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Sholapur Spinning and Weaving Company (Emergency Pro- visions) Act (XXVIII of 1950)~Act dismissing managing agents of & company, removing its directors, authorizing Government to appoint new directors, and curtailing rights of shareholders in the matter of voting, etc.—Validity—Whether infringes fundamental rights—Right not to be deprived of property save by authority of law—Right to acquire, hold and dispose of property-——Right to equal protection of law—Constitution of India, Arts. 14, 19 (1) (f), 29(5), 81, 82—“ Deprivation of property”, “ Property”, acquisition”, ‘taking possession”, “equal protection”, meanings of—Right to apply under Art, 32—Corporation’s right to apply—Shareholders' right.The Governor-General of India, finding that on account of mismanagement and neglect a situation had arisen in the affairs of the Sholapur Spinning and Weaving Company ltd., which had prejudicially affected the production of an essential commodity and had caused serious unemployment amongst a certain section of the community, and that an emergency had thereby arisen which rendered it necessary to make special provision for the proper management and administration of the said company, promulgate- 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 Agents of the said company were dismissed, the directors holding office at the time automatically vacated their office, the Government was authorized to appoint new directors, the rights of the shareholders of the company were curtailed in the matters of voting, appointment of directors, passing of resolutions and applying for winding up, and 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 share holder of the company made an application under Art. 32 of the Constitution for a declaration 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 of the Parliament and infringed his fundamental rights guaran- teed by Arts. 19 (1) (f), 31 and 14 of the Constitution and was consequently void under Art. 18. The company was made a respondent and opposed the petition. Held per Kania OJ., Fazu ALI, MUKBERJEA and Das JJ.— (i) that the impugned Act did not infringe any fundamental right of the petitioner under Art. 31 (1), as it did not deprive the company or the petitioner of any property save under authority of law ; (ii) that the impugned Act did not infringe any fundamental right guaranteed by Art. 31 (2) inasmuch as it did not authorize the ‘‘acquisition” of any property of the company or of the share- holders or “the taking possession” of the property of the petitioner, namely, the skares which he held in the company, though he was disabled from exercising some of the rights which an 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 authorized the “taking possession” of the property of the company, the petitioner was not entitled to any relief on that score under Art. 32; (iii) that, ag 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 restrictions 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, and were there- fore completely protected by cl- (5) of Art. 19. Held .also per Kanta C.J., Faz Ant, and MOKHERIJEA JJ. (PATANJALI SASTRI AND Das JJ. dissenting)—that though the Legislature had proceeded against one company 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 legislation, provided there is sufficient basis or reason for it and there is a strong presumption in favor of the constitutionality of an enactment, the burden was on the petitioner to prove that there were also other companies similarly situated and this company alone had been discriminated against, and as he had failed to discharge this burden the impugned Act cannot be held to have denied 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 SastR1 J-—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 embodied in the Indian Companies Act, it was prima facie within the imAlbiw1on Of Ari, 12; and, even though when & law 1s Made applicable to a class of persons or things and the classification is based on differentia having a rational relation to the object sought to he attained, it can be no objection to its constitutional validity that its application is found to affect only one person or thing, since the impugned Act selected a particular company and imposed upon it and its shareholders burdens and disabilities on the ground of mismanagement 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 discriminatory 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 made 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 mismanagement existed in other companies. The issue was not whether the impugned Act was ill-advised or not justified by the facts on which it was based but whether it transgressed 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 itself, is palpably an infringement of Art. 14 of the Constitution. Assuming that mismanagement and neglect in conducting the affairs of @ company can be a basis of classification and that such a classification would bear a reasonable relation to the conduct of all delinquent companies and shareholders and may therefore create 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 imperative in one instance than in the other. The argument that the presumption being in favour of the Legislature, 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 much wider and cannot, in its 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 prov- ing that there are other companies which are in fact precisely and in ll particulars similarly situated. In any event, the petitioner, 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 and their shareholders and has penalized this particular company 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. (Kanta, C.J., dubitanie).—In so far as the petitioner’s rights as a shareholder were curtailed he was entitled to apply for relief under Art. 82 in his own right on the ground that the Act denied to him the equal protection of the laws and therefore contravened Art. 14 even though the other shareholders did not join him in the application. Per MUKHERIJEA J.—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 the Supreme Court for enforcement of its fundamental rights and so may the individual shareholders to enforce their own; but as the company and its shareholders are in law separate entities, ii would not bs 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. In 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 fundamental 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, of which he could seek enforcement by an appropriate writ or order. Under Art- 32 the Supreme Court has a very wide discretion in the matter of framing writs to suit the exigencies of particular eases and an application under the article cannot be thrown out simply on the ground that the proper writ or direction has not been prayed for. In the context in which the word “acquisition” is used in * Art. 31:2) it means and implies the acquiring of the entire title of the expropriated owner whatever the nature or extent of that right might be. The guarantee against the 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. It means only that there should be no discrimination 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. 81 contemplates only confiscation or destruction of property in exercise of what are known as police powers in American law for which no compensation is necessary. Das J.—The 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 by an Act even though certain privileges incidental to the ownership of the shares have been put in abeyance, the shareholders cannot be said to have been deprived of their “property” in the sense in which that word is used in Art. 19(1) (f) and Art. 31. 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 & 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 possession of by the Government in this case within Art. 31 (2). The language of clause (1) of Art, 81 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 and in such a case no question of payment of compensation arises, Fazu ALl, MUKHERJEA and Das JJ.—Except in the matter of writs in the nature of habeas corpus no one but those whose rights are directly affected by a law can raise the question of the constitutionality of a law and claim relief under Art. 32. A corporation being « different entity from the shareholders,- & share-holder cannot complain on the ground that the rights of the company under Arts. 19 (1) (f) or 31 are infringed. Fazp AtiJ.—A 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 proposed. But the presumption is always in favour of the consttutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression 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 adopted, in construing it. ! |
