS 937

it is "actually and palpably unreasonable and arbit­

rary" and thereby discharging the initial onus.

The Act

is intituled an Act to make special provision

for the proper management

and administration of the

Sholapur Spinning and Weaving Company, Limited."

There is not even a single preamble alleging that the

company was being mismanaged

at all or that any

special reason existed which made it expedient to enact

this law. The Act,

on its face, does not purport to

make any classification

at all or to specify any special

vice to which this particular company and its share­

holders are subject and which

is not to be found in

other companies

and their shareholders so as to justify

any special treatment. Therefore, this Act,

ex Jacie,

is nothing but an arbitrary selection of this particular

company

and its shareholders for discriminating and

hostile treatment

and read by itself is palpably an

infringement of Article

14 of the

Constitution.

The learned Attorney-General promptly takes us to

the preambles to the Ordinance which has been replaced

by the Act and suggests that the Act is based on the

same considerations

on which

the Ordinance was

promulgated. Assuming

that it is right and permis­

sible to refer to

and utilise the preambles, do they alter

the

situation? The preambles were as follows:­

"Whereas on account of mismanagement and neglect a

situation has arisen in the affairs of the Sholapur

Spinning and Weaving Company, Limited, which has

prejudicially affected the production

of an essential

commodity and has caused serious unemployment

amongst a certain section of the community ; And

whereas an emergency has

ariseri which renders it

necessary to make special provision for the proper

management

and administration of the aforesaid com­pany;-" The above preambles quite clearly indicate

that the justification of the Ordinance rested on

mismanagement and neglect producing certain results

therein specified.

It will be noticed that apart from

.

these preambles there is no material whatever before

us establishing or even sw~gesting that this company

p.nd its shareliolders have in fact been guilty of any

120

1950

Ohiranjitlal

Chowdhuri

v.

The Union of

India and

Others.

Das J,

1950

Chiranjitlal

Chowdhuri

v.

The Union ·of

India and

Others.

Das J.

938 SUPREME COURT REPORTS [1950]

mismanagement or neglect. Be that as it may, the

only reason put forward for the promulgation of the

Ordinance was mismanagement resulting in falling off

of production and in producing unemployment. I do

not find

it necessary to say that mismanagement and

neglect in conducting the affairs of corn panies can

never be a criterion or basis of classification for legis­

lative purposes. I shall assume

that it is permissible

to make a law whereby all delinquent companies and

their shareholders may be brought to book and all

companies mismanaging their affairs

and the share­

holders of such companies

may, in the interest of the

general public, be deprived of their

right to manage the

affairs of their companies.

Such a classification made

by a law would bear a reasonable relation to the conduct

of all delinquent companies

and shareholders and may,

therefore, create no inequality, for

the delinquent com­

panies

and their shareholders from a separate class and

cannot claim equality of treatment with good com­

panies and their shareholders who are

their betters.

But a distinction cannot be made between the

delinquent companies inter se or between shareholders

of equal! y

delinquent companies and one set cannot be

punished for its delinquency while

another set is

permitted to continue, or become, in like manner,

delinquent without

any punishment unless there be

some other

apparent difference in their respective

obligations

and unless there be some cogent reason

why prevention of mismanagement is more imperative

in one instance

than in the other. To do so will be

nothing

but an arbitrary selection which can nev.er be

justified as a permissible classiffication. I am not

saying

that this particular company and its share­

holders

may not be guilty of mismanagement and

negligence which has brought about serious fall in

production

of an essential commodity and also con­

siderable unemployment.

But if mismanagement

affecting production

and resulting in unemployment is

to be the basis of a classification for

making a law for

preventing mismanagement

and securing production

and employment, the law must embrace within its

•

.-

S.C.R. SUPREME COURT REPORTS 939

ambit all companies which now are or may hereafter

become subject to the vice. This basis of classification,

by its very nature, cannot be exclusively applicable to

any particular company and its shareholders but is

capable

of wider application and, therefore, the Jaw

founded on that basis must also be wide enough so as

to

be

capable of being applicable to whoever may

happen at any time to fall within that classification.

Mismanagement affecting production can never be

reserved as a special attribute peculiar to a particular

company

or the shareholders of a particular company.

It it were permissible for the legislature to single out

an individual or class

and to punish him or it for some

delinquency which

may equally be found in other

individuals or classes and to lea

v.e out the other mdi­

viduals or classes from the

ambit of the law the

prohibition of the denial of equal protection of the laws

would only be a meaningless and barren form of words.

The argument

that the presumption being in favour of

the legislature, the onus

is on the petitioner to show there

are other individuals or companies equally guilty of

mismanagement prejudicially affecting the production

of

an essential commodity and causing serious unem­

ployment amongst a certain section of the community

does not, in such circumstances, arise, for

the simple

reason

that here there has been no classification at all

and, in any case, the basis of classification by its very

nature

is much wider and cannot, in it .application, be

limited only to

this company and its shareholders and,

that being so, there is no reason to throw on the

petitioner the almost impossible burden

of proving

that there are other companies which are in fact

precisely and in all particulars similarly situated.

In

any event, the petitioner, in my opinion, may well

claim to have discharged

the onus of showing that this

company

and its shareholders have been singled out

for discriminating treatment

by showing that the Act,

on the face

of it, has adopted a basis of classification

which,

by its very nature, cannot be exclusively

applicable to this company

and its shareholders but

which may be equally applicable to other companies

1960

Chiranj1tlal

Chowdhuri

v.

The U1iion of

India and

Others.

DasJ.

•

•

1950

OhiranjitzaZ

Ohowdhuri

v.

The Union of

India and

OthtJTS.

DasJ.

1950

Dec. 14,

940 SUPREME COURT REPORTS [1950]

and their shareholders and has penalised this particular

company and its shareholders, leaving out other com­

panies

and their shareholders who may be equally

guilty of the alleged vice of mismanagement and

neglect of the type referred to in the preambles. In

my opinion the legislation in question infringes the

fundamental rights of the petitioner and offends against

article

14 of our Constitution.

The result, therefore, is

that this petition ought to

succeed

and the petitioner should have an order m

terms of prayer (3) of the petition with costs.

Petition

dismissed .

Agent for the.petitioner: M. S. K. Aiyengar .

Agent for opposite party Nos. 1 & 2: P.A. Mehta.

Agent for opposite party Nos. 3 to 5 and 7 to 10:

Rajinder Narain.

J ANARDAN REDDY AND OTHERS

v.

THE STATE.

[SHRI HARILAL KANIA C.J., SA!YID FAZL ALI,

PATANJALI SASTRI, MUKHERJEA, DAS and

CHANDRASEKHARA AIYAR JJ.J

Constitution of India, Arts. 134, 136, 374(4)-Special leave to

appeal-Judgment of Hyderabad High Court passed before !16th Jan.

1950-Application for special leave-1'.faintainability-Pendency of

application for leave to appeal to Judicial Committee of Hyikrabad

when new constitution came into force, effect of-Scope of Art. 136-

" Any court or tribunal in the territory of India "-Interpretation of

•tatute.-Presumption of prospective operation--Right to appeal.

The petitioners, who v.·ere convicted and sentenced to death

by a special tribunal in the Hyderabad State, preferred appeals

to the High Court of Hyderabad which were dismissed, and they

applied to the.High Court on the 21st Jan., 1950, for leave to appeal

to the Judicial Committee of Hyderabad against the judgments of

the High Court. On the 26th Jan., 1950, the Constitution of

India came into force and under the Constitution, Hyderabad be­

came a part of India, the Judicial Committee of Hyderabad ceased

to exist, and all appeals and other proceedings pending before that