TaxTMI 
TaxTMI 
1950 (12) TMI 17
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....thing 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 principle 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 conclusion 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 Constitution and have nothing more to add. In my opinion therefore this petition fails and is dismissed with costs. Fazl Ali, J.-I am strongly of the opinion that this petition should be dismissed wit....
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....borately 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, 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 protection of equal laws. It forbids class legislation, but does not forbid classification which rests upon reasonable 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 ....
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....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 with the sanction of the Central Government." Prima facie, 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, 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 P....
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....nd showed that the Mill had been grossly mismanaged 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 approched by the Provincial Government and requested 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 managament acting under the direction of a Controller appointed under the Essential Supplies Act, but they also found that a peculiar situation had been created in this case by the managing agents themselves being unable or unwilling to conduct 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 w....
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.... 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 Rs. 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 proceedings 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 difficult for the company to run smoothly under the normal law. ....
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....ne 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 proof it must be shown that there is no reasonable basis for the classification." (Page 580 of "Constitutional Law", 1st Edition, by Professor Willis). 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 commodity' 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 company; 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 reason which apparently influenced the promulgation of the Ordinance and....
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.... disputes 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 intervened by promulgating on the 9th January, 1950, an Ordinance called the Sholapur Spinning and Weaving Company (Emergency Provisions) Ordinance (II of 1950), which empowered the Government of India to 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 (XXVIII of 1950) (hereinafter referred to as the "impugned Act"). The petitioner complains that the impugned Act and the action....
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....hink 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 shareholders when the purpose of the Government's intervention has been fulfilled. Section 13 is important and reads thus: "13. Application of the Companies Act.-(1) Notwithstanding anything contained in the Companies Act or in the memorandum or articles of association of the Company- (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 by 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 be in any Court unless by or with the sanction of the Central Government. (2) Subject to the provisions contained in sub-section (1) and to the other provisions of this Act, and subject to such exceptions, restrictions and l....
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...., 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 undertaking 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 at their general meeting is regulated by various provisions 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 shareholders 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 C....
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....advised or not justified by the facts on which it was based, but whether it transgresses the explicit constitutional restriction on legislative power imposed by article 14. 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 classification 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. 10 crores and upwards, and it may be found that there is only one such company for the time being to which the law could be applied. If other such companies are brought into existence in future, the law would apply to them also, and no discrimination would thus be involved. But the impugned Act, which selects this particular company and imposes upon it and its share....
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....hat this company and its shareholders were arbitrarily singled out for the imposition 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 lockouts resulting in unemployment and cessation of production of essential commodities ? Would 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 decree 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. 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 enactment, 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 pet....
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....tors 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 India 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 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 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 Government 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 directo....
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....ointed respondents 3 to 7 as directors of the company in terms of section 3 of the Ordinance. On the 2nd of March, 1950, respondent No. 9 was appointed a director and respondent No. 5 having resigned his office in the meantime, 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 provisions 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 necessary 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.....
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....s that have 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 appropriate proceeding, for enforcement of the fundamental rights which are enumerated in Part III of the Constitution. Clause (2) of the article lays down that the Supreme Court shall have the power to issue directions or orders or writs including writs in the nature of habeas corpus, mandamus, prohibition, quo waranto and certiorari which ever may be appropriate for the enforcement of any of the rights conferred by this Part. Thus anybody who complains of infraction of any of 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 c....
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....f. This being the position, the proper subject of our investigation would be what rights, if any, of the petitioner as a shere holder of the company have been violated by the impugned legislation. A discussion 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 facie be brought by the company itself. It cannot be said that this course is not possible in the circumstances of the present case. As the law is alleged to be unconstitutional, it is open to the old directors of the company who have been ousted from their position by reason of the enactment to maintain that they are directors still in the eye of law, and on that footing the majority 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 is one of the respondents, and opposes the petition. As regards the other point, it would appear from the language of a....
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....d vest the same in certain persons who are appointed by the State, and the exercise of whose powers cannot be directed or controlled in any way by the shareholders. As the taking of possession is not for any public purpose and no provision for compensation has been made by the law which authorises it, such law, it is said, violates the fundamental rights guaranteed under article 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 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 compensation for the property taken possession 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 ....
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.... of the company or of the shareholders in the present case. The question, therefore, narrows down to this as to whether the legislation in question has authorised the taking of possession of any property or interest belonging to the petitioner. It is argued by the learned Attorney-General that the taking of possession as contemplated by article 31(2) means the taking of possession of the entire bundle of rights which the previous holder had, by excluding him from every part or item thereof. If the original holder is still left to exercise his possession with regard 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 Constitution. 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, the directors, who have been given the custody of the property, effects and actionable claims of the compa....
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....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 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 directors 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 t....
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....bject 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 contemplated 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 proprietary 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, (Minister of State for the Army v. Dalxiel) , 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 Commonwealth Constitution. The majority of the Full Bench answered the question in the affirmative an....
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....on or confiscation of property obviously no such thing has happened in the present 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 compensation nor of public purpose, would 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 the article 19(1)(f) of the Constitution. Article 19(1) of the Constitution enumerates the different forms of individua....
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....ernment and without such sanction, there is also a disability on him to institute 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 property, 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. I do not think that there has been any restriction on the rights of a shareholder to hold, acquire or dispose of its share by reason of the impugned enactment and consequently article 19(1)(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 disabilities imposed by the impugned legislation amount to restrictions on proprietary right, they may very well be supported as reasonable restraints imposed in the interests of general public, viz., to secure the supply of a commodity essential to the community and to prevent a serious unemployment amongst a section of the people. They are, therefore, protected completely by....
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....ho have not been treated in a similar way. As the discriminatory treatment has been in respect to the shareholders 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 themselves. It must be admitted that the guarantee against the denial of equal protection of 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 pretection of laws is a pledge of the protection of equal laws," (see Yick Wo v. Hopkins), and this means "subjection to equal laws applying alike to all in the same situation." (vide Southern Railway Company v. Greene). 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 t....
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....n 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 principles. As was said by the Supreme Court of America in Middleton v. Texas Power and L. Co., "it must be presumed that a Legislature understands and correctly appreciates the needs of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based upon adequate grounds." This being the position, it is for the petitioner to establish facts which 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 Weaving Comp....
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....s might prevail, it is also not impossible to conceive of something "peculiar1" 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." (Vide Radice v. New York). We should bear in mind that a corporation, which is engaged in production of a commodity vitally essential to the community, as a social character of its own, and it must not 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 legislature 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 combination of circumstances which are present here may be of such unique character as could not be existing in any other institution. But all....
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....h 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 promulgated the Central Government acting under section 15 delegated all its powers to the Government of Bombay. On January 10, 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 on the same day respondent No. 9 was also appointed as a director. In the meantime 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 Rs. 50 on the preference shares. Thereupon a suit, being Suit No. 438 of 1950, was filed in the High Court of 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 Benc....
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....ment 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 83A an....
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....ects every person, whether such person 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 expression 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(1)(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....
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....ion, 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 possession and enjoy the full fruits of possession indefinitely, on any terms it chooses or upon no terms at all." In my judgment the question whether the Ordinance or the Act has deprived the shareholder of his " property " must depend, for its answer, on whether it has taken away the substantial bulk of the rights constituting 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 valuless; then there can be no question 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 management by directors elec....
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....from the share be acquired or disposed of or taken possession of as contemplated by those articles. The second question 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 of that there has in fact been any such acquisition. The only question then is whether this "property" of the shareholder, meaning thereby only the rights 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 these rights are tantamount to the taking away of the rights altogether, there is nothing to indicate that the Ordinance or the Act has, after taking away the rights from the shareholder, 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....
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....e 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 property is different from acquisition 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 provided for deprivation of property in exercise of police powers. I am not prepared to adopt such construction, 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 d....
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....nt or agent or has no control over him or has no power to dismiss or discharge him, as in this case, the possession of such servant or agent can hardly, in law, be regarded as the possession of the company. (See Elements of. Law by Mark by, 6th Edition, para. 371, page 192). In this view of the 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 of 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 appropriate 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 production of an essential commodity and had caused serious unemployment amongst a certain section of the community but, as stated by Holmes, J., in Pennsylvania Coal Co. v. Mahon, "A strong public desire to improve the public condition is not enough to warrant achieving the desire by a s....
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....rinciple was laid down in Jeffrey Manufacturing Co. v. Blagg, Hendrick v. Maryland and Newark Natural Gas and Fuel Co. v. The City of Newark. In each of these cases the Court declined to permit the person raising the question 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. Warley, 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 challenged by an alien who had been employed as a cook in a restaurant. That statute made a violation of the Act by an employer punishable. The fact that the employment was at will or that the employer and not the employee was subject to prosecution did not prevent the employee from raising the question of constitutionality because the statute, if enforced, would compel the employer to discharge the employee and, therefore, the employee was directly affected by the statute. In the second of the ....
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....f 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 infringement 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 undertaking 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 attributing a legal personality to a corporation. The proc....
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....scrimination 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 application to other persons, 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....
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....n. The presumption in favour of the legislature cannot in such a case be legitimately 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 Gulf C. & S.F. Railway Co. v. Ellis, while good faith and a knowledge of existing conditions on the part of a legislature was to be presumed, yet to carry that presumption to the extent of 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 protecting clause a mere rope of sand, in no manner restraining State action. The complaint of the petitioner on this head is formulated in paragraph 8(iii) of the petition as follows :-"The Ordinance denied to the company and its shareholders equality before the law and equal protection of laws and was thus a violation of article 14 of the Constitution. The power to make regulations relating to trading corporations or the control of produ....
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....hts of shareholders under the general law for reasons not particularly 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 paragraph 6 of the petition, I deny the soundness of the submissions that on or from the 26th January, 1950, when the Constitution of India came into force the said Ordinance became void under article 13(1) of the Constitution 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 of the said petition." In the whole of the affidavit in opposition there is no suggesti....
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....ng 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 shareholders 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 facie, 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 permissible 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 commod....
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....s brought about serious fall in production of an essential commodity and also considerable 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 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 law 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 protection can never be reserved as a special attribute peculiar to a particular company or the shareholders of a particular company. If 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 leave out the other individuals or classes from the ambit of the law the prohibition of the....