TMI Blog1953 (12) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ance authorises, in effect, a deprivation of the property of the Company within the meaning of article 31 without compensation and is not covered by the exception in clause (5)(b). (ii) of that article. The Ordinance thus violates the fundamental right of the. Company under article31(2), and the appellant as a preference shareholder who is now called upon to pay the moneys unpaid on his shares is entitled to impugn the constitutionality of the Ordinance. I also agree with my learned brother Mahajan that the previous of this Court in Chiranjit Lal Chowdhuri v. The Union of India and Others(2) is distinguishable and has no application here for the reasons mentioned by him. MAHAJAN J.--This is an appeal from the judgment and decree of the High Court of Judicature at Bombay 'passed on the 29th day of August, 1950, in Appeal No. 48 of 1950. The appeal concerns the validity of the same piece of legislation that was considered by this court in the case of Chiranjit Lad Chowdhuri ([1950] S. C. R. 869. 680). There, an ordinary shareholder of the defendant company holding one fully paid up share claimed relief under Art. 32 of the Constitution of India on the ground that the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sked the directors of the company to make a call of Rs. 50 per share on the preference shareholders, the amount remaining unpaid on each of the preference shares. The directors refused to comply with this requisition, as in their judgment that was not in the interest of the company. Thereupon the Governor-General on the 9th January, 1950, promulgated the impugned Ordinance, under which the Mills could be managed and run by directors appointed by the Central Government. On the 9th January, 1950, the Central Government acting under section 15 of the Ordinance delegated all its powers to the Government of Bombay. The Government of Bombay then appointed certain directors who took over the assets and management of the Mills. On the 7th February, 1950, they passed a resolution making a call of Rs. 50 on each of the preference shares payable at the time stated in the resolution. Pursuant to this resolution a notice was addressed on the 22nd February, 1950, to the plaintiff in the suit, who held preference shares, to pay Rs. 1,62,000, the amount of the said call on or before the 3rd April, 1950. The plaintiff instead of meeting the demand, filed the present suit on the 28th March, 1950, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 14 of the Constitution and there had been to him no denial of equality before the law or equal protection of laws, as the Ordinance was based on a classification which rested upon a ground having a fair and substantial relation to the object of the legislation and that it had a reasonable basis for that classification. It was also held that the restrictions imposed on the right of the appellant and the company to hold his or its property were imposed in the interests of the general public. The principal questions for consideration in this appeal are :-- 1. Whether the provisions of the Ordinance for taking over the management and administration of the company, contravene the provisions of article 31 (2) of the Constitution; and 2. Whether the Ordinance as a whole or any of its provisions infringe articles 14 and 19 of the Constitution. In order to decide these issues it is necessary to examine with some strictness the substance of the legislation for the purpose of determining what it is that the legislature has really done; the court, when such questions arise, is not overpersuaded by the mere appearance of the legislation. In relation to constitutional prohibitions bindin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by legislative action the managing agents also share their fate and their contracts come to an end. Section 4 directs the persons appointed under section 3 to take into custody and under their control all the property, effects and actionable claims to which the company is or appears to be entitled and to exercise all the powers of the directors of the company, whether those powers are derived from the Companies Act or from the memorandum or articles of association or from any other source. By section 5 these nominated directors are given powers to raise funds in such manner and offer Such security as they may deem fit. They are given the overriding power of cancelling and varying contracts and agreements entered into between the company and' any other person at any time if they are satisfied that the contract or the agreement is detrimental to the interests the company. Section 10 denies to the managing agents compensation for the' premature termination of the contract of management entered into by the company and it also says that no person shall be entitled to compensation in respect of a cancelled or varied contract under this. Ordinance, entered into with the company. The Ordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mukherjea 1. with whose views Kania C.J., concurred, and to whose views to a certain extent Fazl Ali 1. subscribed. on this part of the case said as follows :- "Mr. Chaff, 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 shareholders themselves and that the statutory directors are acting as the agents of the company, the possession 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 the administration of its affairs. Possession of an 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." Mr. Justice Patanjali Sastri, as he then was held that the effect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that the provisions of the Ordinance should be construed in that light. To emphasize the same point of view reference was also made to the provisions of the Lunacy Act, the provisions of sections 52-A and 52-B introduced in the Insurance Act by Act 47 of 1950, the provisions of the Railway Companies Emergency Powers Act (51 of 1951), and also to the provisions of Act 65 of 1951 (Development of Industries Act), and it was contended that the impugned Ordinance was a piece of social control. legislation as were the provisions contained in the statutes referred to above. In my opinion, these contentions. are not well founded. Reference to illustrative pieces of legislation designed on the same pattern is neither very happy nor apposite; on the other hand, it is apt to mislead because except in the case of the Court of Wards Act, all the laws to which reference was made were enacted after the enactment of the Ordinance in question. The different Court of Wards Acts being existing laws have been excepted from the fundamental right guaranteed by article31 (2). That being so, they can afford little assistance in judging the validity of the impugned law. In dealing with constitutional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinance the Government has merely taken over the superintendence of the affairs of the company ? Or, has it in effect and substance taken over the under taking itself ? Obviously, the field of superintendence has to be' demarcated from the field of eminent domain. It is one thing to superintend the affairs of a concern and it is quite' another thing to take over its affairs and then proceed to carry on ,its trade through agents appointed by the State itself. It seems to me that under the guise of superintendence the State is carrying on the business or trade for which. the company was incorporated with the capital of the company but through its own agents who take orders from it and are appointed by it and in the appointment and dismissal of whom the shareholders have absolutely no voice. The purpose of taking over the company's undertaking is a public purpose, namely, to keep the labour going and contended and to maintain the supply of essential commodity. The company is debarred from carrying on its business in the manner and according to the terms of its charter. Its old complexion stands changed by the terms of the Ordinance. The Ordinance overrides the directors, deprives the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State or was commandeered by the State for State purposes, article 31 (2) could not be invoked to judge the constitutionality of the Ordinance, that article 31 (2) covered within its ambit only two forms of taking of property by the State, namely, where the State acquired title in the property or where the State temporarily commandeered it, and that all other forms of taking the property were outside the fundamental right guaranteed by article 31 (2). It was suggested that the scope of the protection given to private property by our Constitution was not as large as it was contained in the Fifth Amendment of the Constitution of the United States of America. According to the learned Attorney-General, the true content of the fundamental right guaranteed by article 31 (1) was that a person could not be deprived of his property except by statutory authority, but once a law was made depriving a person of his property then the article afforded no further protection. Support for this contention was sought to be derived from the reasoning employed in Gopalan's case ( [1950] S.C.R. 88). There it was held that the freedoms relating to the person of a citizen guaranteed by article 19 assume t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of the compensation, or specifies the principles on which, and the manner in which, the 'compensation is to be determined and given. (3) No such law as is referred to in clause (2) made by the Legislature of a State shall have effect unless such law, having been reserved for the consideration of the President, has received his assent. (4) If any Bill pending at the commencement of this Constitution in the legislature of a State has, after it has been passed by such Legislature, been reserved for the consideration of the President and has received his assent, then, notwithstanding anything in this Constitution, the law so assented to shall not be called in question in any court on the ground that it contravenes the provisions of clause (2). (5) Nothing in clause (2) shall affect-- (a) the provisions of any existing law other than a law to which the provisions of clause (6) apply, or (b) the provisions of any law which the State may hereafter make- (i)for the purpose of imposing or levying any tax or penalty, or (ii) :for the promotion of public health or the prevention of danger to life or property, or (iii) in pursuance of any agreement entered into between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been dealt with in article 31 alone. If both articles covered the same ground, it was unnecessary to have two articles on the same subject. The true approach to this question is that these two articles really deal with two different subjects-and one has no direct relation with the other, namely, article 31 deals with the field of eminent domain and the whole boundary of that field is demarcated by this article. In other words, the State's power to take the property of a person is comprehensively delimited by this article. The article has been split up in six clauses. Moreover, by the amendment of the Constitution certain kinds of laws have been exempted from the operation of the article or from the whole of Part III of the Constitution by the addition of articles 31A and 31B. Article 31(1) declares the first requisite for the exercise of the power of eminent domain. It guarantees that a person cannot be deprived of property by an executive fiat and that it is only by the exercise of its legislative powers that the State can deprive a person of his property. In other words, all that article 31(1)says is that private property can only be taken pursuant to law and not otherwise. A r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public health or the prevention of danger to life or property, but it has also saved from the mischief of the clause the provisions of all existing laws which may be construed as amounting to deprivation of property of a person as well as evacuee property laws under which the State takes possession of properties of persons who have left India for Pakistan. In the result the saving clause comprehensively includes within the ambit all the powers of the State in exercise of which it could deprive a person of property without payment of compensation. In other words, all forms of deprivation of property by the State without payment of compensation have 'been included within the ambit of the exception clause, while other forms of deprivation of property which are outside the ambit of the exception clause are inevitably within the mischief of clause (2) of the article. From the language employed in the different sub-clauses of article 31 it is difficult to escape the conclusion that the words "acquisition" and "taking possession" used in article 31 (2) have the same meaning as the word "deprivation" in article 31(1). The learned Attorney-General suggested that much weight could not be at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R. 869.) :-- "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 acquisition or taking possession of property for a public purpose under any law, 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 of propetty, 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 redundant and clause (2), by itself, would have been sufficient. In the next place, such a view would excludedeprivation of property otherwise than by acquisitionor 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 deprivat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only clause in the article which gives protection to private property from being taken Under executive orders without legislative sanction behind them. The first requisite for the exercise of the power of eminent domain is that it can only be exercised pursuant to law. It was necessary while delimiting the field of eminent domain to state that in the article. If the State had been entitled by clause (1) to take away private property merely by making a law, then no question of paying compensation would arise, whether the taking assumed one form or another. Acquisition of property or its requisition, on that construction of the article, are merely two modes of depriving a person of property and must be held to be included within the ambit of clause (1)of article 31, and clause (2) has not been drafted in the nature of an exception to the provisions of clause (1) of article 31. On this construction of clause (1) of article 31 the logical conclusion is that what has been done by this clause'is that it has declared a fundamental right in the State as against an individual. Such a construction of the article in Part III, in my opinion, has to be avoided, as the purpose of those article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisition within the meaning of the clause and that the expression "taking possession" connoted the idea of requisition cannot be sustained and does not, to my mind, affect the decision of the case. As above pointed, both these expressions used in clause (2) convey the same meaning that is conveyed in clause (1) 'by the expression "deprivation". As I read article 31, it gives complete protection to private property as against executive action, no matter by what process a person is deprived of possession of it. In other words, the Constitution declares that no person shall be deprived of possession of private property without payment of compensation and that too under the authority of law, provided there was a public purpose' behind that law. It is immaterial to the person who is deprived of property as to what use the State makes of his property or what title it acquires in it. The protection is against loss of property to the owner and there is no protection given to the State by the article. It has no fundamental right as against the individual citizen. Article 31 states the limitations on the power of the State in the field of taking property and those limitations are in the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the land or of any estate in the land". The majority of the court held otherwise and expressed the opinion that the taking under Regulation 54 of the National Security (General) Regulations by the Commonwealth for an indefinite period of the exclusive possession of property constituted an acquisition of property within the meaning of section 51 (xxxi) of the Constitution. This is what Rich J. said, representing the majority opinion :- "It would, in my opinion, be wholly inconsistent with the language of the placitum to hold that, whilst preventing the legislature from authorizing the acquisition of n 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 the case now before us, the Minister has seized and taken away from Dalziel everything that made his weekly tenancy worth having, and has left him with the empty husk of tenancy. In such circumstances, he may well say :-- 'You take my house, when you do take the prop That doth sustain my house; you take my life, When you do take the means whereby I live.'" In the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in "acquisition". The learned Judge preferred to follow the view of Latham C.J. and refused to follow the majority judgment in Dalziel's case(68 C.W.L.R. 261.). Having considered the matter in full, and with respect to the learned Judge, I prefer to follow the view of the majority of the court, because it seems to me that it is more in consonance with juridical principle that possession after all is nine-tenths of ownership, and once possession is taken away, practically everything is taken away, and that in construing the Constitution it is the substance and the practical result of the act of the State that should be considered rather than its purely legal aspect. As already said, the correct approach in such cases should be this: what in substance is the loss or injury caused to the owner and not what manner and method has been adopted by the State in taking the property. That the view expressed by Bhagwati J. did not truly represent the intent of Parliament in drafting entry 9 of List II of the 7th Schedule becomes clear from what happened subsequent to this pronouncement. After this judgment was delivered, an Act was passed by Parliament ,amending the Government of India Act nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l probability to avoid any controversy on the scope of the article by giving a limited meaning to these two words. On the finding that the company's property was in effect taken possession of under the provisions of the Ordinance by the State and that the company was deprived of it, there is no escape from the conclusion that the impugned Ordinance and the statute following it are void as both of them encroach on the fundamental right of the company under article 31(2) of the Constitution. It was then argued that even so the plaintiff in the suit was not entitled to the relief claimed by him as it was the company alone that could complain about the abridgement of its fundamental rights by the Ordinance in question. It was also contended that the plaintiff's fundamental right to property had not been infringed in any manner as his property in the share had not been taken possession of by the State. Finally it was said that on both these questions the majority decision of this court in ChiranJit Lal Chowdhuri's case(1) was conclusive. I am unable to sustain any one of these contentions. Undoubtedly the majority decision in Chiranjit Lal Chowdhuri's case (1) has binding force till it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and liabilities of the present plaintiff and the other preference shareholders. 2. The rights and privileges of preference shareholders even in winding up and in earning dividends are somewhat different from the rights and privileges of the ordinary fully paid up shareholders. The court in Chiranjit Lal Chowdhuri's case([1950] S.C.R. 869) did not at all advert to the case of preference shareholders and the effect the Ordinance had on their rights. It is evident that it was the refusal of the directors to obey the mandate of the Controller appointed by the Central Government to make a call on the preference shareholders that to a certain extent resulted in the making of the Ordinance. On the 5th October, 1949, the Government appointed a Controller to supervise the affairs of this ,company. On the 9th November, 1949, the Controller asked the directors of the company to make a call on the preference shareholders. Soon after the directors passed a resolution refusing to comply with the command. On the 9th January, 1950, the Ordinance was promulgated, i.e., soon after the refusal, and on the same day powers were delegated by the Central Government to the Bombay Government under the Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other shareholders of the company." Here it is quite clear that the present contention has been raised in a suit and not in an application for a writ under article 32. That itself distinguishes Chiranjit Lal Chowdhuri's case(1) from the present. It is further clear that all the necessary steps visualised by my learned brother have been taken by the preference shareholders. A requisition' for calling a meeting of the shareholders of, the company was made on 3rd August, 1950, a meeting was actually held on 28th September, 1950, and on subsequent days and on 5th November, 1950, resolutions were passed that the call should not be made. The resolutions were, however, vetoed by the Government. All the preference shareholders are represented in this suit including some of the directors, the company has been impleaded as a defendant and the old directors of the company have made an application that they should be allowed tO support the appeal. On these facts the present case is clearly distinguishable from that of Chiranjit Lal Chowdhuri. 4. In any case, even if it is held that in view of the binding character of this court's decision in Chiranjit Lal Chowdhuri's case([1950] S.C.R. 869 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validly appointed agents of the company qua the company, they cannot function as directors qua the shareholders. 5. The learned Attorney-General drew our attention to a number of cases for the proposition that unless there was a direct infringement of the fundamental right of the shareholders it was not open to them to take advantage of the breach of a fundamental right of the company. In these wide terms I am unable to accede' to this proposition. In my opinion, the correct rule on this point has been stated in Willoughby, at page 20, on the authority of the decision in chusetts v. Mellon(262 U.S. 447), and is in these terms: "We have no power per se to review and annul acts of Congress on the ground that they are unconstitutional. That question may be considered only when the justification for some direct injury suffered or threatened, presenting a justiciable issue is made to rest upon such an act. Then the power exercised is that of ascertaining and declaring the law applicable to the controversy. It amounts to little more than the negative power to disregard an 'unconstitutional enactment, which otherwise, would stand in the way of the enforcement of a legal right. The party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employee and, therefore, the employee was directly affected by the statute. In the second case 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 performance and contended that the Ordinance was unconstitutional. Although the alleged denial of constitutional 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. Reference was also made to the case of Darnell v. The State of Indiana (226 U.S. 388). That is the only case in which a shareholder was not heard to complaining Iris own name when the Ordinance infringed the fundamental right of the company, his own rights had not been infri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Chief Justice. This is what the learned Chief Justice said :-- "The first question 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 .......... do not think . it is necessary to pronounce a definite opinion on the first point." In that case Patanjali Sastri J., as he then was, :also did not pronounce any definite opinion on the question so far as the shareholder's right to question the invasion of the right to property of the company under article 31 was concerned. This is what the learned Judge said :-- "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, were 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." The learned Judge did not offer any opinion on the other questions. Mukherjea J. decided the question on grounds somewhat different from that taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the defendants' respondents 2 to 6 on the 7th February, 1950, for making a call of Rs. 50 per each preference share are illegal, ultra vires, void and inoperative in law. The plaintiff-appellant is the registered holder of 3,244 preference shares of the respondent company of the face value of Rs. 100 per share out of which only Rs. 50 had been paid up and consequently if the call has been duly made, he will have to pay Rs. 1,62,200 in respect of his holding. The plaintiff appellant. resists the payment of the call on the ground, inter alia, that the said Ordinance is illegal, ultra vires and invalid under the provisions of the Government of India Act, 1935, and/or the Constitution of India. No oral evidence was adduced on either side. The matters in issue were argued with questions of law governed by the Constitution. The contention was that the Ordinance was inconsistent with or in derogation of the fundamental rights guaranteed by the Constitution. The suit was dismissed by the trial court and that dismissal was affirmed by the appeal court. The plaintiff has now come up on appeal before us after having obtained a certificate under article 132 (1)of the Constitution' from the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company's assets without payment of any compensation. On the point now under consideration Mukherjea J. expressed himself thus, at page 898: "An incorporated company, therefore, can come up to this court for enforcement of its fundamental rights and so may be 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 corporation 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 indifferent legal entities, it is not competent to one person to seek to enforce the rights of another except where the law 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." And again at page 899 :-- "The rights that could be enforced under article 32 must ordinarily be the rights of the petitioner himself who comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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(1) 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." In the premises, I think it is quite clear that the majority of the members of the Bench which heard (1) 226 U.S. 388. Chiranjitlal's case held that the petitioner was not entitled to question the constitutionality of the Ordinance and the Act on the ground that the fundamental rights of the company under articles 19 (1) (f) and 31 had been infringed. He had, therefore, to rely on the plea of infringement of his own fundamental rights. The majority of the court held that there had been no infringement of his rights as a shareholder under article 19(1)(f) or article 31 and that the petitioner consequently had to fail back on article 14 in order to support his plea of the unconstitutionality of the Ordinance and the Act. Even here the majority of the Bench took the view that the petitioner had not discharged the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectly affects the preference shareholders by imposing on them this liability, or the risk of it, and gives them a sufficient interest to challenge the validity of the Ordinance. It is quite true, as submitted by the learned Attorney-General, that the fact of the property of the company or the managing agents, or the directors or the other persons having contracts with the company having been taken possession of by the State through the directors appointed by the State under the Ordinance has no relation to or bearing on the imposition 'on the preference shareholders of the liability to pay the call, for the directors were not obliged to make the call because they had taken possession of the property of the company or the other persons and that this imposition of liabilityor risk cannot, therefore, be said to be the direct or even indirect result of the State having through the directors appointed under the Ordinance taken possession of the property of the company or the other persons. It is then urged by him that, that being so, the preference shareholders cannot be allowed to complain of the infringment of the rights of the company or of the other persons which does not concern or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question of unconstitutionality of the Ordinance on the ground of the breach of the fundamental rights of the company, or of the other persons he was really fighting the battle of the company and the other persons and not of his own. Here the position is different. Here the law has made the imposition of a liability on him and other preference shareholders possible and he is seeking to resist that liability and as in the premises he is directly affected by the statute he has sufficient interest to challenge its validity. If as between the company or the other persons and these persons who, purporting to act as directors, have made the call the law is unconstitutional for breach of the former's fundamental rights then it follows that these persons are not, in the eve of the law, the directors of the company at all and if they are not in law the directors of the company, surely they cannot arrogate to themselves the right to exercise any of the powers of the directors of the company and to make any call. If the said Ordinance stands, the directors appointed thereunder will have authority to make the call which they have done and the appellant's liability to pay it will stand good. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents or of the directors is "property" or has been taken possession of or acquired. The next question is whether the impugned law has authorised the taking of possession or acquisition of the property of the shareholders, or of the company. It may be mentioned at the outset that the impugned law has not authorised any acquisition of any property in the sense of divesting the shareholders or the company of any property and vesting that property in the State or its nominee. In other words, there has been no transfer of title, voluntarily or by operation of law. It is, therefore, necessary to enquire and as certain whether the Ordinance or the Act which replaced it has authorised the taking of possession of any property of the shareholders or of the company. As regards the property of the shareholders the position is the same as in Chiranjitlal's case(1). The shares still belong to them. They can hold them or dispose. of them. If any dividend is declared they will get them. If there is any winding up and if after payment of all liabilities there remains any surplus then they will participate in that surplus. It is true that from a practical point of view it-may be difficult for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 the administration of its affairs. Possession of an agent, it is said, cannot judicially 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. It is fairly clear that his Lordship was inclined to the view that the company's properties had been taken possession of although he did not categorically an explicitly say so. I dealt with the matter at pages 926-927. After pointing out that the possession of directors who Were not obedient to or amenable to the company or its shareholders and are not liable to be dismissed or discharged by the company cannot, in the eye o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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." Then came the Act on the 10th April, 1950. There is no preamble to the Act. Although the short title of the Act contains a reference to emergency provisions the full title of the Act is as follows: An Act to make special provision for the proper management and administration of the Sholapur Spinning and Weaving Company Limited. There is no suggestion either in this long title or in the body of the Act except in section 12 that the Act is intended only to be a temporary emergency measure. The object of the Ordinance was stated to be to provide employment to a large number of workmen and to keep up the production of an essential commodity. There is no doubt that section 12 of the Act provides that the property of the company and the management and administration of its affairs would be restored to the company or its directors elected by the shareholders but that is left entirely to the unfettered discretion of the Government. The provisions of the Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se([1950] S.C.R. 869] my Lord the present Chief Justice and I were of the' opinion that the Ordinance and the Act did not proceed on any rational basis of classification and that this company and its shareholders had been arbitrarily (1) singled out for discriminatory treatment and that as equality before the law was denied to this company and its shareholders the Ordinance and the Act offended the equal protection clause of our Constitution. The majority of the Bench, however, took the view that, there being a presumption in favour of the constitutionality of the law and that the onus of displacing that presumption being on him who impugns the law, the petitioner in that case had not discharged that onus and that, therefore, he could not complain of discrimination. In the present case there is nothing more than what there was before the court in Chiranjitlal's case. Indeed, the question of discrimination does not appear to have been argued before the trial court and the appeal court has rejected it by saying that the plaintiff had not shown that there were other companies which were guilty of the same conduct but had not been similarly dealt with. Learned Attorney-General has subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquire property in India and if they do then they cannot be deprived of it any more than citizens, save by authority of law. I have put the matter broadly and ignored for the: moment the restrictions imposed by article 19 (5). The rights conferred by article 19 (1)(f)'are not unfettered and the State can impose restrictions: provided they are (I) reasonable and (2) are in the' interests of either the general public or for the protection of the interests of any Scheduled Tribe. But we are not concerned with article 19 in this. case because no one has prevented either the company or the plaintiff from acquiring and holding property. They actually did acquire property and they held it and nobody stopped them. The complaint is that they are now being deprived, in a manner not allowed by the Constitution, of the property which they were lawfully permitted to acquire and hold. That concerns article 31. Now article 31(1) says that no one shall be deprived of property save by authority of law. That to my mind is straight forward and simple. It means that no one's property can be taken away arbitrarily or by executive action. There must be legal sanction for every act of deprivation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nessential. It is the substance that we must seek. Has that happened here ? Of course, it has. The plaintiff and the company have been left with the mere husk of title and not only has every form of enjoyment which normally accompanies an interest in this kind of property been taken away from them but to add insult to injury the plaintiff has also been called upon to pay substantial sums of money; and for what ?--not in compliance with any engagement into which he has entered, not in fulfilment of any duty or obligation which he has incurred, not in furtherance of his interests of which he is the best judge, but blankly and unashamedly because the furtherance of his interests affects "the production of an essential commodity" and, has caused "serious unemployment amongst a certain section of the community." If that is not "deprivation" it is difficult to know what is. One of the privileges of a democracy of free men is the right to mismanage one's own affairs within the confines of the law, and if A can mismanage his concerns in a particular way, so can B, C and D. The production of essential commodities and the employment of labour are matters for the State and statutory bodies to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al's case([1950] S.C.R. 869)and has explained the ratio decidendi of the majority view in that case and I entirely agree with him. That decision does not, in my opinion, conclude the matter so far as the present case is concerned and no question of invoking the principle of stare decisis arises. The question which we are now invited to consider was raised by the appellant, a preference shareholder holding 3,244 preference shares of the face value of Rs. 100 out of which he had paid up Rs. 50 per share. He was called upon by the statutory directors nominated by the Government under the impugned Act to pay Rs. 1,62,000 as the balance of the amount of the call. Thereupon he filed the suit in a representative capacity on behalf of himself and other preference shareholders challenging the validity of the Act. The suit was dismissed by the trial Judge whose decision was affirmed on appeal by the Division Bench of the Bombay High Court. My learned brother has analysed in detail the relevant provisions of the impugned Act and I have no hesitation in agreeing with him that the Act in substance robs the company of every vestige of right except what has been laconically called the husk of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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