1960 (8) TMI 44 - HC - Companies Law

Court upholds company's rights under Article 19(1)(g)

The court held that the petitioner company could claim the privileges granted by Article 19(1)(g) of the Constitution. The Controller's actions were ... Company – Incorporation of and Winding up – Power of Tribunal to make calls Issues Involved:1. Whether the Control Order authorizes the action taken by the Controller.2. Whether the provisions of the Control Order violate the fundamental rights of the petitioner under Article 19(1)(g) of the Constitution.3. Whether a company can claim fundamental rights under Article 19(1)(g) of the Constitution.Issue-wise Detailed Analysis:1. Whether the Control Order authorizes the action taken by the Controller:The petitioner company, engaged in the business of iron and steel materials, was affected by the Iron and Steel (Control) Order, 1956. The Control Order, promulgated under the Essential Commodities Act, 1955, superseded previous orders and regulated the distribution of iron and steel. Under Clause 4, acquisition of iron or steel required a quota certificate or permit issued by the Controller. Clause 5 restricted disposal of iron or steel except under conditions specified by the Controller. Clause 8 mandated the surrender of revoked authorities. Clause 13 empowered the Controller to coordinate production and demand, including prohibiting manufacture or requiring approval for production programs. Clause 17 allowed the Central Government to issue procedural directions. The Controller's notice on March 28, 1957, and May 7, 1958, suspended and canceled orders, respectively, affecting the petitioner. The petitioner argued that the Controller lacked the power to stop dispatches covered by existing planning orders. The court found that the Control Order did not explicitly authorize such actions, rendering the Controller's orders unauthorized.2. Whether the provisions of the Control Order violate the fundamental rights of the petitioner under Article 19(1)(g) of the Constitution:The petitioner contended that if the Controller's actions amounted to a revocation of permits under Clause 8, the lack of directions under Clause 17 made the power arbitrary and an unreasonable restriction on the fundamental right to carry on business under Article 19(1)(g). The court examined whether the Control Order's provisions were constitutionally permissible. It concluded that the power to revoke or cancel permits without restrictions imposed by directions under Clause 17 was a naked and arbitrary power. This constituted an unreasonable restriction on the petitioner's fundamental right to carry on its business and was therefore void.3. Whether a company can claim fundamental rights under Article 19(1)(g) of the Constitution:A preliminary objection was raised that a company cannot have fundamental rights under Article 19(1)(g) as it applies only to citizens. The court analyzed whether a company could be considered a 'citizen' or 'person' under the Constitution. Article 5 of the Constitution defines citizenship, and the General Clauses Act includes companies within the definition of 'person.' The court noted conflicting judgments on whether companies could claim rights under Article 19. It referred to Supreme Court cases where companies were granted relief based on fundamental rights but without explicitly addressing the issue. The court concluded that a company incorporated in India, ordinarily resident for five years preceding the Constitution's commencement, could be considered a citizen under Article 5. Thus, the petitioner company was entitled to fundamental rights under Article 19(1)(g).Conclusion:The court held that the petitioner company could claim the privileges granted by Article 19(1)(g) of the Constitution. The Controller's actions were unauthorized under the Control Order, and the power to revoke permits without restrictions was an unreasonable restriction on the petitioner's fundamental rights. The petition was allowed, and the impugned orders were set aside.