Appeal No 285 of 1961
Appeal from the judgment and order dated December 6 1960 of the Gujrat High Court in Special Civil Application No 434 of 1960
HN Sanyal Additional Solicitor General of India B H Dhebari and T M Sen for the appellants
IM Nanavati section N Andley Rameshwar Nath and P L Vohra for the respondents
August 21
The Judgment of the Court was delivered by DAS GUPTA J
This appeal by special leave raises a question of the correct interpretation of some words in s18A1b of the Industries Development and Regulation Act 1951
The Central Government made an order under section 15 of that Act appointing a committee of three persons for the purpose of making full and complete investi 173 gation into the circumstances of the case as it was of opinion that there had beenor was
likely to be a substantial fall in the volume of production in respect of cotton textiles manufactured in the industrial undertaking known as Hathisingh Manufacturing Company Ltd Ahmedabad for which having regard to the economic conditions prevailing there was no justification
After the committee made its report the Central Government being of opinion thereupon that this industrial undertaking was being managed in a manner highly detrimental to public interest made an order under s18A of the Act authorising Ambalal Shah the first appellant before us to take over the management of the whole of the said undertaking
Against this order the industrial undertaking and its proprietor who are the two respondents before us filed a petition in the Gujarat High Court under article 226 of the Constitution praying for issue of writs directing the authorised controller and the Union of India not to take over the management on the basis of the order under s18A The main ground on which the application was based was that on a proper construction of s18A1b the Central Government has the right to make an order thereunder only where the investigation made under section 15 was initiated on the basis of the opinion as mentioned in s15b that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest
It was also urged that in fact the committee appointed to investigate had not directed its investigation into the question whether the industrial undertaking was being managed in the manner mentioned above
The other grounds mentioned in the petition which were however  abandoned at the time of the hearing included one that
the alleged opinion formed by the Government as mentioned in the order under s18A was in the absence of any material for the same in the report 174 of the investigating committee and therefore  was arbitrary capricious and malafide
On bahalf of the Government and the authorised controller it was urged that the question which one of the five opinions mentioned ins
15 formed the basis of the investigation under that section was wholly immaterial
The allegation that the investigating committee had not directed its investigation into the question whether the undertaking was being managed in a manner
highly detrimental to the scheduled industry concerned or to public interest was also denied
The High Court however came to the conclusion that on a correct construction of section 18A 1b it was necessary before any order could be made thereunder that the investigation should have been initiated on the basis of the opinion mentioned in s15b of the Act
It also accepted the petitioners  contention that no investigation had in fact been held into the question whether the undertaking was being managed in a manner highly detrimental to public interest
Accordingly it made an order setting aside the order of the Central Government dated 28th July 1960 and directing the respondents not to interfere with or take over the management of the undertaking of the first petitioner namely Hathisingh Mills by virtue of or in pursuance of the said order
It is against this decision that the present appeal is directed
The principal question in appeal is whether the High Court is right in its view as regards the construction of section 18A
The relevant portion of s18A1 runs thus If the Central Government is of opinion that a x x x x b an industrial undertaking in respect of which an investigation has been made under section 15 whether or not any directions 175 have been issued to the undertaking in pursuance of section 16 is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest the Central Government may by notified order authorise any person or body of persons to take over the management of the whole or any part of the undertaking or to exercise in respect of the whole or any part of the under taking such functions of control as may be specified in the order   The dispute is over the construction of the words an investigation has been made under section 15
Section 15 is in these words Where the Central Government is of the opinion that ain respect of any scheduled industry or industrial undertaking or undertakings ithere has been or is likely to be a substantial fall in the volume of production in respect of any article or class of articles relatable to that industry or manufactured or produced in the industrial undertaking or undertakings as the case may be for which having regard to the economic conditions prevailing there is no justification  or iithere has been or is likely to be a marked deterioration in the quality of any article or class of articles relatable to that industry or manufactured or produced in the industrial undertaking or undertakings as the case may be which could have been or can be avoided or iiithere has been or is likely to be a rise in the price of an article or class of articles recitable to that industry or manufactured or produced in the industrial undertaking or undertakings
As the 176 case may be for which there is on justification or ivit is necessary to take any such action as is provided in this Chapter for the purpose of conserving any resources of national importance which are utilized in the industry or the industrial undertaking or undertakings as the case may be or bany industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest the Central Government may make or cause to be made a full and complete investigation into the circumstances of the case by such person or body of persons as it may appoint for the purpose
 It may be mentioned here that s15b as it originally stood was amended in 1955 and it was after the amendment that the words as mentioned above appear
Reference may also be made in passing to s16 under which once an investigation under s15 has been commenced or completed the central Government if it considers desirable may issue directions to the industrial undertaking or undertakings concerned in several matters
Section 17 of the original Act was repealed in 1953 by Act 26 of 1953
The same amending Act introduced into this Act two new chapters Chapter IIIA and Chapter IIIB of which s18A in Chapter IIIA makes provisions as set out above for an order by the Central Government authorising any person or body of persons to take over the management of the whole or any part of the under taking
These provisions of section 18A it may be mentioned take the place of the provisions that previously appeared in s171
That section now repealed had empowered the Central Government to authorise any person or development council or any other 177 body of person to takeover the management of an undertaking or to exercise with respect thereto such functions of
control as might be provided by the order in one class of cases only viz
 where after a direction had been issued in pursuance of section 16 the Central Government was of opinion that the directions had not been complied with and that the industrial undertaking in respect of which directions had been issued was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest
The present section
ISA empowers the Government to authorise any person or persons to take over the management or to excercise such functions of control as may be specified in two classes of cases
the first of these classes is mentioned in el
a of s18A1 viz where the Central Government is of opinion that directions issued in pursuance of s16 have not been complied with by an industrial undertaking
The second class with which we are here directly concerned is mentioned in el
b viz
 where the Central Government is of the opinion that an industrial undertaking in respect of which an investigation has been made under s15 is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest irrespective of whether any directions had been issued in pursuance of s16 or not
What is noticeable in the wording of this clause is that while an investigation under s15 may be initiated in respect of an industrial undertaking where the Central Government is of any of the five opinions mentioned in s15ai 15aii 15aiii 15aiv and s15b s18A1b does not refer to any of these opinions Indeed it does not refer at all to the question of the initiation of the investigation and mentions only the making of the investigation under s15
Read without the addition of anything more the language of s18 A 1 b empowers the Central Governmentto authorise a person or persons to take over the management of an industrial undertaking 178 or to exercise specified functions of control in respect of that undertakingif the one condition of an investigation made under s15 has been fulfilled irrespective of on what opinion that investigation was initiated and the further condition is fufillled that the Central Government is of opinion that such undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest
The contention made on behalf of the respondents before us which found favour with the High Court is that when the legislature used the words an investigation has been made under s15 it meant an investigation has been made under s15 based on an opinion of the Central Government that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest
 We should have thought that if the legislature wanted to express such an intention it would not have hesitated to use the additional words mentioned above
It was urged however on behalf of the respondents that these further words viz  based on an opinion of the Central Government that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest are implicit in clb of s18A In his lengthy address to convince us of the correctness of this contention the learned counsel advanced in substance only two arguments
The first is that it is only where the investigation under s15 is initiated on an opinion mentioned in s15b that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interestthat the report of the investigation can furnish the government with materials on which any opinion can be formed that an industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public inter est
For this argument we can find no basis
It appears to 170 us that where the investigation has been initiated in respect of an industrial undertaking on an opinion that there has been or is likely to be a fall in the volume of production for which having regard to the economic conditions there is no justification s15ai or an opinion that there has been or is likely to be a marlied deterioration in the quality of any article which could have been or can be avoided s15aii or an opinion that there has been or is likely to be a rise in the price of any article for which there is no justification s15aiii or an opinion that it is necessary to take action for the purpose of conserving any resources of national importance s15 aiv the investigation in order to be complete must also consider the quality of the management of the undertaking just as it would so consider the quality of management where the investigation is initiated on an opinion that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest
For even when the investigation has been initiated on the Government s forming any of the opinions mentioned in the four sub clauses of el
a of s15 the investigator has necessarily to examine three matters  1 whether the opinion formed by the Government is correct secondly what are the causes of this state of things viz the unjustifiable fall in the volume of production or the deterioration in the quality of the article or the rise in the price of the articles or the necessity of an action for the purpose of conserving the resources  and thirdly how this state of things if it exists can be remedied
In considering the second of these matters viz the cause of this state of things the investigator must examine how far and in what manner the quality of management is responsible for it
He may come to the conclusion that the management is in no way responsible and that some other cause lies at the root of the difficulty
He may hold on the other hand that the 180 management is solely responsible or he may hold that while other causes
also play their part the defect in the quality of management is  also in part responsible
Indeed we find it difficult to understand how an investigator having embarked on an investigation
ordered by the Government in respect of an industrial undertaking on the basis of one or more of the opinions mentioned in section 15 a can avoid an inquiry into the quality of the management of the industrial undertaking
It is said that the use of the words for which having regard to the economic conditions prevailing there is no justification in cl
ai indicate and circumscribe the scope of the enquiry and that the investigator would only try to ascertain whether or not the economic conditions are such that do or do not justify the fall in the volume of production and then to see where necessary how these economic conditions can be altered
To say so is however to miss the entire scheme of the legislation providing for the investigation and for action following the same
Clearly the purpose of this legislation is toenable the Central Government to take suitable action to remedy the undesirable state of things mentioned in the different clauses of s15
In order that Government may have proper materials to know what action is necessary the legislature empowered the Government to make or cause to be made a full and complete investigation
In section 18 it empowered the person or body of persons appointed to make investigation to choose one or more persons possessing special knowledge to assist in the investigation and further vested the investigating committee with all the powers of
the Civil Court under the Code of Civil Procedure for the purpose of taking evidence on oath and for enforcing the attendance of witnesses and compelling the production of documents and material objects
The whole purpopse of the legislation would be frustrated unless the investigation could be full and complete
 No 181 investigation which has not examined the quality of management of the industrial undertaking could be said to be full or complete
It was next contended that the use of the words circumstances of the case shows that the investigation had to be made only into the matter in respect of which the government has formed an opinion and not into anything else
Assuming that it is so and that the investigator has primarily to conduct his investigation where the investigation has been initiated on the basis of an opinion as regards fall in production into questions as regards such fall  and similarly where the investigation has been initiated on an opinion as regards the deterioration in quality into the question of such deterioration that does not other the fact that the investigator would have to try to ascertain the causes of the fall in production or the deterioration in quality and this part of the investigation would necessarily include an investigation into the quality of the management
Learned Counsel contended that if an investigation made on the basis of one or more of the opinions mentioned in el
a of s15 was sufficient to furnish the materials on which the Government could form an opinion whether or not an industrial undertaking was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest el
b would by wholly unnecessary
With this we are unable to agree
There may be many cases where there may be information justifying the formation of opinion that the industrial undertaking was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest even thoughthere are no materials for an opinion that there has been or is likely to be an unjustifiable fall in production or an avoidable deterioration in quality or an unjustifiable rise in prices or the necessity of taking action for the purpose of conserving resources as 182 mentioned in the four sub clauses of cl
a of s15
It was also urged that it would be unfair to expect the management where the investigation has been initiated on the formation of an opinion as mentioned in cl
15a to lead any evidence as regards the quality of its management and so there is risk of the investigator being misled
We can see no reason however for any management to have any doubt on the question that investigation would be directed among other things to the question of quality of management
We believe that one of the first things that any management would do when an investigation is initiated on the basis of any such opinion would be to try to show how efficient it was and how in spite of the high quality ofits management the misdeeds of labour or the unsympathetic attitude of Government or the difficulties of transport or some other cause beyond their control was responsible for the undesirable state of things into which the investigation was being held
The argument that except where the investigation has been initiated on the basis of an opinion mentioned in section 15b there would be no material for the Government to form an opinion that the industrial undertaking was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest therefore fails
Equally untenable is the second argument advanced by the learned counsel that absurd results would follow if the words investigation has been made under section 16 are held to include investigations based on any of the opinions mentioned in s15a
Asked to mention what the absurd results would be the learned counsel could only say that an order under section 18A1b would be unfair in such cases as the owner of an industrial undertaking would have no notice that the quality of management was being investigated
That will be says 183 the learned counsel condemning a person unheard
This argument is really based on the assumption that when the investigation has been initiated on the basis of any of the opinions mentioned in cl
a the quality of the management will not be investigated As we have stated earlier there is no basis for this assumption
We have therefore come to the conclusion that the plain words used by the legislature in respect of which an investigation has been made under section 15 cannot be cut down by the restricting phrase based oil an opinion that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest
 We must therefore hold thatthe construction placed by the High Court on these words in s18A1b is not correct
This brings us to the consideration of the other question raised viz  whether in fact the investigation had been held into
the question whether
the industrial undertaking was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest
On this question the High Court came to a conclusion adverse to the appellants
It is not clear how the respondents though abandoning the ground that Government had nonmaterial before it for forming the opinion that the undertaking was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest could still urge that no investigation had been actually held into the question whether the industrial undertaking was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest
The question whether investigation had in fact been held or not into the question whether the industrial undertaking was being managed in a Manner highly detrimental to the scheduled industry concerned or to public interest would be relevant only to show that the Government 184 acted without any material before it or acted mala facie
If the allegation of  mala fide or the allegation that there was no material before the Government for forming its opinion is abandoned the question whether an investigation had in fact been held into the question whether the industrial undertaking was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest becomes irrelevant
We are satisfied however that the High Court was wrong in its view that it was not established that investigation had in fact been held into this question
We find that the assertion in the petition under article 226 that the investigation had not been directed towards any alleged mismanagement of the mills was denied in the affidavit sworn on behalf of the Union of India
When thereafter on October 10 1960 affidavits in rejoinder filed on behalf of the petitioners affirmed that no question was put which would suggest that the committee was investigating into any mismanagement of the mills an affidavit of Mr Thomas de Sa who was a member of the investigating committee was filed on behalf of the Union of India
This affidavit made the categorical assertion that the committee investigated not only into the question relating to the fall in the volume of production in respect of cotton textiles manufactured in the said industrial undertaking but also made a full and complete investigation into the circumstances of the working of the said industrial undertaking including the management thereof and as to whether the said undertaking was being managed in a manner detrimental to the industry concerned or to public interest
 The High Court has thought it fit to reject this testimony of Mr De Sa for reasons which appear to us to be wholly insufficient
It appears that during the hearing the Advocate General asked for time to file an affidavit preferably of Mr P H Bhuta who was
the lion official member of t he Committee of investigation but ultimately filed the 185 affidavit of Mr De Sa and not the affidavit of  Mr Bhuta
The High Court seems to think that as
Mr Bhuta was an independent member of the investigation committee while Mr De Sa was in the service of the Government Mr De Sa s statement is open to suspicion
In our view such suspicion of high public officials is not ordinarily justified
 Mr De Sa was as much a member of the investigating committee as Mr Bhuta and so no less competent than Mr Bhuta to testify as regards the matter in issue
We do not think it right to suspect his honesty merely because he is an officer of the Union of India
The learned judges of the High Court appear also to have lost sight of the fact that the questionnaire which annexed as annexure X to
the affidavit of the second respondent Rajendra Prasad Manek Lal itself includes a number of questions which show unmistakably that the quality of management was being enquired into
A circumstance which appears to have weighed with the High Court is that the report of the committee which as the learned judges rightly say would be the best evidence to show that there was in fact an investigation into the question of the management of the said undertaking was not produced by the Union of India when called upon to do so by I 
Nanavati on behalf of the petitioners
It is proper to mention that it does not appear that the learned judges themselves directed or desired the Advocate General to produce the report for their inspection
It further appears that no written application for the production of the docu ment was made on behalf of the petitioners
It does not seem to us to be fair to draw an inference against the Union of India merely because an informal request by the petitioners  advocate was not acceded to
In view of what happened in the court below we asked the appellants  counsel whether he was prepared to produce the report before us
The learned counsel readily produced the report and after examining the relevant portion 186 where the report deals with the question of management we read it out in Court so that the respondents  counsel could know the exact situation
This portion of the report says  that the management is in the hands of a young and inexperienced person  and the committee of the opinion that the present manager is incapable of handling the affairs of the mills  the present managing agents are incapable of investing any further The fact that the report does contain such an opinion is sufficient to show that an investigation was actually held into the question of the quality of the management as affirmed by Mr De Sa
The High Court s view therefore that
no investigation was hold into the question of the management of the undertaking wag wrong
We have therefore come to the conclusion that the respondents were not entitled to any writ directing these appellants not to give effect to the Government s order under s 18A1b
We therefore allow the appeal set aside the order of the High Court directing the issue of the writ and order that the application under article 226 of the Constitution be dismissed
The appellants will get their costs both here and below
Apnpeal allowed


Summary:
Being of the opinion that there had been a substantial fall in the volume of production in respect of cotton textiles manufactured in the respondent company an industrial under taking for which having regard to the economic conditions prevailing there was no justification the Central Government made an order under s15 of the Industries Development and Regulation Act 1951 appointing a committee of three persons for the purpose of making a full and complete investigation into the circumstances of the case
After the committee made its reportthe Central Government being of the opinion thereupon that the company was being managed in a manner highly detrimental to public interest made an order under section 18 A of the Act authorising the first appellant to take over the management of the whole of the said undertaking
The respondents challenged the legality of the order on the ground inter alia that on the proper construction of s18A the Central Government had the right to make the order under that section on the ground 172 that the company was being managed in a manner highly detrimental to public interest only where the investigation made under s15 was initiated on the basis of the opinionas mentioned in section 15b whereas in the present case the investigation ordered by the Central Government was initiated on the formation of an opinion as mentioned in cl
a 1 of section 15
Held that the order passed by the Central Government under section 18 A was valid and that the words
used by the legislature in section 18A 1b in respect of which an investigation has been made under section 15 could not be cut down by the restricting phrase based on an opinion that the
industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest
 Section 18A 1b empowers the Central Government to authorise a person to take over the management of an industrial undertaking if the one condition of an investigation made under section 15 had been fulfilled irrespective of on what opinion that investigation was initiated and the further condition is fulfilled that the Central Government was of opinion that such undertaking was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest