Case: Dwarkadas Shrinivas Of Bombay Vs. The Sholapur Spinning & Weaving Co.Ltd., And Others


Decision reasoning: 1[ds]13. In my opinion, these contentions are not well founded Reference to illustrative pieces of legislation designed on the same pattern is neither very happy nor apposite; on the other hand, it is apt to mislead because except in the case of the Court of Wards Act, all the laws to which reference was made were enacted after the enactment of the Ordinance in question. The different Court of Wards Acts being existing laws have been excepted from the fundamental right guaranteed by Article 31 (2). That being so, they can afford little assistance in judging the validity of the impugnedcompany is debarred from carrying on its business in the manner and according to the terms of its charter. Its old complexion stands changed by the terms of the Ordinance. The Ordinance overrides the directors, deprives theof their legal rights and privileges and completely puts an end to be contract of the managing agents. Without there being any vacancy in the number of directors new directors step in and old directors and managing agents stand dismissed. Exercise of any power by them under the articles is subject to heavy penalties. In this situation it is not possible to subscribe to the contention of the learned AttorneyGeneral that the effect of the Ordinance is that the Central Government has taken over the superintendence of the affairs of the company and that the impugned legislation is merely regulative in character.In the present case, practically all incidents of ownership have been taken over by the State and all that has been left with the company is mere paper ownership. This Ordinance in my judgment is an apposite illustration of what Holmes, C. J., had in mind when he made the following observations in the case already referred tothe semingly absolute protection in respect of private property given by the Constitution is found to be qualified by the police power, the natural tendency of human nature is to extend the qualification more and more until at last private property disappears. We are in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut then the constitutional way of paying for the change and that the general rule is that while property may be regulated to a certain extent but if the regulation goes too far it will be recognized as athe reasons given above I am of the opinion that the impugned statute has overstepped the limits of legitimate social control legislation and has infringed the fundamental right of the company guaranteed to it under Art. 31 (2) of the Constitution and is therefore unconstitutional.In my judgment none of these contentions have any validity. The construction sought to be placed by the learnedon the language of Art. 31 is neither borne out by the phraseology employed in that article nor by the scheme of Part III of the Constitution. It seems to me that our Constitution subject to certain exceptions has guaranteed the fullest protection to private property. It has not only provided that no person can be deprived of property by the executive without legislative sanction but it has further provided that even the legislature cannot deprive a person of his property unless there is a public purpose and then only on payment ofalready said, the Article read as a whole comprehensively defines the States power of eminent domain as distinguished from all its other powers the exercise of which may amount to the taking of private property. The argument that these exceptions were incorporated in Art. 31 by way of abundant caution further stands negatived by the contents of(5) (b) (ii) of the article. Only laws made for the promotion of public health or for prevention of danger to life or property have been excluded from the mischief of clause (2) of the article, while other laws made in exercise of power of social control which deprives a person of property have not been saved from the operation of clause (2). Illustratively, laws made by the State dealing with morality and which may lead to deprivation of property are outside the ambit of the exception clause. A fortiori, any deprivation of property under a law made for promotion of morality would fall within the mischief of clause (2) of Art. 31. It is thus clear that only that form of legislation which promotes public health or prevention of danger of life or property is saved from the provisions of Art. 31 (2), while other laws, made in exercise of the power of social control, if they deprive a person of property, are not saved from the operation of clause (2) of Articlev. Warley,; (1917) 245 US 60 (P). There the court allowed the plea to be raised because in both these cases the person raising it was directly, affected. In the first of the two last mentioned cases an Arizona Act of 1914 requiring employers employing more than five workers to employ not less than eightly per cent native born citizens was challenged by an alien who had been employed as a cook in a restaurant. That statute made a violation of the Act by an employer punishable. The fact that the employment was at will or that the employer and not the employee was subject to prosecution did not prevent the employee from raising the question of constitutionality because the statute, if enforced, would compel the employer to discharge the employee and therefore, the employee was directly affected by the statute.In the second case a city Ordinance prevented the occupation of a plot by a coloured person in a block where a majority of the residences were occupied by white persons. A white man sold his property in such a block to a Negro under a contract which provided that the purchaser should not be required to accept a deed unless he would bave a right, under the laws of the city to occupy the same as a residence. The vendor sued for specific performance and contended that the Ordinance was unconstitutional. Although the alleged denial of constitutional rights involved only the rights of coloured persons and the vendor was a while person, yet it was held that the vendor was directly affected, because the courts below, in view of the Ordinance, declined to enforce his contract and thereby directly affected his right to sell his property.Reference was also made to the case of Dar nell v. The state of Indiana, (1912) 226 US 390 (Q0. That is the only case is which a shareholder was not heard to complain in his own name when the Ordinance infringed the fundamental right of the company, his own rights had not been infringed. In view of this decision my brother Das took the view that Chiranjit Lal who was merely a shareholder and did not suffer any direct injury by the result of the law was not entitled to complain. That may very well have been the correct view in the case of a fully paid up shareholder who had no further liability or who was not likely to suffer in any manner by the enforcement of the Ordinance but the situation of a partly paid up preference shareholder as in this case is quite different and distinguishable and in my judgment the apposite rule to apply to the present case is the one laid down in (1915) 239 US 33 (O), and (1917) 245 US 60 (P).The result is that the plaintiff is entitled to challenge the constitutionality of the Ordinance on the basis that it abridges the companys fundamental right under Art 31 (2). The plaintiff is thus entitled to succeed in this suit which should have been decreed in the terms in which it was laid.38. I am further of the opinion that the question of the locus standi of the plaintiff to raise the plea that the Ordinance being void against the company the directors had no authority to make the call, is really of academic interest in this case because here the company has been impleaded as a defendant. Its old directors have made an application to this court supporting the case of the plaintiff on the ground that the Ordinance is void as it infringes the companys fundamental right under Art. 31 (2). The learnedwhen asked about this application said that it not having only been made at the last stage of the case should not be entertained.I am further of the opinion that the question of the locus standi of the plaintiff to raise the plea that the Ordinance being void against the company the directors had no authority to make the call, is really of academic interest in this case because here the company has been impleaded as a defendant. Its old directors have made an application to this court supporting the case of the plaintiff on the ground that the Ordinance is void as it infringes the companys fundamental right under Art. 31 (2). The learnedn asked about this application said that it not having only been made at the last stage of the case should not bemy view, when the question in issue is one concerning constitutional rights, the matter cannot be viewed purely from a technical angle and if in the interests of doing substantial justice it is necessary to grant permission to the old directors to have their say, technical considerations should not stand in the way of doing so. If the Ordinance qua the company is void, I do not see why the old directors should be debarred from saying so and if it is void qua the company, it can certainly not be sustained qua the shareholders. Some of the directors who are preference shareholders are also represented in the suit as well.1951 SC 41 (B), the question of his locus standi was left open by the Chief Justice. This is what the learned Chief Justicefirst question, is whether one individual shareholder can, under the circumstances of the case and particularly when one of the respondents is the company which opposes the petition, challenge the validity of the Act on the ground that it is a piece of discriminatory legislation ... I do not think it is necessary to pronounce a definite opinion on the firstthat case Patanjali J., as he then was, also did not pronounce any definite opinion on the question so far as the shareholders right to question the invasion of the right to property of the company under Art. 31 was concerned. This is what the learned Judge saidvalidity the argument may have in relation to the petitioners claim based on the alleged invasion of his right of property under Art. 31, there be little doubt that, so far as his claim based on the contravention of Art. 14 is concerned, the petitioner is entitled to relief in his ownlearned Judge did not offer any opinion on the other questions. Mukherjea J. decided the question on grounds somewhat different from that taken by Fazi, Ali J. This is what the learned Judge saiddiscussion of the fundamental rights of the company as such would be outside the purview of our enquiry. It is settled law that in order to redress a wrong done to the company, the action should prima facie be brought by the company itself. It cannot be said that this course is not possible in the circumstances of the present case. As the law is alleged to be unconstitutional, it is open to the old directors of the company who have been ousted from their position by reason of the enactment of maintain that they are directors still in the eye of law, and on that footing the majority of shareholders can also assert the rights of the company as such. None of them however, have come forward to institute any proceeding on behalf of the company. Neither in form not in substance does the present application purport to be one made by the company itself. Indeed, the company is one of the respondents, and opposes theon the basis of this reasoning the situation of the present plaintiff, as already explained is quite different and so is that of the company. In these circumstances it cannot be said that the decision given in AIR 1951 SC 41    (B) is binding on this point, as even the judgments of the Judges forming the majority did not speak with the same voice.