Civil Appeal Nos
1629 1857  2087 of 1979
From the Judgment and Order dated 1 5 1979 of the Delhi High Court in Civil Writ No 408 of 1978
F section Nariman section D Parekh A D Mehta Lalit Bhasin Vinay Bhasin and Vineet Kumar for the Appellants in CA No 1629 and for R 1 in CA No 208779
V N Tarkunde section Ganesh K Vasudev and TVSN Chari for the Appellants in CA 185779
Soli J Sorabjee Solicitor General and Girish Chandra for Appellants in CA 2087 and for Respondent UOI in CA 162979
Soli J Sorabjee Solicitor General section Ganesh Vasdev and TVSN Chari for Respondent No 2 in CA 1629
T V section N Chari for Respondent No 4 in CA 2087 Suresh Parik and section Swarup for Respondent No 3 in CA 2087
F section Nariman B P Maheshwari and Suresh Sethi for Respondent Swadeshi Cotton Mills Co Ltd in CA No 1857 and 208779
C M Chopra for Intervenor
The Judgment of R section Sarkaria and D A Desai JJ was delivered by Sarkaria J O Chinnappa Reddy J gave a dissenting Opinion
542 SARKARIAJ
These appeals arise out of a judgment dated May 1 1979 of the High Court of Delhi in the following circumstances Appellant No 1 in Civil Appeal 1629 of 1979 is Swadeshi Cotton Mills Co Ltd hereinafter referred to as the Company
It was incorporated as a private company with an authorised capital of Rs 30 lakhs in 1921 by the Horseman family by converting their partnership business into a Private Joint Stock Company
Its capital was raised in 1923 to Rs 32 lakhs and thereafter in 1945 to Rs 5250 lakhs by issue of bonus shares
In 1946 the Jaipuria family acquired substantial holding in the Company
Jaipuria family is the present management
By issue of further bonus shares in 1946 the capital of the Company was increased to Rs 12250 lakhs
In 1948 the paid up capital of the Company was raised to Rs 210 lakhs by the issue of further bonus shares
The subscribed and issued capital consisting mainly of the bonus shares has since remained constant at Rs 210 lakhs
In the year 1946 the Company had only one undertaking a Textile Unit at Kanpur known as The Swadeshi Cotton Mills Kanpur
Between 1956 and 1973 the Company set up andor acquired five further Textile Units in Pondicherry Naini Udaipur Maunath Bhanjan and Rae Bareilly
Each of these six Units or undertakings of the Company was separately registered in accordance with the provisions of Section 10 of the Industries Development and Regulation Act 1951 hereinafter called the IDR Act
In addition to these six industrial undertakings the Company it is claimed had other distinct businesses and assets
It holds inter alia 97 per cent shares in the subsidiary Swadeshi Mining and Manufacturing Company Ltd which owns two sugar Mills
The Company claims it has substantial income from other businesses and activities including investments in its subsidiary and in other shares and securities which include substantial holding of 1000000 Equity Shares of Rs 10 each in Swadeshi Polytex Ltd representing 30 per cent of the total equity capital value of Swadeshi Polytex Ltd the intrinsic value whereof exceeds Rs 5 crores
The Company made considerable progress during the years 1957 to 1973
The reserves and surplus of the Company increased from Rs 23 crores in 1957 to Rs 43 crores in 1973 74 but declined to Rs 28 crores in 1976 77
The fixed assets of the Company increased from 58 crores in 1957 to 19 crores in 1973 74 but declined to Rs 18 crores registering a marginal decrease of Rs 1 crore in 1976 77
543 The Company maintained separate books of accounts for each of its six industrial undertakings
From and after April 1973 the Company maintained separate sets of books of accounts of the businesses and assets other than of the said six industrial undertakings
Annual accounts of the six industrial undertakings were first prepared separately in seven sets which were separately audited
The consolidated annual accounts of the Company were then prepared from such annual accounts at the registered office of the Company at Kanpur and after audit were placed before the shareholders of the Company
The Company made over all profits up to the year 1969 and even thereafter up to 1975
The Balance Sheet showed that the Company suffered a loss of Rs 8623 lakhs after providing depreciation of Rs 9393 lakhs and gratuity of Rs 4879 lakhs though the trading results showed a gross profit of Rs 5649 lakhs
During the year ending March 31 1976 the Company again suffered a loss of Rs 29482 lakhs after providing for depreciation
The last Balance Sheet and Profit  Loss Account adopted by the shareholders and published by the Company relates to the year ending March 31 1977
It shows that the Company suffered a loss of Rs 20034 Lakhs after taking into account depreciation of Rs 7327 lakhs which was not provided in accounts
Between 1975 and 1978 the Company created the under noted encumbrances on the fixed assets Unit As on As on As on As on Remarks 31 3 75 31 3 76 31 3 77 31 3 78 in lakhs in lakhs 1 2 3 4 5 6 i Pondi 240 Nil Nil Nil On fixed chery assets of of Pondi cherry Unit
ii Maun 1140 571 Nil Nil On fixed ath assets of Bhanjan Unit
iiiUdaipur 276 Nil Nil Nil On fixed assets of Udaipur Unit
iv Kanpur 1344 975 595 200 On fixed ICICI asset of Kanpur Unit
v Kanpur Nil 15000 15000 15000 On fixed assets of Kanpur Maunath Bhanjan  Pondi cherry Units for wages and Bank Dues 544 1 2 3 4 5 6 viCompany 6753 6845 5944 5944 On diesel generating sets of Kanpur Naini Pondi cherry Maunath Bhanjan and Rae Bareilly Units
viiUdaipur Nil 2500 2500 2500 On fixed assets of Udaipur Unit for gratuity fund
viiiNaini Nil Nil 7000 7000 On fixed assets of Naini for gratuity
ix Kanpur 10620 7531 5067 1597 On new Rae machinery Bareilly of Kanpur  Naini Rae Bareilly  Naini Units under de ferred payment credit
20373 33422 36106 32241 The borrowings of the Kanpur Pondicherry Naini Udaipur Maunath Bhanjan and Rae Bareilly Units of the Company as on March 31 1978 against current assets were Rs 25678 18392 27105 7072 4798 and 5582 lakhs respectively
All the encumbrances on fixed assets except the encumbrances of Rs 70 lakhs on the fixed assets of Naini Unit for gratuity funding to get the benefit of Section 44A of the Income tax Act were created prior to March 31 1976
In the accounting year 1976 77 only one new encumbrance was created by the Company on its fixed assets
The following are statistics of production in each of the six units of the Company during the years 1975 76 1976 77 and 1977 78 Name of the Unit 1975 76 1976 77 1977 78 figures in lakhs Naini 6613 kgs
6576 kgs
7235 kgs
Udaipur 1851 kgs
1850 kgs
1860 kgs
Maunath Bhanjan 1559 kgs
1663 kgs
1849 kgs
Rae Bareilly 1209 kgs
1358 kgs
1400 kgs
Pondicherry 17052 Mtrs 17877 Mtrs 17654 Mtrs Kanpur 31875 Mtrs 47212 Mtrs 23822 Mtrs 545 On April 13 1978 the Government of India in exercise of its power under clause a of sub section 1 of Section 18AA of the IDR Act passed an order hereinafter referred to as the impugned order which reads as follows SO 265E18AAIDRA78 Whereas the Central Government is satisfied from the documentary and other evidence in its possession that the persons in charge of the industrial undertakings namely i Ms Swadeshi Cotton Mills Kanpur ii Ms Swadeshi Cotton Mills Pondicherry iiiMs
Swadeshi Cotton Mills Naini iv Ms Swadeshi Cotton Mills Maunath Bhanjan v Ms Udaipur Cotton Mills Udaipur and vi Rae Bareilly Textile Mills Rae Bareilly of Ms Swadeshi Cotton Mills Company Ltd Kanpur hereinafter referred to as the said industrial under takings have by creation of encumbrances on the assets of the said industrial undertakings brought about a situation which has affected and is likely to further affect the production of articles manufactured or produced in the said industrial undertakings and that immediate action is necessary to prevent such a situation Now therefore in exercise of power conferred by clause a of sub section 1 of Section 18AA of the Industries Development and Regulation Act 1951 65 of 1951 the Central Government hereby authorises the National Textile Corporation Limited hereinafter referred to as the Authorised person to take over the management of the whole of the said industrial undertakings subject to the following terms and conditions namely i The authorised person shall comply with all the directions issued from time to time by the Central Government ii the authorised person shall hold office for a period of five years from the date of publication of this order in the Official Gazette iiithe Central Government may terminate the appointment of the authorised person earlier if it considers necessary to do so
546 This order shall have effect for a period of five years commencing from the date of its publication in the Official Gazette
Sd R Ramakrishna Joint Secretary to the Govt
of India Seal
 On April 19 1978 three petitioners namely the Company through its Joint Secretary Shri Bhim Singh Gupta its Managing Director Dr Rajaram Jaipuria and its subsidiary company named Swadeshi Mining and Manufacturing Company through its Directors and Shareholders filed a writ petition under Article 226 of the Constitution in the Delhi High Court against the Union of India and the National Textile Corporation to challenge the validity of the aforesaid Government Order dated April 13 1978
The writ petition was further supplemented by subsequent affidavits and rejoinders
The Union of India and the National Textile Corporation Ltd who has been authorised to assume management of the undertakings concerned were impleaded as respondents
The writ petition first came up for hearing before a Division Bench who by its order dated August 11 1978 requested the Chief Justice to refer it to a larger Bench
The case was then heard by a three Judge Bench who by their order dated October 12 1978 requested the Hon ble the Chief Justice to constitute a still larger Bench to consider the question whether a prior hearing is necessary to be given to the persons affected before the order under Section 18AA is passed
Ultimately the reference came up for consideration before a Full Bench of five Judges to consider the question which was reframed by the Bench as under Whether in construing Section 18AA of the Industries Development and Regulation Act 1951 as a pure question of law compliance with the principle of audi alteram partem is to be implied
If so a whether such hearing is to be given to the parties who would be affected by the order to be passed under the said Section prior to the passing of the order or b whether such hearing is to be given after the passing of the order and c if prior hearing is to be normally given and the order passed under the said Section is vitiated by not giving of such 547 hearing whether such vice can be cured by the grant of a subsequent hearing
 The Bench by a majority consisting of Deshpande CJR Sacher and M L Jain JJ answered this three fold question as follows 1 Section 18AA1 a b excludes the giving of prior hearing to the party who would be affected by order thereunder
2 Section 18F expressly provides for a post decisional hearing to the owner of the industrial undertaking the management of which is taken over under Section 18AA to have the order made under Section 18AA cancelled on any relevant ground
3 As the taking over of management under Section 18AA is not vitiated by the failure to grant prior hearing the question of any such vice being cured by a grant of a subsequent hearing does not arise H L Anand and N N Goswamy JJ however dissented
In the opinion of the minority in compliance with the principles of natural justice a prior hearing to the owner of the undertaking was required to be given before passing an order under Section 18AA that the second question did not arise as the denial of a prior hearing would not cure the vice by the grant of subsequent hearing but it would be open to the Court to moderate the relief in such a way that the order is kept alive to the extent necessary until the making of the fresh order to subserve public interest and to make appropriate directions to ensure that the subsequent hearing would be a full and complete review of the circumstances of the take over and for the preservation and maintenance of the property during the interregnum
After the decision of the reference the case was reheard on merits by a Bench of three learned Judges consisting of Deshpande CJ Anand and M L Jain JJ who by their judgment dated May 1 1979 disposed of the writ petition
The operative part of the judgment reads as under In the result the writ petition succeeds in part the challenge to the validity of the impugned order fails and to that extent the petition is dismissed
The petition succeeds in so far as it seeks to protect from the impugned order the corporate entity of the company the corporate entity of the subsidiary and its assets the holding of the company in Polytex and the assets and property of the company which are not referable to any of the industrial undertakings
The respondents are hereby restrained from in any manner interfering 548 with the corporate entity the assets and property which are outside the impugned order
The respondents would release from its control and custody andor deliver possession of any assets or property of the company which are not referable to the industrial undertakings in terms of the observations made in paras 46 and 47 of the judgment within a period of three months from today May 1 1979
In the peculiar circumstances the parties would bear their respective costs
 On the application of the Company the Delhi High Court certified under Article 133 of the Constitution that the case was fit for appeal to this Court
Subsequently on July 121979 a similar certificate was granted by the High Court to the Union of India and the National Textile Corporation Ltd Consequently the Company the Union of India and the National Textile Corporation have filed Civil Appeals 1629 2087 and 1857 of 1979 respectively in this Court
All the three appeals will be disposed of by this judgment
The primary two fold proposition posed and propounded by Shri F section Nariman learned counsel for the appellant Company in Civil Appeal 1629 of 1979 is as follows a Whether it is necessary to observe the rules of natural justice before issuing a notified order under Section 18AA or enforcing a decision under Section 18AA or b Whether the provisions of Section 18AA andor Section 18F impliedly exclude rules of natural justice relating to prior hearing
There were other contentions also which were canvassed by the learned counsel for the parties at considerable length
But for reasons mentioned in the final part of this judgment we do not think it necessary for the disposal of these appeals to deal with the same
Thus the first point for consideration is whether as a matter of law it is necessary in accordance with the rules of natural justice to give a hearing to the owner of an undertaking before issuing a notified order or enforcing a decision of its take over under Section 18AA
Shri Nariman contends that there is nothing in the language scheme or object of the provisions in Section 18AA andor Section 18F which expressly or by inevitable implication excludes the application of the principles of natural justice or the giving a pre decisional hearing adapted to the situation to the owner of the undertaking
It is submitted that mere use of the word immediate in sub clause a of Section 18AA 1 does not show a legislative intent to exclude the 549 application of audi alterm partem rule altogether
It is maintained that according to the decision of this Court in Keshav Mills Company Ltd vs Union of India even after a full investigation has been made under Section of the IDR Act the Government has to observe the rules of natural justice and fairplay which in the facts of a particular case may include the giving of an opportunity to the affected owner to explain the adverse findings against him in the investigation report
In support of his contention that the use of the word immediate in Section 18AA1a does not exclude natural justice learned counsel has advanced these reasons i The word immediate in clause a has been used in contra distinction to investigation 
It only means that under Section 18AA action can be taken without prior investigation under Section 15 if there is evidence in the possession of the Government that the assets of the Company owning the undertaking are being frittered away by doing any of the three things mentioned in clause a or the undertaking has remained closed for a period of not less than three months and the condition of plant and machinery is such that it is possible to restart the undertaking
This construction that the use of the word immediate in Section 18AA1a only dispenses with investigation under Section 15 and not with the principle of audi alterm partem altogether is indicated by the marginal heading of Section 18AA and para 3 of the Statement of Objects and Reasons of the Amendment Bill which inserted Section 18AA in 1971
ii The word immediate  occurs only in clause a and not in clause b of Section 18AA1
It would be odd if intention to exclude this principle of natural justice is spelt out in one clause of the sub section when its other clause does not exclude it
iii Section 18F does not exclude a pre decisional hearing
This section was there when in Keshav Mills  case ibid it was held by this Court that even at the post investigation stage before passing an order under Section 18A the Government must proceed fairly in accordance with the rules of natural justice
The so called post decisional hearing contemplated by Section 18F cannot be and is not intended to be a substitute for a pre decisional hearing
Section 18F in terms deals with the power of Central Government to cancel an order of take over under two conditions namely First when the purpose of an order under Section 18A has been fulfilled or second when for any other reason it is not necessary that the order should remain in force Any other reason has reference to post take 550 over circumstances only and does not cover a reason relatable to pre takeover circumstances
An order of cancellation under Section 18F is intended to be prospective
This is clear from the plain meaning of the expressions remain in force necessary etc
used in the Section
Section 18 incorporates only a facet albeit qualified of Section 21 of the General Clauses Act Kamla Prasad Khetan vs Union of India referred to Therefore the illusory right given by Section 18F to the aggrieved owner of the undertaking to make an application for cancellation of the order is not a full right of appeal on merits
The language of the Section impliedly prohibits an enquiry into circumstances that led to the passing of the order of take over and under it the aggrieved person is not entitled to show that on merits the order was void ab initio
As held by a Bench consisting of Bhagwati and Vakil JJ of the Gujarat High Court in Dosabhai Ratanshah Keravale vs State of Gujarat a power to rescind or cancel an order analogous to that under Section 21 General Clauses Act has to be construed as a power of prospective cancellation and not of retroactive obliteration
It is only the existence of a full right of appeal on the merits or the existence of a provision which unequivocally confers a power to reconsider cancel and obliterate completely the original order just as in appeal which may be construed to exclude natural justice or a pre decisional hearing in an emergent situation
Reference on this point has been made to Wade s Administrative Law 4th Edition PP464 to 468 iv Immediacy  does not exclude a duty to act fairly because even an emergent situation can co exist with the canons of natural justice
The only effect of urgency on the application of the principle of fair hearing would be that the width form and duration of the hearing would be tailored to the situation and reduced to the reasonable minimum so that it does not delay and defeat the purpose of the contemplated action
v Where the civil consequences of the administrative action as in the instant case are grave and its effect is highly prejudicial to the rights and interests of the person affected and there is nothing in the language and scheme of the statute which unequivocally excludes a fair pre decisional hearing and the post decisional hearing provided therein is not a real remedial hearing equitable to a full 551 right of appeal the Court should be loath to infer a legislative intent to exclude even a minimal fair hearing at the pre decisional stage merely on ground of urgency
Reference in this connection has been made to Wade s Administrative Law ibid page 468 bottom Applying the proposition propounded by him to the facts of the instant case Shri Nariman submits that there was ample time at the disposal of the Government to give a reasonably short notice to the Company to present its case
In this connection it is pointed out that according to para 3 of the further affidavit filed by Shri Daulat Ram on behalf of the Union of India and other respondents the Central Government had in its possession two documents namely a copy of the Survey Report on Ms Swadeshi Cotton Mills Company Ltd covering the period from May to September 1977 prepared by the office of the Textile Commissioner and b Annual Report dated September 30 1977 of the Company for the year ending March 31 1971
In addition the third circumstance mentioned in the affidavit of Shri Daulat Ram is that by an order dated January 28 1978 the Central Government appointed four Government Officials including one from the office of the Textile Commissioner to study the affairs of the Company and to make recommendation
This Official Group submitted its report on February 16 1978
It is submitted that this evidence on the basis of which the impugned order was passed was not disclosed to the appellant Company till May 1978 only after it had filed the writ petition in the High Court to challenge the impugned order
It is emphasised that if the Survey Report was assumed to contain something adverse to the appellants there was time enough about six weeks between the submission of the Survey Report and the passing of the impugned order for giving a short reasonable opportunity to the appellants to explain the adverse findings against them
It is urged that even if there was immediacy situational modifications could be made to meet the requirement of fairness by reducing the period of notice that even the manner and form of such notice could be simplified to eliminate delay that telephonic notice or short opportunity for furnishing their explanation to the Company might have satisfied the requirements of natural justice
Such an opportunity of hearing could have been given after the passing of a conditional tentative order and before its enforcement under Section 18AA
For the interregnum suitable interim action such as freezing the assets of the Company or restraining the Company from creating further encumbrances etc could be taken under Section 16
552 Reference in this connection has been made to Keshav Mills case ibid Mohinder Singh Gill vs Election Commissioner of India Maneka Gandhi vs Union of India Sukhdev Singh  Ors
vs Bhagatram Sardar Singh A K Kraipak vs Union of India Ridge vs Baldwin Heatley vs Tasmanian Racing  Gaming Commission Commissioner of Police vs Tanos Secretary of State for Education  Science vs Metropolitan Borough of Tameside Wiseman vs Borneman Nawabkhan Abbaskhan vs State of Gujarat and State of Orissa vs Dr Bina Pani Dei
As against this Shri Soli Sorabji learned Solicitor General appearing on behalf of respondent 1 contends that the presumption in favour of audi alteram partem rule stands impliedly displaced by the language scheme setting and the purpose of the provision in Section 18AA
It is maintained that Section 18AA on its plain terms deals with situations where immediate preventive action is required
The paramount concern is to avoid serious problems which may be caused by fall in production
The purpose of an order under Section 18AA is not to condemn the owner but to protect the scheduled industry
The issue under Section 18AA is not solely between the Government and the management of the industrial under taking
The object of taking action under this Section is to protect other outside interests of the community at large and the workers
On these premises it is urged the context the subject matter and the legislative history of Section 18AA negative the necessity of giving a prior hearing that Section 18AA does not contemplate any interval between the making of an order thereunder and its enforcement because it is designed to meet an emergent situation by immediate preventive action
Shri Sorabji submits that this rule of natural justice in a modified form has been incorporated in Section 18F which gives an opportunity of a post decisional hearing to the owner of the undertaking who if he feels aggrieved can on his application be heard to show that even the original order under Section 18AA was passed on invalid grounds and should be cancelled or rescinded
Thus 553 Shri Sorabji does not go to the length of contending that the principles of natural justice have been fully displaced or completely excluded by Section 18AA
On the contrary his stand is that on a true construction of Section 18AA read with Section 18F the requirements of natural justice and fair play can be read into the statute only in so far as conformance to such canons can reasonably and realistically be required of it by the provision for a remedial hearing at a subsequent stage
Shri Sorabji further submits that since Section 18F does not specify any period of time within which the aggrieved party can seek the relief thereunder the opportunity of full effective and post decisional hearing has to be given within a reasonable time
It is stressed that under Section 18F the Central Government exercises curial functions and that Section confers on the aggrieved owner a right to apply to the Government to cancel the order of take over
On a true construction this Section casts an obligation on the Central Government to deal with and dispose of an application filed thereunder with reasonable expedition
Shri Sorabji further concedes that on the well settled principle of implied and ancillary powers the right of hearing afforded by Section 18F carries with it the right to have inspection and copies of all the relevant books documents papers etc
and the Section obligates the Central Government to take all steps which are necessary for the effective hearing and disposal of an application under Section 18F
Shri Sorabji has in connection with his arguments cited these authorities Mohinder Singh Gill vs Chief Election Commissioner ibid In re K An Infant Official Solicitor vs K  Anr Collymore vs Attorney General Union of India vs Col J N Sinha Judicial Review 3rd Edn
by De Smith Queen vs Davey Gaiman vs National Association for Internal Revenue John H N Fahey vs Paul Millionee Schwartz s Administrative Law  Madhav Hayawadanrao Hoskot vs Maharashtra Vijay Kumar Mundhra vs Union of India Joseph Kuruvilla Vellukumel vs 554 Reserve Bank of India Corporation of Calcutta vs Calcutta Tramways and Furnell vs Whapgarei High School
Before dealing with the contentions advanced on both sides it will be useful to have a general idea of the concept of natural justice and the broad principles governing its application or exclusion in the construction or administration of statutes and the exercise of judicial or administrative powers by an authority or tribunal or constituted thereunder
Well then what is natural justice  The phrase is not capable of a static and precise definition
It cannot be imprisoned in the straight jacket of a cast iron formula
Historically natural justice has been used in a way which implies the existence of moral principles of self evident and unarguable truth
In course of time judges nurtured in the traditions of British jurisprudence often invoked it in conjunction with a reference to equity and good conscience
Legal experts of earlier generations did not draw any distinction between natural justice and natural law
Natural justice was considered as that part of natural law which relates to the administration of justice
Rules of natural justice are not embodied rules
Being means to an end and not an end in themselves it is not possible to make an exhaustive catalogue of such rules
But two fundamental maxims of natural justice have now become deeply and indelibly ingrained in the common consciousness of man kind as pre eminently necessary to ensure that the law is applied impartially objectively and fairly
Described in the form of Latin tags these twin principles are i audi alteram partem and ii nemo judex in re sua
For the purpose of the question posed above we are primarily concerned with the first
This principle was well recognised even in the ancient world
Seneca the philosopher is said to have referred in Medea that it is unjust to reach a decision without a full hearing
In Maneka Gandhi s case Bhagwati J emphasised that audi alteram partem is a highly effective rule devised by the Courts to ensure that a statutory authority arrives at a just decision and it is calculated to act as a healthy check on the abuse or misuse of power
Hence its reach should not be narrowed and its applicability circumscribed
During the last two decades the concept of natural justice has made great strides in the realm of administrative law
Before the epoch making decision of the House of Lords in Ridge vs Baldwin it was 555 generally thought that the rules of natural justice apply only to judicial or quasi judicial proceedings and for that purpose whenever a breach of the rule of natural justice was alleged Courts in England used to ascertain whether the impugned action was taken by the statutory authority or tribunal in the exercise of its administrative or quasi judicial power
In India also this was the position before the decision dated February 7 1967 of this Court in Dr Bina Pani Dei s case ibid wherein it was held that even an administrative order or decision in matters involving civil consequences has to be made consistently with the rules of natural justice
This supposed distinction between quasi judicial and administrative decisions which was perceptibly mitigated in Bina Pani Dei s case was further rubbed out to a vanishing point in A K Kraipak vs Union of India ibid thus If the purpose of these rules of natural justice is to prevent miscarriage of justice one fails to see why those rules should be made inapplicable to administrative enquiries
Often times it is not easy to draw the line that demarcates administrative enquiries from quasi judicial enquiries   
Arriving at a just decision is the aim of both quasi judicial enquiries as well as administrative enquiries
An unjust decision in an administrative enquiry may have more far reaching effect than a decision in a quasi judicial enquiry
 In A K Kraipak s case the Court also quoted with approval the observations of Lord Parker from the Queens Bench decision in In re H K An Infant ibid which were to the effect that good administration and an honest or bona fide decision require not merely impartiality or merely bringing one s mind to bear on the problem but acting fairly
Thus irrespective of whether the power conferred on a statutory body or tribunal is administrative or quasi judicial a duty to act fairly that is in consonance with the fundamental principles of substantive justice is generally implied because the presumption is that in a democratic polity wedded to the rule of law the state or the Legislature does not intend that in the exercise of their statutory powers its functionaries should act unfairly or unjustly
In the language of VR Krishna Iyer J vide Mohinder Singh Gill s case ibid Subject to certain necessary limitations natural justice is now a brooding omnipresence although varying in its play
Its essence is good conscience in a given situation nothing more but nothing less
 556 The rules of natural justice can operate only in areas not covered by any law validly made
They can supplement the law but cannot supplant it Per Hegde J in A K Kraipak ibid
If a statutory provision either specifically or by inevitable implication excludes the application of the rules of natural justice then the Court cannot ignore the mandate of the Legislature
Whether or not the application of the principles of natural justice in a given case has been excluded wholly or in part in the exercise of statutory power depends upon the language and basic scheme of the provision conferring the power the nature of the power the purpose for which it is conferred and the effect of the exercise of that power
See Union of India vs Col J N Sinha ibid The maxim audi alteram partem has many facets
Two of them are a notice of the case to be met and b opportunity to explain
This rule is universally respected and duty to afford a fair hearing in Lord Loreburn s oft quoted language is a duty lying upon every one who decides something in the exercise of legal power
The rule cannot be sacrificed at the altar of administrative convenience or celerity for convenience and justice as Lord Atkin felicitously put it are often not on speaking terms
The next general aspect to be considered is Are there any exceptions to the application of the principles of natural justice particularly the audi alteram partem rule  We have already noticed that the statute conferring the power can by express language exclude its application
Such cases do not present any difficulty
However difficulties arise when the statute conferring the power does not expressly exclude this rule but its exclusion is sought by implication due to the presence of certain factors such as urgency where the obligation to give notice and opportunity to be heard would obstruct the taking of prompt action of a preventive or remedial nature
It is proposed to dilate a little on this aspect because in the instant case before us exclusion of this rule of fair hearing is sought by implication from the use of the word immediate  in Section 18AA1
Audi alteram partem rule may be disregarded in an emergent situation where immediate action brooks no delay to prevent some imminent danger or injury or hazard to paramount public interests
Thus Section 133 of the Code of Criminal Procedure empowers the magistrates specified therein to make an exparte conditional order in emergent cases for removal of dangerous public nuisances
Action under Section 17 Land Acquisition Act furnishes another such instance
Similarly action on grounds of public safety public health may justify disregard of the rule of prior hearing
557 Be that as it may the fact remains that there is no consensus of judicial opinion on whether more urgency of a decision is a practical consideration which would uniformly justify non observance of even an abridged form of this principle of natural justice
In Durayappah vs Fernando
Lord Upjohn observed that while urgency may rightly limit such opportunity timeously perhaps severely there can never be a denial of that opportunity if the principles of natural justice are applicable
These observations of Lord Upjohn in Durayappah s case were quoted with approval by this Court in Mohinder Singh Gill s case
It is therefore proposed to notice the same here
In Mohinder Singh Gill s case the appellant and the third respondent were candidates for election in a Parliamentary Constituency
The appellant alleged that when at the last hour of counting it appeared that he had all but won the election at the instance of respondent violence broke out and the Returning Officer was forced to postpone declaration of result
The Returning Officer reported the happening to the Chief Election Commissioner
An officer of the Election Commission who was an observer at the counting reported about the incidents to the Commission
The appellant met the Chief Election Commissioner and requested him to declare the result
Eventually the Chief Election Commissioner issued a notification which stated that taking all circumstances into consideration the Commission was satisfied that the poll had been vitiated and therefore in exercise of the powers under Article 324 of the Constitution the poll already held was cancelled and a repoll was being ordered in the constituency
The appellant contended that before making the impugned order the Election Commission had not given him a full and fair hearing and all that he had was a vacuous meeting where nothing was disclosed
The Election Commission contended that a prior hearing has in fact been given to the appellant
In addition on the question of application of the principles of natural justice it was urged by the respondents that the tardy process of notice and hearing would thwart the conducting of elections with speed that unless civil consequences ensued hearing was not necessary and that the right accrues to a candidate only when he is declared elected
This contention which had found favour with the High Court was negatived by this Court
Delivering the judgment of the Court V R Krishna Iyer J lucidly explained the meaning and scope of the concept of natural justice and its role in a case where there is a competition between the necessity of taking speedy 558 action and the duty to act fairly
It will be useful to extract those illuminating observations in extenso Once we understand the soul of the rule as fairplay in action and it is so we must hold that it extends to both the fields
After all administrative power in democratic set up is not allergic to fairness in action and discretionary executive justice cannot degenerate into unilateral injustice
Nor is there ground to be frightened of delay in convenience and expense if natural justice gains access
For fairness itself is a flexible pragmatic and relative concept not a rigid ritualistic or sophisticated abstraction
It is not a bull in a china shop nor a bee in one s bonnet
Its essence is good conscience in a given situation nothing more but nothing less
The exceptions  to the rules of natural justice are a misnomer or rather are but a shorthand form of expressing the idea that in those exclusionary cases nothing unfair can be inferred by not affording an opportunity to present or meet a case
 After referring to several decisions including the observations of Lord Upjohn in Durayappah vs Fernando the Court explained that mere invocation or existence of urgency does not exclude the duty of giving a fair hearing to the person affected It is untenable heresy in our view to lock law the victim or act behind his back by tempting invocation of urgency unless the clearest case of public injury flowing from the least delay is self evident
Even in such cases a remedial hearing as soon as urgent action has been taken is the next best
Our objection is not to circumscription dictated by circumstances but to annihilation as an easy escape from benignant albeit inconvenient obligation
The procedural pre condition or fair hearing however minimal even post decisional has relevance to administrative and judicial gentlemanliness We may not be taken to say that situational modifications to notice and hearing are altogether impermissible  the glory of the law is not that sweeping rules are laid down but that it tailors principles to practical needs
doctors remedies to suit the patient promotes not freezes Life s processes if we may mix metaphors
   559 The Court further emphasised the necessity of striking pragmatic balance between competing requirements of acting urgently and fairly thus Should the cardinal principle of hearing  as condition for decision making be martyred for the cause of administrative immediacy We think not
The full panoply may not be there but a manageable minimum may make do In Wiseman vs Borneman there was a hint of the competitive claims of hurry and hearing
Lord Reid said Even where the decision has to be reached by a body acting judicially there must be a balance between the need for expedition and the need to give full opportunity to the defendant to see material against him emphasis added
We agree that the elaborate and sophisticated methodology of a formalised hearing may be injurious to promptitude so essential in an election under way
Even so natural justice is pragmatically flexible and is amenable to capsulation under the compulsive pressure of circumstances
To burke it altogether may not be a stroke of fairness except in very exceptional circumstances
 The Court further pointed out that the competing claims of hurry and hearing can be reconciled by making situational modifications in the audi alteram partem rule Lord Denning MR in Manward vs Boreman summarised the observations of the Law Lords in this form
No doctrinaire approach is desirable but the Court must be anxious to salvage the cardinal rule to the extent permissible in a given case
After all it is not obligatory that counsel should be allowed to appear nor is it compulsory that oral evidence should be adduced
Indeed it is not even imperative that written statements should be called for disclosure of the prominent circumstances and asking for an immediate explanation orally or otherwise may in many cases be sufficient compliance
It is even conceivable that an urgent meeting with the concerned parties summoned at an hour s notice or in a crisis even a telephone call may suffice
If all that is not possible as in the case of a fleeing person whose passport has to be impounded lest he should evade the course of justice or a dangerous nuisance needs immediate abate 560 ment the action may be taken followed immediately by a hearing for the purpose of sustaining or setting aside the action to the extent feasible
It is quite on the cards that the Election Commission if pressed by circumstances may give a short hearing
In any view it is not easy to appreciate whether before further steps got under way he could have afforded an opportunity of hearing the parties and revoke the earlier directions
All that we need emphasize is that the content of natural justice is a dependent variable not an easy casualty Civil consequence  undoubtedly cover infraction of not merely property or personal rights but of civil liberties material deprivations and non pecuniary damages
In its comprehensive connotation everything that affects a citizen in his civil life inflicts a civil consequence emphasis added In Maneka Gandhi it was laid down that where in an emergent situation requiring immediate action it is not practicable to give prior notice or opportunity to be heard the preliminary action should be soon followed by a full remedial hearing
The High Court of Australia in Commissioner of Police vs Tanos ibid held that some urgency or necessity of prompt action does not necessarily exclude natural justice because a true emergency situation can be properly dealt with by short measures
In Heatley vs Tasmanian Racing  Gaming Commission ibid the same High Court held that without the use of unmistakable language in a statute one would not attribute to Parliament an intention to authorise the Commission to order a person not to deal in shares or attend a stock exchange without observing natural justice
In circumstances of likely immediate detriment to the public it may be appropriate for the Commission to issue a warning off notice without notice or stated grounds but limited to a particular meeting coupled with a notice that the Commission proposed to make a long term order on stated grounds and to give an earliest practicable opportunity to the person affected to appear before the Commission and show why the proposed long term order be not made
As pointed out in Mohinder Singh Gill vs Chief Election Commissioner and in Maneka Gandhi vs Union of India ibid such cases where owing to the compulsion of the fact situation or the necessity of taking speedy action no pre decisional hearing is given but the action is followed soon by a full post decisional hearing to the 561 person affected do not in reality constitute an exception  to the audi alteram partem rule
To call such cases an exception  is a misnomer because they do not exclude fair play in action  but adapt it to the urgency of the situation by balancing the competing claims of hurry and hearing
The necessity for speed writes Paul Jackson may justify immediate action it will however normally allow for a hearing at a later stage
The possibility of such a hearing and the adequacy of any later remedy should the initial action prove to have been unjustified are considerations to be borne in mind when deciding whether the need for urgent action excludes a right to rely on natural justice
Moreover however the need to act swiftly may modify or limit what natural justice requires
it must not be thought that because rough swift or imperfect justice only is available that there ought to be no justice  Pratt vs Wanganui Education Board
 Prof de Smith the renowned author of Judicial Review  3nd Edn has at page 170 expressed his views on this aspect of the subject thus Can the absence of a hearing before a decision is made be adequately compensated for by a hearing ex post facto  A prior hearing may be better than a subsequent hearing but a subsequent hearing is better than no hearing at all and in some cases the courts have held that statutory provision for an administrative appeal or even full judicial review on the merits are sufficient to negative the existence of any implied duty to hear before the original decision is made
The approach may be acceptable where the original decision does not cause serious detriment to the person affected or where there is also a paramount need for prompt action or where it is impracticable to afford antecedent hearings
 In short the general principle as distinguished from an absolute rule of uniform application seems to be that where a statute does not in terms exclude this rule of prior hearing but contemplates a post decisional hearing amounting to a full review of the original order on merits then such a statute would be construed as excluding the audi alteram partem rule at the pre decisional stage
Conversely if the statute conferring the power is silent with regard to the giving of a pre decisional hearing to the person affected and the administrative decision taken by the authority involves civil consequences of a grave nature and no full review or appeal on merits against that decision is provided courts will be extremely reluctant to con 562 strue such a statute as excluding the duty of affording even a minimal hearing shown of all its formal trappings and dilatory features at the pre decisional stage unless viewed pragmatically it would paralyse the administrative process or frustrate the need or utmost promptitude
In short this rule of fairplay must not be jettisoned save in very exceptional circumstances where compulsive necessity so demands
The court must make every effort to salvage this cardinal rule to the maximum extent possible with situational modifications
But to recall the words of Bhagvati J the core of it must however remain namely that the person affected must have reasonable opportunity of being heard and the hearing must be a genuine hearing and not an empty public relations exercise
Keeping the general principles stated above let us now examine the scheme content object and legislative history of the relevant provisions of the IDR Act
The IDR Act Act 65 of 1951 came into force on May 81952 The Statement of Objects and Reasons published in the Gazette of India dated March 26 1949 says that its object is to provide the Central Government with the means of implementing their industrial policy which was announced in their Resolution dated April 6 1948 and approved by the Central Legislature
The Act brings under Central Control the development and regulation of a number of important industries specified in its First Schedule the activities of which affect the country as a whole and the development of which must be governed by economic factors of all India import
The requirement with regard to registration issue or revocation of licences of these specific industrial undertakings has been provided in Chapter II of the Act
Section 3d defines an industrial undertaking  to mean any undertaking pertaining to a scheduled industry carried on in one or more factories by any person or authority including Government Clause f of the same section defines owner in relation to an undertaking
Section 15 gives power to the Central Government to cause investigation to be made into a scheduled industry or industrial undertaking
The Section reads as follows where the Central Government is of the opinion that a in respect of any scheduled industry or industrial undertaking or undertakings i there has been or is likely to be a substantial fall in the volume of production in respect of any article or class 563 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 ii there 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 iii there has been or is likely to be a rise in the price 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 there is no justification or iv it 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 utilised in the industry or the industrial undertaking or undertakings as the case may be or b any 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
 Section 16 empowers the Central Government to issue appropriate directions to the industrial undertaking concerned on completion of investigation under Section 15
Such directions may be for all or any of the following purposes a regulating the production of any article or class of articles by the industrial undertaking or undertakings and fixing the standards of production b requiring the industrial undertaking or undertakings to take such steps as the Central Government may consider necessary to stimulate the development of the industry to which the undertaking or undertakings relates or relate 564 c prohibiting the industrial undertaking or undertakings from resorting to any act or practice which might reduce its or their production capacity or economic value d controlling the prices or regulating the distribution of any article or class of articles which have been the subject matter of investigation
 Sub section 2 enables the Central Government to issue such directions to the industrial undertakings pending investigation
In the course of the working of IDR Act certain practical difficulties came to light
One of them was that Government cannot take over the management of any industrial undertaking even in a situation calling for emergent action without first issuing directions to it and waiting to see whether or not they are obeyed In order to remove such difficulties the Amending Act 26 of 1953 inserted Chapter IIIA containing Sections 18A to 18F in the IDR Act
Section 18A confers power on the Central Government to assume management or control of an industrial undertaking in certain cases
The material part of the Section reads as under 1 If the Central Government is of opinion that a an industrial undertaking to which directions have been issued in pursuance of Section 16 has failed to comply with such directions or b an industrial undertaking in respect of which an investigation has been made under Section 15 whether or not any directions 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 undertaking such functions of control as may be specified in the order
2 Any notified order issued under sub section 1 shall have effect for such period not exceeding five years as may be specified in the order
 Section 18B specifies the effect of notified order under Section 18A Sub section 1 of the section reads thus 565 On the issue of a notified order under Section 18A authorising the taking over of the management of an industrial undertaking a all persons in charge of the management including persons holding office as managers or directors of the industrial undertaking immediately before the issue of the notified order shall be deemed to have vacated their offices as such b any contract of management between the industrial undertaking and any managing agent or any director thereof holding office as such immediately before the issue of the notified order shall be deemed to have been terminated c the managing agent if any appointed under Section 18A shall be deemed to have been duly appointed as the managing agent in pursuance of the Indian Companies Act 1913 7 of 1913 and the memorandum and articles of association of the industrial undertaking and the provisions of the said Act and of the memorandum and articles shall subject to the other provisions contained in this Act apply accordingly but no such managing agent shall be removed from office except with the previous consent of the Central Government d the person or body of persons authorised under Section 18A to take over the management shall take all such steps as may be necessary to take into his or their custody or control all the property effects and actionable claims to which the industrial undertaking is or appears to be entitled and all the property and effects of the industrial undertaking shall be deemed to be in the custody of the person or as the case may be the body of persons as from the date of the notified order and e the persons if any authorised under Section 18A to take over the management of an industrial undertaking which is a company shall be for all purposes the directors of industrial undertaking duly constituted under the Indian Companies Act 1913 7 of 1913 and shall alone be entitled to exercise all the powers of the directors of the industrial undertaking whether such powers are derived from the said Act or from the memorandum or articles of association of the industrial undertaking or from any other source 566 Section 18D provides that a person whose office is lost under clause a or whose contract of management is terminated under clause b of Section 18B shall have no right to compensation for such loss or termination
Section 18F is material
It reads thus If at any time it appears to the Central Government on the application of the owner of the industrial undertaking or otherwise that the purpose of the order made under Section 18A has been fulfilled or that for any other reason it is not necessary that the order should remain in force the Central Government may by notified order cancel such order and on the cancellation of any such order the management or the control as the case may be of the industrial undertaking shall vest in the owner of the undertaking
 By the Constitution Fourth Amendment Act 1955 Chapter IIIA of the IDR Act was included as Item 19 in the Ninth Schedule of the Constitution
Before we may come to Section 18AA we may notice here the legislative policy with regard to Cotton Textile Industry as adumbrated in the Cotton Textile Companies Management of Undertakings and Liquidation or Reconstruction Act 1967 Act XXIX of 1967
The Statement of Objects and Reasons for enacting this statute inter alia says The cotton textile industry provides one of the basic necessities of life and affords gainful employment to millions of people
Over the last few years this vital industry has been passing through difficult times
Some mills have already to close down and the continuing economic operation of many others is beset with many difficulties
These difficulties have been aggravated in many cases by the heavy burden of past debts
The taking over the management of the mills for a limited time and then restoring them to original owners has not remedied the situation
Steps are therefore necessary to bring about a degree of rationalisation of the financial and managerial structure of such units with a view to their rehabilitation so that production and employment may not suffer
 Textile Industry is also among the industries included in the First Schedule to the IDR Act
567 The Amendment Act 72 of 1971 inserted Section 18AA in the original IDR Act
The material part of the Statement of Objects and Reasons for introducing this Bill of 1971 published in the Gazette of India Extraordinary is as follows The industries included in the First Schedule  not only substantially contribute to the Gross National produce of the country but also afford gainful employment to millions of people
For diverse reasons a number of industrial undertakings engaged in these industries have had to close down and the continuing economic operation of many others is beset with serious difficulties affecting industrial production and employment
During the period of take over Government has to invest public funds in such undertakings and it must be able to do so with a measure of confidence about the continued efficient management of the undertaking at the end of the period of take over
In order to ensure that at the end of the period of take over by Government the industrial undertaking is not returned to the same hands which were responsible for its earlier misfortune it has been provided in the Bill that in relation to an undertaking taken over by them Government will have the power to move for i the sale of the undertaking at a reserve price or higher Government purchasing it at the reserve price if no offer at or above the reserve price is received action being taken simultaneously for the winding up of the company owning the industrial undertaking or ii the reconstruction of the company owning the industrial undertaking with a view to giving the Government a controlling interest in it
With a view to ensuring speedy action by Government it has been provided in the Bill that if the Government has evidence to the effect that the assets of the company owning the industrial undertaking are being frittered away or the undertaking has been closed for a period not less than three months and such closure is prejudicial to the concerned scheduled industry and that the financial condition of the company owning the industrial undertaking and the condition of the plant and machinery installed in the undertaking is such that it is possible to restart the undertaking and such restarting is in the public interest Government may take over the management without an investigation emphasis added
568 With the aforesaid Objects in view Section 18AA was inserted by the Amendment Act No 72 of 1971
The marginal heading of the Section is to the effect Power to take over industrial undertakings without investigation under certain circumstances
This marginal heading it will be seen accords with the Objects and Reasons extracted above
Section 18AA runs as under Without prejudice to any other provision of this Act if from the documentary or other evidence in its possession the Central Government is satisfied in relation to an industrial undertaking that a the persons incharge of such industrial undertaking have by reckless investments or creation of encumbrances on the assets of the industrial undertaking or by diversion of funds brought about a situation which is likely to affect the production of articles manufactured or produced in the industrial undertaking and that immediate action is necessary to prevent such a situation or b it has been closed for a period of not less than three months whether by reason of the voluntary winding up of the company owning the industrial undertaking or for any other reason and such closure is prejudicial to the concerned scheduled industry and that the financial condition of the company owning the industrial undertaking and the condition of the plant and machinery of such undertaking are such that it is possible to re start the undertaking and such re starting is necessary in the interests of the general public it may by a notified order authorise any person hereinafter referred to as the authorised person  to take over the management of the whole or any part of the industrial undertaking or to exercise in respect of the whole or any part of the undertaking such functions of control as may be specified in the order
2 The provisions of sub section 2 of Section 18A shall as far as may be apply to a notified order made under sub section 1 as they apply to a notified order made under sub section 1 of Section 18A 3 Nothing contained in sub section 1 and sub section 2 shall apply to an industrial undertaking owned by a company which is being wound up by or under the supervision of the Court
569 4 Where any notified order has been made under sub section 1 the person or body of persons having for the time being charge of the management or control of the industrial undertaking whether by or under the orders of any court or any contract instrument or otherwise shall notwithstanding anything contained in such order contract instrument or other arrangement forthwith make over the charge of management or control as the case may be of the industrial undertaking to the authorised person
5 The provisions of Section 18 B to 18 E bot inclusive shall as far as may be apply to or in relation to the industrial undertaking in respect of which a notified order has been made under sub section 1 as they apply to an industrial undertaking in relation to which a notified order has been issued under Section 18 A A comparison of the provisions of Section 18A1b and Section 18AA1a would bring out two main points of distinction First action under Section 18A 1b can be taken only after an investigation had been made under Section 15 while under Section 18AA1a or b action can be taken without such investigation
The language scheme and setting of Section 18AA read in the light of the objects and Reasons for enacting this provision make this position clear beyond doubt
Second before taking action under Section 18A1 b the Central Government has to form an opinion on the basis of the investigation conducted under Section 15 in regard to the existence of the objective fact namely that the industrial undertaking is being managed in a manner highly detrimental to the Scheduled industry concerned or to public interest while under Section 18AA1 a the Government has to satisfy itself that the persons incharge of the undertaking have brought about a situation likely to cause fall in production by committing any of the three kinds of acts specified in that provision
This shows that the preliminary objective fact attributable to the persons in charge of the management or affairs of the undertaking on the basis of which action may be taken under Section 18A1 b is of far wider amplitude than the circumstances the existence of which is a sine qua non for taking action under Section 18AA1
The phrase highly detrimental to the scheduled industry or public interest in Section 18A is capable of being construed to over a large variety of acts or things which may be considered wrong with the manner of running the industry by the management
In contrast with it action under Section 18AA1 a can be taken only if the Central Gov 570 ernment is satisfied with regard to the existence of the twin conditions specifically mentioned therein on the basis of evidence in its possession
From an analysis of Section 18AA1 a it will be clear that as a necessary preliminary to the exercise of the power thereunder the Central Government must be satisfied from documentary or other evidence in its possession in regard to the co existence of two circumstances i that the persons in charge of the industrial undertaking have by committing any of these acts namely reckless investments or creation of incumbrances on the assets of industrial undertaking or by diversion of funds brought about a situation which is likely to affect the production of the article manufactured or produced in the industrial undertaking and ii that immediate action is necessary to prevent such a situation
Speaking for the High Court majority the learned Chief Justice Deshpande CJ has observed that only with regard to the fulfilment of condition i the satisfaction of the Government is required to be objectively reached on the basis of relevant evidence in its possession while with regard to condition ii that is the need for immediate action it is purely subjective and therefore the satisfaction of the Government with regard to the immediacy of the situation is outside the scope of judicial review
Shri Sorabji has in his arguments forcefully supported this opinion of the High Court
He maintains that the satisfaction of the Government with regard to the existence of the immediacy is not justiciable
Reliance has been placed on the following passage in the judgment of Channell J in Queen vs Davey  Ors The general principle of law is that an order affecting his liberty or property cannot be made against any one without giving him an opportunity of being heard the result is that if general words used in a statute empowering the making of such an order as this it must be made on notice to the party affected
There are however exceptions to this rule which arise where it can be seen on the words of the statute that it was intended that the order should be made on an ex parte application and the case in which it is easiest to see the propriety of the exception is where looking 571 at the scope and object of the legislation it was clearly intended that the parties putting the law in force should act promptly
Such a case is an order for the destruction of unsound meat which clearly may be made ex parte because it is desirable in the interest of the public health that it should be acted upon at once
The case of removing an infectious person likely to spread abroad the infection to an infectious hospital is obviously of the same character
 According to the learned Solicitor General the power conferred on the Central Government is in the nature of an emergency power that the necessity for taking immediate action is writ large in Section 18AA1 a the provision being a legislative response to deal with an economically emergent situation fraught with national repercussions
The object of the exercise of this power is not to punish anyone but to take immediate preventive action in the public interest
On the other hand Shri Nariman submits that the High Court was clearly in error in holding that the satisfaction of the Central Government with regard to the necessity of taking immediate action was not open to judicial review at all
It is emphasised that the very language of the provision shows that the necessity for taking immediate action is a question of fact which should be apparent from the relevant evidence in the possession of the Government
We find merit in this contention
It cannot be laid down as a general proposition that whenever a statute confers a power on an administrative authority and makes the exercise of that power conditional on the formation of an opinion by that authority in regard to the existence of an immediacy its opinion in regard to that preliminary fact is not open to judicial scrutiny at all
While it may be conceded that an element of subjectivity is always involved in the formation of such an opinion but as was pointed out by this Court in Bariam Chemicals ibid the existence of circumstances from which the inferences constituting the opinion as the sine qua non for action are to be drawn must be demonstrable and the existence of such circumstances if questioned must be proved at least prima facie
Section 18AA1a in terms requires that the satisfaction of the Government in regard to the existence of the circumstances or conditions precedent set out above including the necessity of taking immediate action must be based on evidence in the possession of the Government
If the satisfaction of the Government in regard to the existence of any of the conditions i and ii is based on no evidence or on irrelevant evidence or on an extraneous consideration 572 it will vitiate the order of take over  and the Court will be justified in quashing such an illegal order on judicial review in appropriate proceedings
Even where the statute conferring the discretionary power does not in terms regulate or hedge around the formation of the opinion by the statutory authority in regard to the existence of preliminary jurisdictional facts with express checks the authority has to form that opinion reasonably like a reasonable person
While spelling out by a construction of Section 18AA1a the proposition that the opinion or satisfaction of the Government in regard to the necessity of taking immediate action could not be the subject of judicial review the High Court majority relied on the analogy of Section 17 of the Land Acquisition Act under which according to them the Government s opinion in regard to the existence of the urgency is not justiciable
This analogy holds good only upto a point
Just as under Section 18AA of the IDR Act in case of a genuine immediacy  or imperative necessity of taking immediate action to prevent fall in production and consequent risk of imminent injury paramount public interest an order of take over  can be passed without prior time consuming investigation under Section 15 of the Act under Section 171 and 4 of the Land Acquisition Act also the preliminary inquiry under Section 5A can be dispensed with in case of an urgency
It is true that the grounds on which the Government s opinion as to the existence of the urgency can be challenged are not unlimited and the power conferred on the Government under Section 174 of that Act has been formulated in subjective term nevertheless in cases where an issue is raised that the Government s opinion as to urgency has been formed in a manifestly arbitrary or perverse fashion without regard to patent actual and undeniable facts or that such opinion has been arrived at on the basis of irrelevant considerations or no material at all or on materials so tenuous flimsy slender or dubious that no reasonable man could reasonably reach that conclusion the Court is entitled to examine the validity of the formation of that opinion by the Government in the context and to the extent of that issue
In Narayan Govind Gavate vs State of Maharashtra  Ors
this Court held that while exercising the power under Section 174 of the Land Acquisition Act the mind of the officer or authority concerned has to be applied to the question whether there is an urgency of such a nature that even the summary proceedings under Section 5A of the Act should be eliminated
It is not just the existence of an 573 urgency but the need to dispense with an inquiry under Section 5A of the Act which has to be considered
If the circumstances on the basis of which the Government formed its opinion with regard to the existence of the urgency and the other conditions precedent recited in the notification are deficient or defective the Court may look beyond it
At that stage Section 106 Evidence Act can be invoked by the party assailing the notification and if the Government or the authority concerned does not disclose such facts or circumstances especially within its knowledge without even disclosing a sufficient reason for their abstention from disclosure they have to take the consequences which flow from the non production of the best evidence which could be produced on behalf of the State if its stand was correct
Again in Dora Phalauli vs State of Punjab  Ors this Court held that where the purported order does not recite the satisfaction of the Government with regard to the existence of urgency nor the fact of the land being waste or arable land the order was liable to be struck down and the mere direction therein to the Collector to take action on ground of urgency was not a legal and complete fulfilment of the requirement of the law
Recently in State of Punjab vs Gurdial Singh V R Krishna Iyer J speaking for the Court made these apposite observations It is fundamental that compulsory taking of a man s property is a serious matter and the smaller the man the more serious the matter
Hearing him before depriving him is both reasonable and preemptive of arbitrariness and denial of this administrative fairness is constitutional anathema except for good reasons
Save in real urgency where public interest does not brook even the minimum time needed to give a hearing land acquisition authorities should not having regard to Articles 14 and 19 burke an enquiry under Section 17 of the Act
 From these decisions it is abundantly clear that even under Section 17 of the Land Acquisition Act the satisfaction or opinion of Governmentauthority in regard to the urgency of taking action thereunder is not altogether immune from judicial scrutiny
For the reasons already stated it is not possible to subscribe to the proposition propounded by the High Court that the satisfaction of the Central Government in regard to condition ii ie the exis 574 tence of immediacy  though subjective is not open to judicial review at all
From a plain reading of Section 18AA it is clear that it does not expressly in unmistakable and unequivocal terms exclude the application of the audi alteram partem rule at the pre decisional stage
The question therefore is narrowed down to the issue whether the phrase that immediate action is necessary excludes absolutely by inevitable implication the application of this cardinal canon of fairplay in all cases where Section 18AA1a may be invoked
In our opinion for reasons that follow the answer to this question must be in the negative
Firstly as rightly pointed out by Shri Nariman the expression immediate action in the said phrase is to be construed in the light of the marginal heading of the Section its context and the Objects and Reason for enacting this provision
Thus construed the expression only means without prior investigation under Section 15
Dispensing with the requirement of such prior investigation does not necessarily indicate an intention to exclude the application of the fundamental principles of natural justice or the duty to act fairly by affording to the owner of the undertaking likely to be affected at the pre decisional stage wherever practicable a short measure fair hearing adjusted attuned and tailored to the exigency of the situation
At this stage it is necessary to examine two decisions of this Court viz Ambalal M Shah vs Hathi Singh Manufacturing Co Ltd and Keshav Mills Co Ltd vs Union of India ibid because according to the High Court as per Deshpande CJ who wrote the leading opinion these two decisions which are binding on the High Court conclusively show that The only prior hearing consisted of the investigation under Section 15 read with Rule 5 before action under Section 18A is taken
The very object of Section 18AA is to enable action to be taken thereunder without being preceded by the investigation under Section 15
On the authority of the two Supreme Court decisions in Ambalal M Shah and Keshav Mills that the only hearing prior to action under Section 18A was the investigation under Section 15 it would follow that action under Section 18AA is to be taken without the investigation under Section 15 and therefore without a prior hearing
 575 Shri Nariman maintains that the High Court has not correctly construed these decisions
According to the learned counsel the corollary deduced by the High Court viz that exclusion of the investigation under Section 15 includes exclusion of the audi alteram partem rule at the pre takeover stage is just the contrary of what was laid down by this Court in Keshav Mills in which Ambalal s case was also noticed
Indeed Shri Nariman strongly relies on this decision in support of his argument that if the application of this rule of natural justice at the pre decisional stage is not excluded even where a full investigation has been made there is stronger reason to hold that it is to be observed in a case where there has been no investigation at all
We will first notice the case of Keshav Mills because that is a later decision in which Ambalal s case was referred to
In that case the validity of an order passed by the Central Government under Section 18A was challenged
By that impugned order the Gujarat State Textile Corporation Ltd hereinafter referred to as the Corporation was appointed as authorised controller of the Company for a period of five years
The Company was the owner of a cotton textile mill
Till 1965 the Company made flourishing business
After the year 1964 65 the Company fell on evil days and the textile mill of the Company was one of the 12 sick textile mills in Gujarat which had to be closed down during 1966 and 1968
On May 31 1969 the Central Government passed an order appointing a Committee for investigation into the affairs of the Company under Section 15 of the IDR Act
After completing the inquiry the Investigating Committee submitted its report to the Government who thereafter on November 24 1970 passed the impugned order under Section 18A authorising the Corporation to take over the management of the Company for a period of five years
The Company challenged the order of take over  by a writ petition in the High Court of Delhi
The High Court dismissed the petition
The main contention of the Company before the High Court was that the Government was not competent to proceed under Section 18A against the Company without supplying before hand a copy of the report of the Investigating Committee to the Company
It was further contended that the Government should also have given a hearing to the Company before finally deciding upon take over under Section 18A
This contention was pressed on behalf of the Company in spite of the fact that an opportunity had been given by the Investigating Committee to the management and the employees of the Company for adducing evidence and for making representation before the completion of the investigation
On the contentions raised by the Company and 576 resisted by the respondent in that case the Court formulated the following questions 1 Is it necessary to observe the rules of natural justice before enforcing a decision under Section 18A of the Act 2 What are the rules of natural justice in such a case 3a In the present case have the rules to be observed once during the investigation under Section 15 and then again after the investigation is completed and action on the report of the Investigating Committee taken under Section 18A b Was it necessary to furnish a copy of the Investigating Committee s Report before passing an order of take over Mukherjea J speaking for the Court answered these questions thus 1 The first of these questions does not present any difficulty
It is true that the order of the Government of India that has been challenged by the appellants was a purely executive order embodying on administration decision
Even so the question of natural justice does arise in this case
It is too late now to contend that the principles of natural justice need not apply to administrative order or proceedings in the language of Lord Denning MR in Regina vs Gaming Board exparte Beniam that heresy was scotched in Ridge vs Baldwin 2 The second question however as to what are the principles of natural justice that should regulate an administrative act or order is a much more difficult one to answer We do not think it either feasible or even desirable to lay down any fixed or rigorous yard stick in this manner
The concept of natural justice cannot be put into a straight jacket
It is futile therefore to look for definitions or standards of natural justice from various decisions and then try to apply them to the facts of any given case
The only essential point that has to be kept in mind in all cases is that the person concerned should have a reasonable opportunity of presenting his case and that the administrative authority concerned should act fairly impartially and reasonably
Where administrative officers are concerned the duty is not so much to act judicially as to act fairly
See for instance the observations of Lord Parker in In re 577 HK an infant
It only means that such measure of natural justice should be applied as was described by Lord Reid in Ridge vs Baldwin as insusceptible of exact definition but what a reasonable man would regard as a fair procedure in particular circumstances
However even the application of the concept of fairplay requires real flexibility
Everything will depend on the actual facts and circumstances of a case 3 a For answering that question we shall keep in mind  and examine the nature and scope of the inquiry that had been carried out by the Investigating Committee set up by the Government the scope and purpose of the Act and rules under which the Investigating Committee was supposed to act the matter that was being investigated by the Committee and finally the opportunity that was afforded to the appellants for presenting their case before the Investigating Committee After noticing the object purpose and content of the relevant provisions the judgment proceeded In fact it appears from a letter addressed by appellant No 2 Navinchandra Chandulal Parikh on behalf of the Company to Shri H K Bansal Deputy Secretary Ministry of Foreign Trade and Supply on 12th September 1970 that the appellants had come to know that the Government of India was in fact considering the question of appointing an authorised controller under Section 18A of the Act in respect of the appellants undertaking
In that letter a detailed account of the facts and circumstances under which the mill had to be closed down was given
There is also an account of the efforts made by the Company s Directors to restore the mill
There is no attempt to minimise the financial difficulties of the Company in that letter 
The letter specifically mentions the company s application to the Gujarat State Textile Corporation Ltd for financial help the Corporation ultimately failed to come to the succour of the Company
Parikh requested Government not to appoint an authorised controller and further prayed that the Government of India should ask the State Government and the Gujarat State Textile Corporation Ltd to give a financial guarantee to the Company  Only a few days before this letter had been addressed Parikh it appears had an interview with the Minister of 578 Foreign Trade on 26th August 1970 when the Minister gave him as a special case four weeks  time with effect from 26th August 1970 to obtain the necessary financial guarantee from the State or the Gujarat State Textile Corporation without which the Company had expressed its inability to reopen and run the mill
In a letter of 22 September 1970 Bansal informed Parikh in clear language that if the Company failed to obtain the necessary guarantee by 26 September 1970 Government was proceeding to take action under the Act
It is obvious therefore that the appellants were aware all long that as a result of the report of the Investigating Committee the Company s undertaking was going to be taken up by Government Parikh had not only made written representations but had also seen the Minister of Foreign Trade and Supply
He had requested the Minister not to take over the undertaking and on the contrary to lend his good offices so that the Company could get financial support from the Gujarat State Textile Corporation or from the Gujarat State Government emphasis added All these circumstances leave in no manner of doubt that the Company had full opportunities to make all possible representations before the Government against the proposed take over of its mill under Section 18A
In this connection it is significant that even after the writ petition had been filed before the Delhi High Court the Government of India had given the appellants at their own request one month s time to obtain the necessary funds to commence the working of the mill
Even then they failed to do so   There are at least five features of the case which make it impossible for us to give any weight to the appellants complaint that the rules of natural justice have not been observed
First on their own showing they were perfectly aware of the grounds on which Government had passed the order under Section 18A of the Act
Secondly they are not in a position to deny a that the Company has sustained such heavy losses that its mill had to be closed down indefinitely and b that there was not only loss of production of textiles but at least 1200 persons had been thrown out of employment
Thirdly it is transparently clear from the affidavits that the Company was not in a position 579 to raise the resources to recommence the working of the mill
Fourthly the appellants were given a full hearing at the time of the investigation held by the Investigating Committee and were also given opportunities to adduce evidence
Finally even after the Investigating Committee had submitted its report the appellants were in constant communion with the Government and were in fact negotiating with Government for such help as might enable them to reopen the mill and to avoid a take over of their undertaking by the Government
Having regard to these features it is impossible for us to accept the contention that the appellants did not get any reasonable opportunity to make out a case against the take over of their undertaking or that the Government has not treated the appellants fairly
There is not the slightest justification in this case for the complaint that there has been any denial of natural justice In our opinion since the appellants have received a fair treatment and also all reasonable opportunities to make out their own case before Government they cannot be allowed to make any grievance of the fact that they were not given a formal notice calling upon them to show cause why their undertaking should not be taken over or that they had not been furnished with a copy of the report
They had made all the representations that they could possibly have made against the proposed take over
By no stretch of imagination can it be said that the order for take over took them by surprise
In fact Government gave them ample opportunity to reopen and run the mill on their own if they wanted to avoid the take over
The blunt fact is that the appellants just did not have the necessary resources to do so
Insistence on formal hearing in such circumstances is nothing but insistence on empty formality emphasis added 3 b In our opinion it is not possible to lay down any general principle on the question as to whether the report of an investigating body or an inspector appointed by an administrative authority should be made available to the persons concerned in any given case before the authority takes a decision upon that report
The answer to this question also must always depend on the facts and circumstances of the case
It is not at all unlikely that there may be certain cases where unless the report is 580 given the party concerned cannot make any effective representation about the action that Government takes or proposes to take on the basis of that report
Whether the report should be furnished or not must therefore depend in every individual case on the merits of that case
We have no doubt that in the instant case non disclosure of the report of the Investigating Committee has not caused any prejudice whatsoever to the appellants
emphasis added It will be seen from what has been extracted above that in Keshav Mills case this Court did not lay it down as an invariable rule that where a full investigation after notice to the owner of the industrial undertaking has been held under Section 15 the owner is never entitled on grounds of natural justice to a copy of the investigation report and to an opportunity of making a representation about the action that the Government proposes to take on the basis of that report
On the contrary it was clearly said that this rule of natural justice will apply at that stage in cases where unless the report is given the party concerned cannot make any effective representation about the action that Government takes or proposes to take on the basis of that report
 It was held that the application or non application of this rule depends on the facts and circumstances of the particular case
In the facts of that case it was found that the non disclosure of the investigation report had not caused any prejudice whatever because the Company were aware all along that as a result of the report of the Investigating Committee the Company s undertaking was going to be taken over by Government and had full opportunities to make all possible representations before the Government against the proposed take over of the Mill
Shri Sorabji submitted that the observations made by this Court in Keshav Mills case to the effect that in certain cases even at the post investigation stage before making an order of take over under Section 18A it may be necessary to give another opportunity to the affected owner of the undertaking to make a representation appear to be erroneous
The argument is that the Legislature has provided in Sections 15 and 18A of the Act and Rule 5 framed thereunder its measure of this principle of natural justice and the stage at which it has to be observed
The High Court therefore was not right in engrafting any further application of the rule of natural justice at the post investigation stage
According to the learned Solicitor General for the decision of the case it was not necessary to go beyond the 581 ratio of Shri Ambalal M Shah  Anr
vs Hathi Singh Manufacturing Co Ltd which was followed in Keshav Mills case
In our opinion the observations of this Court in Keshav Mills in regard to the application of this rule of natural justice at the post investigation stage cannot be called obiter dicta
There is nothing in those observations which can be said to be inconsistent with the ratio decidendi of Ambalal s case
The main ground on which the order of take over under Section 18A was challenged in Ambalal s case was that on a proper construction of Section 18A the Central Government had the right to make the order under that Section on the ground that the Company was being managed in a manner highly detrimental to public interest only where the investigation made under Section 15 was initiated on the basis of the opinion as mentioned in Section 15b whereas in the present case ie Ambalal s case the investigation ordered by the Central Government was initiated on the formation of an opinion as mentioned in clause a i of Section 15
It was 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 High Court came to the conclusion that on a correct construction of Section 18 A1 b 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 Section 15b of the Act
It also accepted the petitioner s 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
On appeal by special leave this Court reversed the decision of the High Court and held that the words used by the Legislature in Section 18A 1 b 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 that Section 18A 1 b 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
In this Court it 582 was urged on behalf of the Company that absurd results would follow if the words investigation has been made under Section 15 are held to include investigation based on any of the opinions mentioned in Section 15a
Asked to mention what the absurd results would be the counsel could only say that an order under Section 18A 1 b would be unfair and contrary to natural justice in such cases as the owner of an industrial undertaking would have no notice that the quality of management was being investigated
The Court found no basis for this assumption because in its opinion the management could not but be aware that investigation would be directed in regard to the quality of management also
It is to be noted that the question of natural justice was casually and halfheartedly raised in a different context as a last resort
It was negatived because in the facts and circumstances of that case the Company was fully aware that the quality of the management was also being inquired into and it had full opportunity to meet the allegations against it during investigation
The second reason which is more or less a facet of the first for holding that the mere use of the word immediate in the phrase immediate action is necessary does not necessarily and absolutely exclude the prior application of the audi alteram partem rule is that immediacy or urgency requiring swift action is a situational fact having a direct nexus with the likelihood of adverse effect on fall in production
And such likelihood and the urgency of action to prevent it may vary greatly in degree
The words likely to affect production used in Section 18AA 1 a are flexible enough to comprehend a wide spectrum of situations ranging from the one where the likelihood of the happening of the apprehended event is imminent to that where it may be reasonably anticipated to happen sometime in the near future
Cases of extreme urgency where action under Section 18AA1 a to prevent fall in production and consequent injury to public interest brooks absolutely no delay would be rare
In most cases where the urgency is not so extreme it is practicable to adjust and strike a balance between the competing claims of hurry and hearing
The audi alteram partem rule as already pointed out is a very flexible malleable and adaptable concept of natural justice
To adjust and harmonise the need for speed and obligation to act fairly it can be modified and the measure of its application cut short in reasonable proportion to the exigencies of the situation
Thus in the ultimate analysis the question as to what extent and in what measure this rule of fair hearing will apply at the pre decisional stage will depend upon the degree of urgency if any evident from the facts and circumstances of the particular case
583 In the instant case so far as Kanpur Unit is concerned it was lying closed for more than three months before the passing of the impugned order
There was no immediacy  in relation to that unit which could absolve the Government from the obligation of complying fully with the audi alteram partem rule at the pre decisional or pre takeover stage
As regards the other five units of the Company the question whether on the basis of the evidential matter before the Government at the time of making the impugned order any reasonable person could reasonably form an opinion about a likelihood of fall in production and the urgency of taking immediate action will be discussed later
For the purpose of the question under consideration we shall assume that there was a likelihood of fall in production
Even so the undisputed facts and figures of production of 2 or 3 years preceding the take over relating to these units show that on the average production in these units has remained fairly constant
Rather in some of these units an upward trend in production was discernible
Be that as it may the likelihood of fall in production or adverse effect on production in these five units could not by any stretch of prognostication or feat of imagination be said to be imminent or so urgent that it could not permit the giving of even a minimal but real hearing to the Company before taking over these units
There was an interval of about six weeks between the Official Group s Report dated February 16 1978 and the passing of the impugned order dated April 13 1978
There was thus sufficient time available to the Government to serve a copy of that report on the appellant Company and to give them a short measure opportunity to submit their reply and representation regarding the findings and recommendations of the Group Officers and the proposed action under Section 18AA1
The third reason for our forbearance to imply the exclusion of the audi alteram partem rule from the language of Section 18AA1 a is that although the power thereunder is of a drastic nature and the consequences of a take over are far reaching and its effect on the rights and interests of the owner of the undertaking is grave and deprivatory yet the Act does not make any provision giving a full right of a remedial hearing equitable to a full right of appeal at the post decisional stage
The High Court seems to be of the view that Section 18F gives a right of full post decisional remedial hearing to the aggrieved party
Shri Soli Sorabji also elaborately supported that view of the High Court
In the alternative the learned counsel has committed himself on behalf of his client to the position that the Central Government will if required give the Company a full and fair hearing on merits 584 including an opportunity to show that the impugned order was not made on adequate or valid grounds
Shri Nariman on the other hand contends and we think rightly that the so called right of a post decisional hearing available to the aggrieved owner of the undertaking under Section 18F is illusory as in its operation and effect the power of review if any conferred thereunder is prospective and not retro active being strictly restricted to and dependent upon the post takeover circumstances
By virtue of sub section 2 of Section 18AA the reference to Section 18A in Section 18F will be construed as a reference to Section 18AA also
The power of cancellation under Section 18F can be exercised only on any of these grounds  i that the purpose of the order made under Section 18A has been fulfilled or ii that for any other reason it is not necessary that the order should remain in force
These grounds  and the language in which they are couched is clear enough to show that the cancellation contemplated thereunder cannot have the effect of annulling rescinding or obliterating the order of take over with retro active force it can have only a prospective effect
Section 18F embodies a principle analogous to that in Section 21 of the General Clauses Act
The first ground  in Section 18F for the exercise of the power obviously does not cover a review of the merits or circumstances preceding and existing at the date of passing the order of take over  under Section 18AA1
The words for any other reason if read in isolation no doubt appear to be of wide amplitude
But their ambit has been greatly cut down and circumscribed by the contextual phrase no longer necessary that it should remain in force
Construed in this context the expression for any other reason cannot include a ground that the very order of take over was invalid or void ab initio
Thus the post decisional hearing available to the aggrieved owner of the undertaking is not an appropriate substitute for a fair hearing at the pre decisional stage
The Act does not provide any adequate remedial hearing or right of redress to the aggrieved party even where his under taking has been arbitrarily taken over on insufficient grounds
Rather the plight of the aggrieved owner is accentuated by the provision in 18D which disentitles him and other persons whose officers are lost or whose contract of management is terminated as a result of the take over  from claiming any compensation whatever for such loss or termination
Before we conclude the discussion on this point we may notice one more argument that has been advanced on behalf of the respondents
It is argued that this was a case where a prior hearing to the Company could only be a useless formality because the impugned action has been 585 taken on the basis of evidence consisting of the Balance sheet account books and other records of the Company itself the correctness of which could not have been disputed by the Company
On these premises it is submitted that non observance of the rule of audi altrem partem would not prejudice the Company and thus make no difference
The contention does not appear to be well founded
Firstly this documentary evidence at best shows that the Company was in debt and the assets of some of its units  had been hypothecated or mortgaged as security for those debts
Given an opportunity the Company might have explained that as a result of this indebtedness there was no likelihood of fall in production which is one of the essential conditions in regard to which the Government must be satisfied before taking action under Section 181a
Secondly what the rule of natural justice required in the circumstances of this case was not only that the Company should have been given an opportunity to explain the evidence against it but also an opportunity to be informed of the proposed action of take over and to represent why it be not taken
In the renowned case Ridge vs Baldwin  Ors
ibid it was contended before the House of Lords that since the appellant police officer had convicted himself out of his own mouth a prior hearing to him by the Watch Committee could not have made any difference that on the undeniable facts of that case no reasonable body of men could have reinstated the appellant
This contention was rejected by the House of Lords for the reason that if the Watch Committee had given the police officer a prior hearing they would not have acted wrongly or unreasonably if they had in the exercise of their discretion decided to take a more lenient course than the one they had adopted
A similar argument was advanced in section L Kapoor vs Jagmohan  Ors to which decision two of us Sarkaria and Chinnappa Reddy JJ were parties
In negativing this argument this Court inter alia quoted with approval the classic passage reproduced below from the judgment of Megarry J in John vs Rees  Ors As everybody who has anything to do with the law well knows the path of the law is strewn with examples of open and shut cases which somehow were not of unanswerable charges which in the event were completely answered of inexplicable conduct which was fully explained of fixed and unalterable determinations that by discussion suffered a change
Nor are those with any knowledge of human 586 nature who pause to think for a moment likely to under estimate the feelings of resentment of those who find that a decision against them has been made without their being afforded any opportunity to influence the course of events
 In General Medical Council vs Spackman Lord Wright condemned the oft adopted attitude by tribunals to refuse relief on the ground that a fair hearing could have made no difference to the result
Wade in his Administrative Law 4th Edn page 454 has pointed out that in principle it is vital that the procedure and the merits should be kept strictly apart since otherwise the merits may be prejudged unfairly
In Maxwell vs Department of Trade  Industry Lawton LJ expressed in the same strain that doing what is right may still result in unfairness if it is done in the wrong way
 This view is founded on the cordinal canon that justice must not only be done but also manifestly be seen to be done
Observance of this fundamental principle is necessary if the courts and the tribunals and the administrative bodies are to command public confidence in the settlement of disputes or in taking quasi judicial or administrative decisions affecting civil rights or legitimate interests of the citizens
The same proposition was propounded in R V Thames Magistrates  Court ex p Polemis by Lord Widgery CJ at page 1375 and by the American Supreme Court in Margarita Fuentes et al vs Tobert L Shevin
In concluding the discussion in regard to this aspect of the matter we can do no better than reiterate what was said by one of us Chinnappa Reddy J in section L Kapoor vs Jagmohan ibid  In our view the principles of natural justice know of no exclusionary rule dependent on whether it would have made any difference if natural justice had been observed
The non observance of natural justice is itself prejudice to any man and proof of prejudice independently of proof of denial of natural justice is unnecessary
It ill comes from a person who has denied justice that the person who has been denied justice is not prejudiced
 587 We therefore over rule this last contention
In sum for all the reasons aforesaid we are of the view that it is not reasonably possible to construe Section 18AA1 as universally excluding either expressly or by inevitable intendment the application of the audi alteram partem rule of natural justice at the pre takeover stage regardless of the facts and circumstances of the particular case
In the circumstances of the instant case in order to ensure fairplay in action it was imperative for the Government to comply substantially with this fundamental rule of prior hearing before passing the impugned order
We therefore accept the two fold proposition posed and propounded by Shri Nariman
The further question to be considered is  What is the effect of the non observance of this fundamental principle of fairplay Does the non observance of the audi alteram partem rule which in the quest of justice under the rule of law has been considered universally and most spontaneously acceptable principle render an administrative decision having civil consequences void or voidable  In England the outfall from the watershed decision Ridge vs Baldwin brought with it a rash of conflicting opinion on this point
The majority of the House of Lords in Ridge vs Baldwin held that the non observance of this principle had rendered the dismissal of the Chief Constable void
The rationale of the majority view is that where there is a duty to act fairly just like the duty to act reasonably it has to be enforced as an implied statutory requirement so that failure to observe it means that the administrative act or decision was outside the statutory power unjustified by law and therefore ultra vires and void
See Wade s Administrative Law ibid page 448
In India this Court has consistently taken the view that a quasi judicial or administrative decision rendered in violation of the audi alteram partem rule wherever it can be read as an implied requirement of the law is null and void
eg Maneka Gandhi s case ibid and section L Kapoor vs Jagmohan ibid
In the facts and circumstances of the instant case there has been a non compliance with such implied requirement of the audi alteram partem rule of natural justice at the pre decisional stage
The impugned order therefore could be struck down as invalid on that score alone
But we refrain from doing so because the learned Solicitor General in all fairness has both orally and in his written submissions dated August 28 1979 committed himself to the position that under Section 18F the Central Government in exercise of its curial functions is bound to give the affected owner of the undertaking taken over a full and effective hearing on all aspects touching the validity andor correctness of the order andor action of take 588 over within a reasonable time after the take over
The learned Solicitor has assured the Court that such a hearing will be afforded to the appellant Company if it approaches the Central Government for cancellation of the impugned order
It is pointed out that this was the conceded position in the High Court that the aggrieved owner of the undertaking had a right to such a hearing
In view of this commitmentor concession fairly made by the learned Solicitor General we refrain from quashing the impugned order and allowing Civil Appeal 1629 of 1979 send the case back to the Central Government with the direction that it shall within a reasonable time preferably within three months from today give a full fair and effective hearing to the aggrieved owner of the undertaking ie the Company on all aspects of the matter including those touching the validity andor correctness of the impugned order andor action of take over and then after a review of all the relevant materials and circumstances including those obtaining on the date of the impugned order shall take such fresh decision andor such remedial action as may be necessary just proper and in accordance with law
In view of the above decision no separate order is necessary in Civil Appeals 1857 and 2087 of 1979
All the three appeals are disposed of accordingly with no order as to costs
Since the appeals have been disposed of on the first and foremost point canvassed before us in the manner indicated above it is not necessary to burden this judgment with a discussion of the other points argued by the counsel for the parties
CHINNAPPA REDDY J I have the misfortune to be unable to agree with the erudite opinion of my learned brother Sarkaria on the question of the applicability of the principles of natural justice
I do so with diffidence and regret
The first of the submissions of Shri F section Nariman learned counsel for the appellant company was that there was a violation of the principles of natural justice
He submitted that the provisions of the Industries Development and Regulation Act did not rule out natural justice and that there were several occasions in the march of events that led to the passing of the order under Sec
18AA when an opportunity could have been given to the Company and the principles of natural justice observed but the Government of India refrained from doing so
He urged that the immediate action contemplated by Sec
18AA1 a was not to be construed as negat 589 ing natural justice but as intended merely to distinguish it from action under Sec
18A which was to be taken only after investigation under Sec 15
He drew inspiration for this argument from the marginal note to Section 18AA which is power to take over industrial undertakings without investigation under certain circumstances
He also urged that Sec
18F contemplated a post decisional situation necessitating cancellation of the order of take over but did not contemplate cancellation of the order of take over on the ground that such order ought never to have been made
He urged that the scope of Sec
18F was very narrow and did not entitle the party affected to a fair hearing
In any case he argued that the remedy such as it was provided by Sec
18F was not an answer to the claim to pre decisional natural justice
His submission was that natural justice was not to be excluded except by the clear and unmistakable language of the statute though the quantum of natural justice to be afforded in an individual case might vary from case to case
Shri Soli Sorabji learned Solicitor General while conceding that statutory silence on the question of natural justice should ordinarily lead to an implication by presumption that natural justice was to be observed urged that the presumption might be displaced by necessary implication as for instance where compliance with natural justice might be inconsistent with the demands of promptitude and delayed action might lead to disaster
The presumption of implication of natural justice was very weak where action was of a remedial or preventive nature or where such action concerned property rights only
In appropriate situations post decisional hearing might displace pre decisional natural justice
The statute itself might well provide for a post decisional hearing as a substitute for pre decisional natural justice in situations requiring immediate action
18 F of the Industries Development and Regulation Act expressly provided for such a post decisional hearing and the urgency of the situation contemplated by Sec
18AA necessarily excluded pre decisional natural justice
There was no reason to belittle the scope of Sec
18F so to exclude a fair post decisional hearing at the instance of the party affected and consequently to imply pre decisional natural justice
Both the learned counsel invited our attention to considerable case law
I do not propose to discuss the case law as my brother Sarkaria has referred to all the cases in great detail
Before I consider the submissions of the learned counsel as to the applicability of the principles of natural justice a few prefatory remarks however require to be made
590 Natural justice like Ultra Vires and Public Policy is a branch of the Public Law and is a formidable weapon which can be wielded to secure justice to the citizen
It is productive of great good as well as much mischief
While it may be used to protect certain fundamental liberties civil and political rights it may be used as indeed it is used more often than not to protect vested interests and to obstruct the path of progressive change
In the context of modern welfare legislation the time has perhaps come to make an appropriate distinction between natural justice in its application to fundamental liberties civil and political rights and natural justice in its application to vested interests
Our Constitution as befits the Constitution of a Socialist Secular Democratic Republic recognises the paramountcy of the public weal over the private interest
Natural justice Ultra Vires Public Policy or any other rule of interpretation must therefore conform grow and be tailored to serve the public interest and respond to the demands of an evolving society
In Ridge vs Baldwin it was thought by Lord Reid that natural justice had no easy application where questions of public interest and policy were more important than the rights of individual citizens
He observed  If a Minister is considering whether to make a scheme for say an important new road his primary concern will not be with the damage which its construction will do to the rights of individual owners of land
He will have to consider all manner of questions of public interest and it may be a number of alternate schemes
He cannot be prevented from attaching more importance to the fulfilment of his policy than to the fate of individual objectors and it would be quite wrong for the Courts to say that the Minister should or could act in the same kind of way as a board of works deciding whether a house should be pulled down And as pointed out by a contributor in 1972 Cambridge Law Journal at page 14   the safeguarding of existing rights can after all in some circumstances amount to little more than the fighting of a rear guard action by the reactionary element in society seeking only to preserve its own vested position
 The United States Supreme Court has recognised the distinction between cases where only property rights are involved and cases where other civil and political rights are involved
In cases where only 591 property rights are involved postponement of enquiry has been held not to be a denial of due process vide  Annie G Phillips vs Commissioner of Internal Revenue John H Fahey vs Paul Mallonee Margarita Fuentes vs Robert L Shevin Attorney General of Florida and Lawrence Mitchell vs W F Grant Co In the first case   Brandeis J observed Where only property rights are involved mere postponement of the judicial inquiry is not a denial of due process if the opportunity given for the ultimate judicial determination of the liability is adequate
Delay in the judicial determination of property rights is not uncommon where it is essential that Governmental needs be immediately satisfied
For the protection of public health a state may order the summary destruction of property by administrative authorities without antecedent notice or hearing
Because of the public necessity the property of citizens may be summarily seized in war time
And at any time the United States may acquire property by eminent domain without paying or determining the amount of the compensation before the taking
 The principles of natural justice have taken deep root in the judicial conscience of our people nurtured by Binapani Kraipak Mohinder Singh Gill Maneka Gandhi etc
They are now considered so fundamental as to be implicit in the concept of ordered liberty and therefore implicit in every decision making function call it judicial quasi judicial or administrative
Where authority functions under a statute and the statute provides for the observance of the principles of natural justice in a particular manner natural justice will have to be observed in that manner and in no other
No wider right than that provided by statute can be claimed nor can the right be narrowed
Where the statute is silent about the observance of the principles of natural justice such statutory silence is taken to imply compliance with the principles of natural justice
The implication of natural justice being presumptive it may be excluded by express words of statute or by necessary intendment
Where the conflict is between the public interest and the private interest the presumption must necessarily be weak and may therefore be readily displaced
The presumption is also weak where what are involved are mere property rights
In cases of urgency particularly where the public interest is involved pre emptive 592 action may be a strategic necessity
There may then be no question of observing natural justice
Even in cases of preemptive action
if the statute so provides or if the Courts so deem fit in appropriate cases a postponed hearing may be substituted for natural justice
Where natural justice is implied the extent of the implication and the nature of the hearing must vary with the statute the subject and the situation
Seeming judicial ambivalence on the question of the applicability of the principles of natural justice is generally traceable to the readiness of judges to apply the principles of natural justice where no question of the public interest is involved particularly where rights and interests other than property rights and vested interests are involved and the reluctance of judges to apply the principles of natural justice where there is suspicion of public mischief and only property rights and vested interests are involved
In the light of these prefatory remarks I will proceed to consider the relevant statutory provisions
The Industries Development and Regulation Act 1951 was enacted pursuant to the power given to Parliament by Entry 52 of List I of the Seventh Schedule to the Constitution
As required by that Entry Section 2 of the Act declares that it is expedient in the public interest that the Union should take under its control the industries specified in the First Schedule to the Act
Item 23 of the First Schedule to the Act relates to Textiles of various categories Sec
3d defines Industrial undertaking to mean any undertaking pertaining to a scheduled industry carried on in one or more factories by any person or authority including Government
The expression undertaking is not however defined Sec 3f defines Owner in relation to an industrial undertaking as the person who or the authority which has the ultimate control over the affairs of the undertaking and where the said affairs are entrusted to a manager managing director or managing agents such manager managing director or managing agent shall be deemed to be the owner of the undertaking
Sec 3j provides that words and expressions not defined in the Act but defined in the Companies Act shall have the meaning assigned to them in that Act
10 obliges the owner of an industrial undertaking to register the undertaking in the prescribed manner
10A authorises the revocation of registration after giving an opportunity to the owner of the undertaking in certain circumstances
11 provides for the licensing of the new industrial undertaking and Sec
11A provides for the licensing of the production and manufacture of the new articles
Sec 13 provides among other things that except under and in accordance with a licence issued in that behalf by the Central Government no owner of an industrial undertaking shall effect any substantial expansion or 593 change the location of the whole or any part of an industrial undertaking
14 provides for a full and complete investigation in respect of applications for the grant of licence or permission under Sections 11 11A 13 or 29B Sec
15 authorises the Central Government to make or cause to be made a full and complete investigation into the circumstances of the case if the Central Government is of the opinion that  a in respect of any scheduled industry or industrial undertaking or undertakings i there has been or is likely to be a substantial fall in the volume of production for which having regard to the economic conditions prevailing there is no justification or ii there has been or is likely to be a marked deterioration in the quality of any article   which could have been or can be avoided or iii there has been or is likely to be a rise in the price of any article  for which there is no justification or iv it is necessary to take any such action for the purpose of conserving any resources of national importance or b any industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest
After the investigation is made under Sec
provides if the Central Government is satisfied that such action is desirable it may issue appropriate directions for a regulating the production of any article  and fixing the standards of production b requiring the industrial undertaking to take such steps as the Central Government may consider necessary to stimulate the development of the industry c prohibiting resort to any act or practice which might reduce the undertaking s production capacity or economic value d controlling the prices or regulating the distribution of any article
162 also provides for the issue of interim directions by the Central Government pending investigation under Sec 15
Such directions are to have effect until validly revoked by the Central Government
594 Chapter III A consisting of Sections 18A 18 AA
18 B 18 C 18 D 18 E and 18 F deals with direct management or control of Industrial Undertakings by Central Government in certain cases
18 A which is entitled Power of Central Government to assume management or control of an industrial undertaking in certain cases provides that 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 an industrial undertaking or to exercise in respect of the whole or any part of the undertaking such functions of control as may be specified in the order if the Central Government is of opinion that  a an industrial undertaking to which directions have been issued in pursuance of Sec
16 has failed to comply with such directions or b an industrial undertaking in respect of which an investigation has been made under section 15 is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest
18 AA refers to Power to take over industrial undertakings without investigation under certain circumstances
It enables the Central Government by a notified order to authorise any person or body of persons to take over the management of the whole or any part of an industrial undertaking or to exercise in respect of whole or any part of the undertaking such functions of control as may be specified in the order if without prejudice to any other provisions of the Act from the documentary or other evidence in its possession the Central Government is satisfied in relation to the industrial undertaking that a the persons incharge of such industrial undertakings have by reckless investments or creation of encumbrances on the assets of the industrial undertaking or by diversion of funds brought about a situation which is likely to affect the production of articles manufactured or produced in the industrial under taking and that immediate action is necessary to prevent such a situation or b it has been closed for a period of not less than three months whether by reason of the voluntary winding up of the company owning the industrial undertaking or for any other reason and such closure is prejudicial to the concerned scheduled industry and 595 that the financial condition of the company owning the industrial undertaking and the condition of the plant and machinery of such undertaking are such that it is possible to re start the undertaking and such re starting is necessary in the interests of the general public
18 AA5 stipulates that the provisions of Sections 18 B to 18 E shall be applicable to the industrial undertaking in respect of which an order has been made under section 18 AA even as they apply to an industrial undertaking taken over under Sec
18 A Sec
18 B specifies the effect of a notified order under Sec
18 A Sec
18C empowers the Court to cancel or vary contracts made in bad faith etc
by the management of an undertaking before such management was taken by the Central Government
18 D provides that there shall be no right to compensation for termination of office or contract as a result of the take over 
18 E deprives the shareholders and the Company of certain rights under the Indian Companies Act
if the industrial undertaking whose management is taken over is a Company
18 F empowers the Central Government on the application of the owner of the industrial undertaking or otherwise to cancel the order made under Sec
18 A if it appears to the Central Government that the purpose of the order has been fulfilled or that for any other reason it is not necessary that the order should remain in force
18FD3 enables the Central Government to exercise the powers under Sec
18 F in relation to an undertaking taken over under Sec
18 AA
The question for consideration is whether Sec
18 AA excludes natural justice by necessary implication
The development and regulation of certain key industries was apparently considered so basic and vital to the economy of our country that Parliament in its wisdom thought fit to enact the Industries Development  Regulation Act after making the declaration required by Entry 52 of List I of the Seventh Schedule to the Constitution that it was expedient in the public interest that the Union should take under its control the industries specified in the schedule to the Act as earlier mentioned by us
Apart from making provision for the establishment of a Central Advisory Council and other Development Councils and the licensing of scheduled industries the Act empowers the Central Government to cause a full and complete investigation to be made where there is a substantial fall in the volume of production for which there is no justification having regard to the prevailing economic conditions or there is marked deterioration in the quality of the 596 goods produced or the price of the goods produced is rising unjustifiably or where conservation of resources of national importance is necessary or the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry or to public interest Sec 15 and thereafter to issue necessary and appropriate directions to the industrial undertaking to mend matters suitably Sec 16
Where the instructions issued under Sec
16 are not complied with or where the investigation reveals that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry or to the public interest the Central Government may take over the industry under Sec
Whether there is an investigation or not the Central Government may also take over  the management of the industry under Sec
18 AA if consequent on certain wilfull acts of commission on the part of the management the production is likely to be effected but immediate action may prevent such a situation or the industrial undertaking has been closed for a period of not less than three months and the closure is prejudicial to the scheduled industry
Action under Sec
18 AA is thus preventive and remedial
Where there is an apprehension that production is likely to be affected as a result of the wilfull acts of the management or where the production has already come to a stand still because of the closure of the undertaking for a period of not less than three months the Central Government is authorised to intervene to restore production
The object clearly is to take immediate action to prevent a situation likely to affect production or to restore production
There was some argument at the Bar that the expression immediate action  was not to be found in Sec
18 AA1 b
I do not think that the absence of the expression immediate action in Sec
18 AA1b makes any difference
18 AA1a refers to a situation where immediate preventive action may avert a disaster whereas Sec
18 AA contemplates a situation where the disaster has occurred and action is necessary to restore normalcy
Restoration of production where production has stopped in a key industry or industrial undertaking is as important and urgent in the public interest as prevention of a situation where production may be affected
Immediate action is therefore as necessary in the situation contemplated by Sec
18 AA1b as in the situation contemplated by Sec 18 AA1a
It is true that the marginal note refers to the power to take over without investigation but there is no sufficient reason to suppose that the word immediate  is used only to contra distinguish it from the investigation contemplated by Sec 15 of the Act though of course a consequence of immediate action under Sec
18 AA may be to dis 597 pense with the enquiry under Sec 15
In fact facts which come to light during the course of an investigation under Sec 15 may form the basis of action under Sec 18 AA1a
Where in the course of an investigation under Sec
15 it is discovered that the management have by reckless investments or creation of encumbrances on the assets of the industrial undertaking or by diversion of funds brought about a situation which is likely to affect the production of the articles manufactured or produced in the industrial undertaking if the Government is satisfied that immediate action is necessary to prevent such a situation there is no reason why the Central Government may not straight away take action under Sec 18 AA1a without waiting for completion of investigation under Sec 15
Parliament apparently contemplated a situation where immediate action was necessary and having contemplated such a situation there is no reason to assume that Parliament did not contemplate situations which brooked not a moments delay
If Parliament also contemplated situations which did not brook a moment s delay it would be difficult to read natural justice into Sec
18 AA
The submission of Shri Nariman was that the immediacy of the situation would be relevant and relatable to the quantum of natural justice and not to a total denial of natural justice
According to him the scope and extent of the opportunity to be given to the party against whom action is taken may depend upon the situation but nothing would justify a negation of a natural justice
He pointed out that in a situation of great urgency which brooked no delay an order under Sec
18 AA might be made the situation could be so frozen that the persons incharge of the industrial undertaking might do no more mischief and the Government could then without giving further effect to the order under Sec
18 AA give a notice to the person incharge to show cause why the order under Sec
18 AA should not be given effect
In another given case according to Shri Nariman notice of say two weeks might be given before making an order if the making of an order was not so very urgent
He suggested that the opportunity to be given might vary from situation to situation but opportunity there must be either before the decision was arrived at or so shortly after the decision was arrived at and before any great mischief might result from the order
The argument of Shri Nariman would vest in the Government a power to decide from case to case the extent of opportunity to be given in each individual case and as a corollary a corresponding right in the aggrieved party to claim that the opportunity provided was not enough
Such a procedure may be possible practicable and desirable in situations where there is no statutory provision enabling the decision making authority to review or reconsider its decision
Where there is a 598 provision in the statute itself for revocation of the order by the very authority making the decision it appears to us to be unnecessary to insist upon a pre decisional observance of natural justice
The question must be considered by regard to the terms of the statute and by an examination on the terms of the statute whether it is possible practicable and desirable to observe pre decisional natural justice and whether a post decisional review or reconsideration provided by the statute itself is not a sufficient substitute
The likelihood of production being jeopardized or the stoppage of production in a key industrial undertaking is a matter of grave concern affecting the public interest
Parliament has taken so serious a view of the matter that it has authorised the Central Government to take over the management of the industrial undertaking if immediate action may prevent jeopardy to production or restore production where it has already stopped
The necessity for immediate action by the Central Government contemplated by Parliament is definitely indicative of the exclusion of natural justice
It is not as if the owner of the industrial undertaking is left with no remedy
He may move the Central Government under Sec
18 F to cancel the order made under Sec
18 AA
True some mischief affecting the management and top executives may have already been done
On the other hand greater mischief affecting the public economy and the lives of many a thousand worker may have been averted
While on the one hand mere property rights are involved on the other vital public interest is affected
This  again in the light of the need for immediate action contemplated by Parliament is a clear pointer to the exclusion of natural justice
It was submitted by the learned counsel that Sec
18 F did not provide any remedy but merely provided for cancellation of an order of take over on the fulfilment of the purpose of the order of take over or for any other reason which rendered further continuance in force of the order unnecessary because of the happening of subsequent events
According to the learned counsel the basic assumption of Sec
18 F was the validity of the order under Sec
18 A or Sec
18 AA
All that Sec
18 F did was to prescribe conditions for the exercise of the general power which every authority had under Sec
21 of the General Clauses Act to cancel its own earlier order
It was said that if Sec
18 F could be said to impliedly exclude natural justice there is then no reason not to hold that Sec
21 of the General Clauses Act similarly excluded natural justice in every case
I am unable to agree with these submissions of the learned counsel
Neither Sec
18 F of the Industries Development and Regulation Act nor Sec
21 of the General Clauses Act by itself excludes natural justice
The exclusion of natural justice where such exclusion is not express has to be implied by reference 599 to the subject the statute and the statutory situation
Where an express provision in the statute itself provides for a post decisional hearing the other provisions of the statute will have to be read in the light of such provision and the provision for post decisional hearing may then clinch the issue where pre decisional natural justice appears to be excluded on the other terms of the statute
That a post decisional hearing may also be had by the terms of Sec
21 of the General Clauses Act may not necessarily help in the interpretation of the provisions of the statute concerned
On the other hand even the general provision contained in Sec
21 of the General Clauses Act may be sufficient to so interpret the terms of a given statute as to exclude natural justice
As I said it depends on the subject statute and the statutory situation
I am therefore satisfied that the principles of natural justice are not attracted to the situations contemplated by Sec
18 AA of the Industries Development and Regulation Act
In view of the order proposed by my learned brothers Sarkaria and Desai JJ
I do not propose to consider the other questions
ORDER As per majority decision the appeals are allowed
N K A Appeals allowed


Summary:
The Industries Development and Regulation Act 1951 empowers the Union of India in the public interest to take under its control the industries specified in the First Schedule to the Act
Item 23 of the First Schedule relates to textiles of various categories
Section 15 authorises the Central Government to make or cause to be made a full and complete investigation into the circumstances of the case if the Central Government is of the opinion that a in respect of any scheduled industry or industrial undertaking or undertakings i there has been or is likely to be a substantial fall in the volume of production for which having regard to the economic conditions prevailing there is no justification or ii there has been or is likely to be a marked deterioration in the quality of any article which could have been or can be avoided or iii there has been or is likely to be a rise in the price of any article  for which there is no justification or iv it is necessary to take any such action for the purpose of conserving any resources of national importance or b any industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest
After the investigation is made under section 15 section 161 empowers the Central Government if action is desirable to issue appropriate directions and section 162 provides for the issue of interim directions by the Central Government pending investigation under section 15
Chapter III A consisting of Sections 18A 18 AA 18 B 18 C 18 D 18 E and 18 F deal with direct management or control of Industrial Undertakings by Central Government in certain cases
18 A empowers the Central Government by notified order to authorise any person or body of persons to take over the management of the whole or any part of an industrial undertaking or to exercise in respect of the whole or any part of the undertaking such functions of control as may be specified in the order if the Central Government is of opinion that a an industrial undertaking to which directions have been issued in pursuance of section 16 has failed to comply with such directions or b an industrial undertaking in respect of which an investigation has been made under 534 section 15 is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest
Section 18AA5 stipulates that the provisions of Sections 18 B to 18 E shall be applicable to the industrial undertaking in respect of which an order has been made under section 18 AA even as they apply to an industrial undertaking taken over under Section 18 A Section 18 F empowers the Central Government to cancel the order made under section 18 A if it appears that the purpose of the order has been fulfilled or it is not necessary that the order should remain in force
The appellant Ms Swadeshi Cotton Mills was taken over by the Government of India by a notification dated April 13 1978 in exercise of the powers conferred on it under clause a of sub section 1 of section 18AA of the Industries Development and Regulation Act 1951 on the ground that the company had by creation of encumbrances on the assets of its industrial undertakings brought about a situation which had affected and is likely to further affect the production of articles manufactured or produced by it and that immediate action is necessary to prevent such a situation
The Government authorised the National Textile Corporation Limited to take over the management subject to the conditions that the authorised person shall comply with all the directions issued from time to time by the Central Government and that the authorised person shall hold office for a period of five years
The appellant Mills challenged the aforesaid order in a writ petition in the High Court
The case was heard by a Full Bench of five Judges to consider the question whether in construing section 18AA of the Industries Development and Regulation Act 1951 compliance with the principle of audi alteram partem is to be implied and whether hearing is to be given to the parties who would be affected by the order to be passed prior to the passing of the order or whether hearing can be given after the order is passed and whether the order passed under the said Section is vitiated by not giving of such hearing and whether such vice can be cured
The Bench by a majority answered the three questions as follows a Section 18AA1ab excludes the giving of prior hearing to the party who would be affected by order thereunder
b Section 18 F expressly provides for a post decisional hearing to the owner of the industrial undertaking the management of which is taken over under section 18AA to have the order made under section 18AA cancelled on any relevant ground
c As the taking over of management under section 18A is not vitiated by the failure to grant prior hearing the question of any such vice being cured by a grant of a subsequent hearing does not arise
The minority however held that in compliance with the principles of natural justice prior hearing to the owner of the undertaking was required to be given before the passing of an order under section 18AA that the second question did not arise as the denial of a prior hearing would not cure the vice by the 535 grant of subsequent hearing but it would be open to the Court to moderate the relief in such a way that the order is kept alive to the extent necessary until the making of the fresh order to subserve public interest and to make appropriate directions
After the decision on the reference the case was reheard on merits by a Full Bench of three Judges and the writ petition was allowed in part
The challenge to the validity of the order being rejected but insofar as the impugned order seeking to take over the corporate entity of the company the corporate entity of the subsidiary and its assets the petition was allowed and the respondents the Union of India and the authorised person were directed to release from its control and custody andor deliver possession of any assets or property of the company which were not referable to the industrial undertakings
Appeals to this Court were filed on behalf of the Company as well as by the Union of India and the National Textile Corporation
Two propositions were propounded on behalf of the company that a Whether it was necessary to observe the rules of natural justice before issuing a notified order under section 18AA1a and further whether section 18 F impliedly excludes rules of natural justice relating to prior hearing and it was contended 1 the mere use of the word immediate  in sub clause a of section 18AA does not show a legislative intent to exclude the application of audi alteram partem rule altogether
2 The word immediate  in clause a has been used in contra distinction to investigate 
It only means that under section 18AA action can be taken without prior investigation under section 15
The use of the word immediate  in section 18AA1a only dispenses with investigation under section 15 and not with the principle of audi alteram partem altogether and this is indicated by the marginal note of section 18A and para 3 of the Statement of Objects and Reasons of the Amendment Bill which inserted section 18AA in 1971
3 The word immediate  occurs only in clause a and not in clause b of section 18AA1
It would be odd if intention to exclude this principle of natural justice is spelt out in one clause of the sub section when the other clause does not exclude it
4 Section 18 F does not exclude a pre decisional hearing
The so called post decisional hearing contemplated by section 18 F cannot be and is not intended to be a substitute for a pre decisional hearing
5 Section 18F incorporates only a facet albeit qualified of section 21 of the General Clauses Act
The language of the Section implicity prohibits an enquiry into circumstances that led to the passing of the order of take over and under it the aggrieved person is not entitled to show that on merits the order was void ab initio
6 Immediacy  does not exclude a duty to act fairly because even an emergent situation can co exist with the canons of natural justice
The only effect of urgency on the application of the principle of fair hearing would be that the width form and duration of the hearing would be tailored to the situation and reduced to the reasonable minimum so that it does not delay and defeat the purpose of the contemplated action
7 Where the civil consequences of the administrative action are grave and its effect is highly prejudicial to the rights and interests of the person affected and there is nothing in the language and scheme of the statute which unequivocally excludes a fair pre decisional hearing and the post decisional hearing provided therein is not a real remedial hearing equitable to a full right of appeal the Court should be loath to infer a legislative intent to exclude even a minimal fair hearing at the 536 pre decisional stage merely on ground of urgency
8 The Central Government appointed four Government Officials including one from the office of the Textile Commissioner to study the affairs of the Company and to make recommendation
This Official Group submitted its report on February 16 1978
The evidence on the basis of which the impugned order was passed was not disclosed to the appellant company till May 1978 only after it had filed the writ petition in the High Court
If there was anything adverse to the appellants in the survey report there was time enough about six weeks between the submission of the Survey Report and the passing of the impugned order for giving a short reasonable opportunity to the appellants to explain the adverse findings against them
If there was immediacy situational modifications could be made to meet the requirement of fairness by reducing the period of notice that even the manner and form of such notice could be simplified to eliminate delay that telephonic notice or short opportunity for furnishing their explanation to the Company might have satisfied the requirements of natural justice
Such an opportunity of hearing could have been given after the passing of a conditional tentative order and before its enforcement under section 18AA
For the interregnum suitable interim action such as freezing the assets of the Company or restraining the Company from creating further encumbrances could be taken under section 16
On behalf of the Union of India and the Authorised Officer it was contended that 1 the presumption in favour of audi alteram partem rule stands impliedly displaced by the language scheme setting and the purpose of the provision in section 18AA
2 Section 18AA on its plain terms deals with situations where immediate preventive action is required
The paramount concern is to avoid serious problems which may be caused by fall in production
The purpose of an order under section 18AA is not to condemn the owner but to protect the scheduled industry
The issue under section 18AA is not solely between the Government and the management of the industrial undertaking
The object of taking action under this Section is to protect other outside interests of the community at large and the workers
3 The rule of natural justice to give a hearing has been incorporated in section 18 F which gives an opportunity of a post decisional hearing to the owner of the undertaking who if he feels aggrieved can on his application be heard to show that even the original order under section 18AA was passed on invalid grounds and should be cancelled or rescinded
4 On a true construction of section 18AA read with section 18 F the requirements of natural justice and fair play can be read into the statute only insofar as conformance to such canons can reasonably and realistically be required of it by the provision for a remedial hearing at a subsequent stage
5 Under section 18 F the Central Government exercises curial functions and that Section confers on the aggrieved owner a right to apply to the Government to cancel the order of take over
This section casts an obligation on the Central Government to deal with and dispose of an application filed thereunder with reasonable expedition
Allowing the appeal by the Company  HELD Sarkaria  Desai JJ
per Chinnappa Reddy J dissenting In the facts and circumstances of the instant case there has been a noncompliance with the implied requirement of the audi alteram partem rule of 537 natural justice at the pre decisional stage
The impugned order could be struck down as invalid on that score alone
But in view of the commitment  concession that a hearing would be afforded to the Company the case is remitted to the Central Government to give a full fair and effective hearing
587G H 588C 1
The phrase natural justice  is not capable of a static and precise definition
It cannot be imprisoned in the straight jacket of a cast iron formula
Rules of natural justice are not embodied rules
Hence not possible to make an exhaustive catalogue of such rules
Two fundamental maxims of natural justice have now become deeply and indelibly ingrained in the common consciousness of mankind as pre eminently necessary to ensure that the law is applied impartially objectively and fairly
These twin principles are i audi alteram partem and ii nemo judex in re sua
Audi alteram partem is a highly effective rule devised by the Courts to ensure that a statutory authority arrives at a just decision and it is calculated to act as a healthy check on the abuse or misuse of power
Its reach should not be narrowed and its applicability circumscribed554C G 2
The rules of natural justice can operate only in areas not covered by any law validly made
If a statutory provision either specifically or by inevitable implication excludes the application of the rules of natural justice then the Court cannot ignore the mandate of the Legislature
Whether or not the application of the principles of natural justice in a given case has been excluded in the exercise of statutory power depends upon the language and basic scheme of the provision conferring the power the nature of the power the purpose for which it is conferred and the effect of that power
556A B 3
The maxim audi alteram partem has many facets
Two of them are a notice of the case to be met and b opportunity to explain
The rule cannot be sacrificed at the altar of administrative convenience or celerity for convenience and justice are often not on speaking terms
Difficulties however arise when the statute conferring the power does not expressly exclude this rule but its exclusion is sought by implication due to the presence of certain factors such as urgency where the obligation to give notice and opportunity to be heard would obstruct the taking of prompt action of a preventive or remedial nature
Audi alteram partem rule may be disregarded in an emergent situation where immediate action brooks no delay to prevent some imminent danger or injury or hazard to paramount public interests
Section 133 of the Code of Criminal Procedure empowers the magistrates specified therein to make an exparte conditional order in emergent cases for removal of dangerous public nuisances
Action under section 17 Land Acquisition Act furnishes another such instance
Similarly action on grounds of public safety public health may justify disregard of the rule of prior hearing
556C H 4
Cases where owing to the compulsion of the fact situation or the necessity of taking speedy action no pre decisional hearing is given but the action is followed soon by a full post decisional hearing to the person affected do not in reality constitute an exception to the audi alteram partem rule
To call such cases as exception is a misnomer because they do not exclude fair play in action but adapt it to the urgency of the situation by balancing the competing claims of hurry and hearing
560H 561A 5
The general principle as distinguished from an absolute rule of uniform application seems to be that where a statute does not in terms exclude this rule 538 of prior hearing but contemplates a post decisional hearing amounting to a full review of the original order on merits then such a statute would be construed as excluding the audi alteram partem rule at the pre decisional stage
561G 6
If the statute conferring the power is silent with regard to the giving of pre decisional hearing to the person affected and the administrative decision taken by the authority involves civil consequences of a grave nature and no full review or appeal on merits against that decision is provided courts will be extremely reluctant to construe such a statute as excluding the duty of affording even a minimal hearing shorn of all its formal trappings and dilatory features at the pre decisional stage unless viewed pragmatically it would paralyse the administrative process or frustrate the need for utmost promptitude
561H 7i
A comparison of the provisions of Section 18A1b and Section 18AA1c bring out two main points of distinction First action under Section 18A1b can be taken only after an investigation had been made under Section 15 while under Section 18AA1a or b action can be taken without such investigation
The language scheme and setting of Section 18AA read in the light of the Objects and Reasons for enacting this provision make this position clear beyond doubt
Second before taking action under Section 18A1b the Central Government has to form an opinion on the basis of the investigation conducted under section 15 in regard to the existence of the objective fact namely that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest while under section 18A1a the Government has to satisfy itself that the persons incharge of the undertaking have brought about a situation likely to cause fall in production by committing any of the three kinds of acts specified in that provision
This shows that the preliminary objective fact attributable to the persons in charge of the management or affairs of the undertaking on the basis of which action may be taken under section 18A1b is of far wider amplitude than the circumstance the existence of which is a sine qua non for taking action under section 18AA1
The phrase highly detrimental to the scheduled industry or public interest in section 18 A is capable of being construed to cover a large variety of acts or things which may be considered wrong with the manner of running the industry by the management
In contrast with it action under section 18AA1a can be taken only if the Central Government is satisfied with regard to the existence of the twin conditions specifically mentioned therein on the basis of evidence in its possession
569D H 7ii
An analysis of section 18AA1a indicates that as a necessary preliminary to the exercise of the power thereunder the Central Government must be satisfied from documentary or other evidence in its possession in regard to the co existence of two circumstances i that the persons in charge of the industrial undertaking have by committing any of these acts namely reckless investments or creation of incumbrances on the assets of industrial undertaking or by diversion of funds brought about a situation which is likely to affect the production of the article manufactured or produced in the industrial undertaking and ii that immediate action is necessary to prevent such a situation
570B D 8
It cannot be laid down as a general proposition that whenever a statute confers a power on an administrative authority and makes the exercise of that power conditional on the formation of an opinion by that authority in regard 539 to the existence of an immediacy its opinion in regard to that preliminary fact is not open to judicial scrutiny at all
While it may be conceded that an element of subjectivity is always involved in the formation of such an opinion the existence of the circumstances from which the inference constituting the opinion as the sine qua non for action are to be drawn must be demonstrable and the existence of such circumstances if questioned must be proved at least prima facie
571 E G 9
From a plain reading of section 18AA it is clear that it does not expressly in unmistakable and unequivocal terms exclude the application of the audi alteram partem rule at the pre decisional stage
574B In the instant case so far as Kanpur Unit is concerned it was lying closed for more than three months before the passing of the impugned order
There was no immediacy  in relation to that unit which could absolve the Government from the obligation of complying fully with audi alteram partem rule at the pre decisional or pre takeover stage
583A Keshav Mills Co Ltd vs Union of India   Kamla Prasad Khetan vs Union of India   Maneka Gandhi vs Union of India 1978 2 SCR 621 Sukhdev Singh  Ors
vs Bhagatram Sardar Singh   A K Kraipak vs Union of India  Ridge vs Baldwin   196 Heatley vs Tasmanian Racing  Gaming Commission 14 Australian Law Reports 519 Nawabkhan Abbaskhan vs State of Gujarat   State of Orissa vs Dr Bina Pani Dei  Ambalal M Shah vs Hathi Singh Manufacturing Co Ltd  and section L Kapoor vs Jagmohan  Ors
   referred to
Per Chinnappa Reddy J dissenting The principles of natural justice are not attracted to the situations contemplated by section 18AA of Industries Development and Regulation Act
Natural justice like Ultra Vires and Public Policy is a branch of the public law and is a formidable weapon which can be wielded to secure justice to the citizen
While it may be used to protect certain fundamental liberties civil and political rights it may be used as indeed it is used more often than not to protect vested interests and to obstruct the path of progressive change
The time has come to make an appropriate distinction between natural justice in its application to fundamental liberties civil and political rights and natural justice in its application to vested interests
590A B 2
Our constitution as befits the Constitution of a Socialist Secular Democratic Republic recognises the paramountcy of the public weal over the private interest
Natural justice ultra vires public policy or any other rule of interpretation must therefore conform grow and be tailored to serve the public interest and respond to the demands of an evolving society
590C 3i
The principles of natural justice have taken deep root in the judicial conscience of our people
They are now considered so fundamental as to be implicit in every decision making function judicial quasi judicial or administra 540 tive
Where authority functions under a statute and the statute provides for the observance of the principles of natural justice in a particular manner natural justice will have to be observed in that manner and in no other
Where the statute is silent about the observance of the principles of natural justice such statutory silence is taken to imply compliance with the principles of natural justice
Where the conflict is between the public interest and the private interest the presumption must necessarily be weak and may therefore be readily displaced
The presumption is also weak where what are involved are mere property rights
In cases of urgency particularly where the public interest is involved preemptive action may be a strategic necessity
Even in cases of preemptive action if the statute so provides or if the Courts so deem fit in appropriate cases a postponed hearing may be substituted for natural justice
590A C 591F G 3ii
Where natural justice is implied the extent of the implication and the nature of the hearing must vary with the statute the subject and the situation
592B 4
The absence of the expression immediate action  in section 18AA1b does not make any difference
Section 18AA1a refers to a situation where immediate preventive action may avert a disaster whereas section 18AA contemplates a situation where the disaster has occurred and action is necessary to restore normalcy
Restoration of production where production has stopped in a key industry or industrial undertaking is as important and urgent in the public interest as prevention of a situation where production may be affected
Immediate action is therefore as necessary in the situation contemplated by section 18AA1b as in the situation contemplated by section 18AA1a
596 F G 5
The marginal note refers to the power to take over without investigation but there is no sufficient reason to suppose that the word immediate is used only to contra distinguish it from the investigation contemplated by section 15 of the Act though of course a consequence of immediate action under section 18AA may be to dispense with the enquiry under section 15
In fact facts which come to light during the course of an investigation under section 15 may form the basis of action under section 18AA1a
Where in the course of an investigation under section 15 it is discovered that the management have by reckless investments or creation of encumbrances on the assets of the industrial undertaking or by diversion of funds brought about a situation which is likely to affect the production of the articles manufactured or produced in the industrial undertaking if the Government is satisfied that immediate action is necessary to prevent such a situation there is no reason why the Central Government may not straightaway take action under section 18AA1a without waiting for completion of investigation under section 15
597A B 6
Where there is a provision in the statute itself for revocation of the order by the very authority making the decision it appears to be unnecessary to insist upon a pre decisional observance of natural justice
598A 7
The likelihood of production being jeopardized or the stoppage of production in a key industrial undertaking is a matter of grave concern affecting the public interest
Parliament has taken so serious a view of the matter that it has authorised the Central Government to take over the management of the industrial undertaking if immediate action may prevent jeopardy to production or restore production where it has already stopped
The necessity for immediate 541 action by the Central Government contemplated by Parliament is definitely indicative of the exclusion of natural justice
It is not as if the owner of the industrial undertaking is left with no remedy
He may move the Central Government under section 18 F to cancel the order made under section 18AA
598C D 8
Neither section 18 F of the Industries Development and Regulation Act nor section 21 of the General Clauses Act by itself excludes natural justice
The exclusion of natural justice where such exclusion is not express has to be implied by reference to the subject the statute and the statutory situation
Where an express provision in the statute itself provides for a post decisional hearing the other provisions of the Statute will have to be read in the light of such provision and the provision for post decisional hearing may then clinch the issue where pre decisional natural justice appears to be excluded on the other terms of the statute
That a post decisional hearing may also be had by the terms of section 21 of the General Clauses Act may not necessarily help in the interpretation of the provisions of the statute concerned
599 A C Ridge vs Baldwin 1964 AC p 40 Annie G Phillip vs Commissioner of Internal Revenue   John H Fahey vs Paul Mallonee   Margarita Fuentes vs Robert L Shevin Attorney General of Florida  and Lawrence Mitchell vs W T Grant Co   referred to