1950 (12) TMI 34 - SC - Indian Laws

Supreme Court upholds Sholapur Act 1950. No violation of Constitution.

Chiranjit Lal Chowdhuri Versus The Union of India (UOI) and Ors.

Chiranjit Lal Chowdhuri Versus The Union of India (UOI) and Ors. - AIR 1951 SC 41, [1951] 21 Comp Cas 33 (SC) , [1950] 1 SCR 869 Issues Involved:1. Validity of the Sholapur Spinning and Weaving Company (Emergency Provisions) Act, 1950 under Articles 31 and 19 of the Constitution of India.2. Whether the Act infringes Article 14 of the Constitution of India.3. Legislative competence to enact the Act.4. Whether an individual shareholder can challenge the Act on grounds of discrimination.Issue-wise Detailed Analysis:1. Validity of the Act under Articles 31 and 19 of the Constitution of India:The petitioner, a shareholder of the Sholapur Spinning and Weaving Company Ltd., challenged the Act on the grounds that it infringed his fundamental rights under Articles 31 and 19(1)(f) of the Constitution. Article 31 provides that no person shall be deprived of his property save by authority of law and mandates compensation for property acquired for public purposes. Article 19(1)(f) guarantees the right to acquire, hold, and dispose of property.The Court held that the Act did not amount to deprivation of property under Article 31. The petitioner retained ownership of his shares and could still receive dividends and dispose of the shares. The Act merely suspended certain rights, such as voting for directors and passing resolutions, which were deemed reasonable restrictions in the interest of the general public under Article 19(5). Thus, the Act did not violate Articles 31 and 19(1)(f).2. Whether the Act infringes Article 14 of the Constitution of India:Article 14 guarantees equality before the law and equal protection of the laws. The petitioner argued that the Act discriminated against the shareholders of the Sholapur Company vis-`a-vis shareholders of other companies.The Court examined whether the classification made by the Act was reasonable and based on substantial distinctions. The Court noted that the Act was enacted due to specific mismanagement and neglect in the Sholapur Company, which prejudicially affected the production of an essential commodity and caused serious unemployment. The Court emphasized that a law can apply to a single individual or entity if there are special circumstances justifying such classification. The Court found that the petitioner failed to show that other companies were similarly situated and that the classification was arbitrary. Therefore, the Act did not violate Article 14.3. Legislative competence to enact the Act:The petitioner contended that the Parliament lacked the legislative competence to enact the Act. The Court referred to Entry 43 of the Union List, which pertains to the incorporation, regulation, and winding up of trading corporations. The Court held that the Act, which regulated the management of the Sholapur Company, fell within the ambit of this entry. Thus, the Parliament had the legislative competence to enact the Act.4. Whether an individual shareholder can challenge the Act on grounds of discrimination:The Court considered whether an individual shareholder could challenge the Act on the grounds of discrimination. The Court referred to the principle that a person whose rights are directly affected by a law can challenge its constitutionality. The Court held that the petitioner, as a shareholder, had a direct interest in the company's management and could challenge the Act on the grounds of discrimination under Article 14.Conclusion:The Supreme Court dismissed the petition, holding that the Sholapur Spinning and Weaving Company (Emergency Provisions) Act, 1950, did not violate Articles 31, 19, or 14 of the Constitution. The Act was within the legislative competence of the Parliament, and the petitioner failed to prove that the classification made by the Act was arbitrary or unreasonable. The petition was dismissed with costs.