Case: Shri Ambalal M. Shah And Another Vs. Hathisingh Manufacturing Co., Ltd

The Central Government made an order under S. 15 of that Act appointing a committee of three persons for the purpose of making full and complete investigation into the circumstances of the case as it was of opinion that there had been or was likely to be a substantial fall in the volume of production in respect of cotton textile manufactured in the industrial undertaking known as Hathisingh Manufacturing Company Ltd., Ahmedabad, for which having regard to the economic conditions prevailing there was no justification. After the committee made its report the Central Government being of opinion thereupon that this industrial undertaking was being managed in a manner highly detrimental to public interest made an order under S. 18A of the Act authorising Ambalal Shah (the first appellant before us) to take over the management of the whole of the said undertaking.2. Against this order the industrial undertaking and its proprietor-who are the two respondents before us-filed a petition in the Gujarat High Court under Art. 226 of the Constitution praying for issue of writs directing the authorised controller and the Union of India not to take over the management on the basis of the order under Section 18A. The main ground on which the application was based was that on a proper construction of S. 18A (1) (b) the Central Government has the right to make an order threreunder only where the investigation made under S. 15 was initiated on the basis of the opinion as mentioned in S. 15(b)-that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest. It was also urged that in fact the committee appointed to investigate had not directed its investigation into the question whether the industrial undertaking was being managed in the manner mentioned above. The other grounds mentioned in the petition which were however abandoned at the time of the hearing included one that the alleged opinion formed by the Government as mentioned in the order under S. 18A was in the absence of any material for the same in the report of the investigating committee and therefore was arbitrary, capricious and mala fide.3. On behalf of the Government and the authorised controller it was urged that the question which one of the five opinions mentioned in S. 15 formed the basis of the investigation under that section was wholly immaterial. The allegation that the investigating committee had not directed its investigation into the question whether the undertaking was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest was also denied.4. The High Court however came to the conclusion that on a correct construction of S. 18A (1) (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 S. 15(b) of the Act. It a so accepted the petitioners contention that no investigation had in fact been held into the question, whether the undertaking was being managed in a manner highly detrimental to public interest. Accordingly it made an order "setting aside the order of the Central Government dated 28th July, 1960, and directing the respondents not to interfere with or take over the management of the undertaking of the first petitioner, namely "Hathising Mills" by virtue of or in pursuance of the said order. It is against this decision that the present appeal is directed.

Court's reasoning:
7. The contention made on behalf of the respondents before us which found favour with the High Court is that when the legislature used the words "an investigation has been made under Section 15" it meant "an investigation has been made under Section 15 based on an opinion of the Central Government that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest". We should have thought that if the legislature wanted to express such an intention it would not have hesitated to use the additional words mentioned above. It was urged however on behalf of the respondents that these further words, viz., "based on an opinion of the Central Government that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest" are implicit in cl. (b) of S. 18A. In his lengthy address to convince us of the correctness of this contention the learned counsel advanced in substance only twoappears to us that where the investigation has been initiated, in respect of an industrial undertaking, on an opinion that there has been or is likely to be a fall in the volume of production for which having regard to the economic conditions there is no justification (S. 15(a)(i)) or an opinion that 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 (S. 15(a) (ii) ) ; or an opinion that there has been or is likely to be a rise in the price of any article for which there is no justification (S. 15(a) (iii) ); or an opinion that it is necessary to take action for the purpose of conserving any resources of national importance (S. 15(a) (iv) ), the investigation in order to be complete must also consider the quality of the management of the undertaking just as it would so consider the quality of management where the investigation is initiated on an opinion that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to publicS. 18 it empowered the person or body of persons appointed to take investigation to choose one or more persons possessing special knowledge to assist in the investigation and further vested the investigating committee with all the powers of the Civil Court under the Code of Civil Procedure for the purpose of taking evidence on oath and for enforcing the attendance of witnesses and compelling the production of documents and material objects. The whole purpose of the legislation would be frustrated unless the investigation could be "full and complete." No investigation which has not examined the quality of management of the industrial undertaking could be said to be full or complete.8. It was next contended that the use of the words "circumstances of the case" shows that the investigation had to be made only into the matter in respect of which the government has formed an opinion and not into anything else. Assuming that it is so and that the investigator has primarily to conduct his investigation where the investigation has been initiated on the basis of an opinion as regards fall in production, into questions as regards such fall; and similarly, where the investigation has been initiated on an opinion as regards the deterioration in quality, into the question of such deterioration, that does not alter the fact that the investigator would have to try to ascertain the causes of the fall in production or the deterioration in quality and this part of the investigation would necessarily include an investigation into the quality of the management.We are satisfied however that the High Court was wrong in its view that it was not established that investigation had in fact been held into this question. We find that the assertion in the petition under Art. 226 that the investigation had not been directed "towards any alleged mis-management of the mills" was denied in the affidavit sworn on behalf of the Union of India. When thereafter on October 10, 1960 affidavits in rejoinder filed on behalf of the petitioners affirmed that "no question was put which would suggest that the committee was investigating into any mismanagement of the mills," an affidavit of Mr. Thomas de Sa, who was a member of the investigating committee was filed on behalf of the Union of India. This affidavit made the categorical assertion that the "committee investigated not only into the question relating to the fall in the volume of production in respect of cotton textiles manufactured in the said industrial undertaking but also made a full and complete investigation into the circumstances of the working of the said industrial undertaking including the management thereof and as to whether the said undertaking was being managed in a manner detrimental to the industry concerned or to public interest," The High Court has thought it fit to reject this testimony of Mr. De Sa for reasons which appear to us to be wholly insufficient. It appears that during the hearing the Advocate-General asked or time to file an affidavit preferably of Mr. P. H. Bhuta who was the non-official member of the committee of investigation but ultimately filed the affidavit of Mr. De Sa and not the affidavit of Mr. Bhuta. The High Court seems to think that as Mr. Bhuta was an independent member of the investigation committee while Mr. De Sa was in the service of the Government Mr. De Sas statement is open to suspicion. In our view such suspicion of high public officials is not ordinarily justified. Mr. De Sa was as much a member of the investigating committee as Mr. Bhuta and so no less competent than Mr. Bhuta to testify as regards the matter in issue. We do not think it right to suspect his honesty merely because he is an officer of the Union of India. The learned judges of the High Court appear also to have lost sight of the fact that the questionnaire which is annexed as annexure X to the affidavit of the second respondent Rajendra Prosad Manek Lal itself includes a number of questions which show unmistakably that the quality of management was being enquired into.16. A circumstance which appears to have weighed with the High Court is that the report of the committee which as the learned judges rightly say would be the best evidence to show "that there was in fact an investigation into the question of the management of the said undertaking" was not produced by the Union of India when called upon to do so by Mr. Nanavati on behalf of the petitioners. It is proper to mention that it does not appear that the learned judges themselves directed or desired the Advocate General to produce the report for their inspection. It further appears that no written application for the production of the document was made on behalf of the petitioners. It does not seem to us to be fair to draw an inference against the Union of India merely because an informal request by the petitioners advocate was not acceded to. In view of what happened in the court below we asked the appellants counsel whether he was prepared to produce the report before us. The learned counsel readily produced the report and after examining the relevant portion where the report deals with the question of management, we read it out in Court so that the respondents counsel could know the exact situation.We have therefore come to the conclusion that the respondents were not entitled to any writ directing these appellants not to give effect to the Governments order under S. 18A(1)(b).