dedol-hf/india-case-legal-rag huggingface dataset:
It  must  be  admitted that the  guarantee  against  the
denial  of equal protection of the laws does not  mean  that
identically the same rules of law should be made  applicable
to  all  persons within the territory of India in  spite  of
differences  of  circumstances and conditions. As  has  been
said  by the Supreme Court of America, "equal protection  of
laws  is a pledge of the protection of equal  laws('),"  and
this  means "subjection to equal laws applying alike to  all
in  the same situation(")." In other words, there should  be
no  discrimination  between  one person and  another  if  as
regards the subject-matter of the legislation their position
is the same. I am unable to accept the argument of Mr. Chari
that a legislation relating to one individual or one  family
or one body corporate would per se violate the guarantee  of
the  equal protection rule.  There can certainly  be  a  law
applying  to  one person or to one group of persons  and  it
cannot be held to be
(1) Yick Wo v. Hopkins, 118 U.S. at 369
(2) Southern Raliway Company v. Greene, 216 U.S 400,412.
912
unconstitutional if it is not  discriminatory in its charac-
ter (1).  It would be bad law "if it arbitrarily selects one
individual or a class of individuals, one corporation or   a
class  of  corporations  and  visits a  penalty  upon  them,
which   is   not  imposed  upon  others   guilty   of   like
delinquency(2)."   The  legislature undoubtedly has  a  wide
field  of choice in determining and classifying the  subject
of  its laws, and if the law deals alike with all of a  cer-
tain  class, it is normally not obnoxious to the  charge  of
denial  of equal protection; but the  classification  should
never be arbitrary.  It must always rest upon some real  and
substantial distinction bearing a reasonable and just  rela-
tion to the things in respect to which the classification is
made; and classification made without any' substantial basis
should be regarded as invalid(3).
    The  question  is whether judged by this test  the   im-
pugned  Act  can be said to have contravened  the  provision
embodiedin  article 14 of the Constitution.   Obviously  the
Act  purports  to  make provisions which are  of  a  drastic
character  and against the general law of the land  as  laid
down in the Indian Companies Act, in regard to  the   admin-
istration  and management of the affairs of one  company  in
indian  territory.  The Act itself gives no reason  for  the
legislation but the Ordinance, which was a precursor of  the
Act expressly stated why the legislation was necessary.   It
said  that owing to  mismanagement and neglect, a  situation
had arisen in the affairs of the company which prejudicially
affected  the  production  of an  essential  commodity   and
caused serious unemployment amongst a certain section of the
community. Mr. Chari's contention in substance is that there
are various textile companies in  India situated in a  simi-
lar  manner as the Sholapur company, against which the  same
charges could be brought and for the control and  regulation
of which all the reasons that are mentioned in the  preamble
to the Ordinance
(1) Willis Constitutional Law, p. 580.
(2) Gulf C. &  S. F.R. Co. v. Ellis. 163 U.S, 150, at 159.
(3) Southern Railway Co. v. Greene, 216 US. 400, at 412
913
could be applied.  Yet, it is said, the legislation has been
passed  with regard to this one company alone. The  argument
seems plausible at first sight, but on a closer  examination
I  do not think that I can accept it as sound.  It  must  be
conceded  that  the  Legislature has a  wide  discretion  in
determining  the   subject  matter of its laws.   It  is  an
accepted doctrine of the American Courts and which seems  to
me  to be well founded  on  principle, that the  presumption
is  favour of the constitutionality of an enactment and  the
burden  is  upon him who attacks it to show that  there  has
been  a transgression of constitutional principles.  As  was
said  by the Supreme Court of America in Middleton v.  Texas
Power  and  Light Company(1), 'It must be  presumed  that  a
Legislature  understands  and  correctly  appreciates    the
needs   of  its own people, that  its laws are  directed  to
problems  made  manifest by experience  and  that        its
discriminations   are  based  upon  adequate       grounds."
This  being  the position,  it is for  the    petitioner  to
establish   facts  which  would  prove  that  the  selection
of this particular subject by the Legislature is  unreasona-
ble  and based upon arbitrary grounds. No  allegations  were
made in the petition and no materials were placed before  us
to  show  as to whether there are other companies  in  India
which come precisely under the same category as the Sholapur
Spinning  and Weaving Company and the reasons  for  imposing
control upon the latter as mentioned in the preamble to  the
Ordinance  are applicable to them as well. Mr. Chari  argues
that  these  are  matters of common knowledge  of  which  we
should  take judicial notice.  I do not think that  this  is
the  correct  line of approach.  It is quite true  that  the
Legislature  has,  in this instance, proceeded  against  one
company only and its shareholders; but even one  corporation
or a group of persons can be taken as a class by itself  for
the purpose of legislation, provided it exhibits some excep-
tional  features  which  are not possessed  by  others.  The
courts should prima facie
(1) 219 u.s. 152 at p. 157.
117
914
lean  in favour of constitutionality and should support  the
legislation  if  it is possible to do so on  any  reasonable
ground, and it is for the party who attacks the validity  of
the  legislation  to place all materials  before  the  court
which  would go to show that the selection is arbitrary  and
unsupportable.   Throwing out of vague hints that there  may
be other instances of similar nature is not enough for  this
purpose.   We have not even before us any statement on  oath
by  the petitioner that what has been alleged  against  this
particular  company may be said against other  companies  as
well. If there was any such statement, the respondents could
have placed before us the whole string of events that led up
to the passing of this legislation. If we are to take  judi-
cial notice of the existence of similar other badly  managed
companies,  we  must  take notice also of  the  facts  which
appear  in the parliamentary proceedings in connection  with
this legislation which leave been referred to by my  learned
brother,  Fazl Ali J. in his judgment and which would go  to
establish that the facts connected with this corporation are
indeed exceptional and the discrimination that has been made
can be supported on just and reasonable grounds.  I purpose-
ly  refrain from alluding to these facts or basing my  deci-
sion thereon as we had no opportunity of investigating  them
properly  during  the  course of the  hearing.   As  matters
stand,  no  proper materials have been placed before  us  by
either  side and as I am unable to say that the  legislature
cannot be supported on any reasonable ground, I think it  to
be  extremely  risky to overthrow it on  mere  suspicion  or
vague conjectures. If it is possible to imagine or think  of
cases  of other companies where similar or identical  condi-
tions  might prevail, it is also not impossible to  conceive
of  something"  peculiar" or "unusual" to  this  corporation
which  led the legislature to intervene in its  affairs.  As
has  been  laid down by the Supreme Court of  America,  "The
Legislature is free to recognise degrees of harm and it  may
confine  its restrictions to those cases where the  need  is
deemed to be the clearest"(1). We should
(1) Radics, v. New York, 264 U.S.
915
bear in mind that a corporation, which is engaged in produc-
tion of a commodity  vitally essential to the community, has
a  social character of its own, and it must not be  regarded
as  the concern primarily or only of those who invest  their
money  in it. If its possibilities  are large and it  had  a
prosperous  and useful career for a long period of time  and
is about to collapse not for any economic reason but through
sheer  perversity of the controlling authority,  one  cannot
say  that the legislature has no authority to treat it as  a
class  by itself and make special legislation applicable  to
it  alone  in the interests of the community at  large.  The
combination  of circumstances which are present here may  be
of  such  unique character as could not be existing  in  any
other  institution.  But all these, I must say, are  matters
which  require  investigation on proper materials  which  we
have not got before us in the present case. In these circum-
stances  I am constrained to hold that the present  applica-
tion must fail on the simple ground that the petitioner made
no attempt to discharge the primafacie burden that lay  upon
him  and did not place before us the materials upon which  a
proper  decision  on the point could be arrived at.   In  my
opinion  , therefore, the attack on the legislation  on  the
ground  of  the  denial of equal protection  of  law  cannot
succeed.
    The  only other thing that requires to be considered  is
the  argument of Mr. Chari that the law in question  is  in-
valid as it is not covered by any of the items in the legis-
lative list.  In my opinion, this argument has no substance.
What the law has attempted to do is to regulate the  affairs
of this company by laying down certain special rules for its
management and administration.  It is fully covered by  item
No. 43 of the Union List which speaks inter alia of  "incor-
poration,    regulation   and   winding   up   of    trading
corporations."
The  result  is that the application fails and  is  dis-
missed with costs.
    DAS J.--As I have arrived at a conclusion different from
that reached by the majority of this Court, I
916
consider it proper, out of my respect for the opinion of  my
learned colleagues, to state the reasons for my  conclusions
in some detail.
    On  January  9,  1950, the  Governor-General  of  India,
acting  under  section 42 of the Government  of  India  Act,
1935,  promulgated an Ordinance, being Ordinance No.  II  of
1950, concenrning the Sholapur Spinning and Weaving Company,
Limited,  (hereafter referred to as the said  company).  The
preambles  and  the provisions of the  Ordinance  have  been
referred  to in the judgment just delivered by Mukherjea  J.
and need  not  be recapitulated by me in detail.  Suffice it
to  say  that the net result of the Ordinance was  that  the
managing  agents  of the said company  were  dismissed,  the
directors holding office at the  time  automatically vacated
their  office,  the Government was  authorised  to  nominate
directors,  the rights of the shareholders of  this  company
were  curtailed  in that it was made unlawful for  them   to
nominate  or  appoint any director, no resolution passed  by
them  could be given effect to without the sanction  of  the
Government  and no proceeding for winding up could be  taken
by  them without such sanction, and power was given  to  the
Government  to further modify the provisions of  the  Indian
Companies Act in its application to the said company.
    On  the very day that the Ordinance was promulgated  the
Central  Government  acting under section 15  delegated  all
its  powers  to the Government  of Bombay.   On January  10,
1950, the Government of Bombay appointed Respondents Nos.  3
to 7 as the new directors.  On March 2, 1950, Respondent No.
5 having resigned, Respondent No. 8 was appointed a director
in  his place and on the same day Respondent No. 9 was  also
appointed as a director.  In the meantime the new  Constitu-
tion  had come into force on January 26, 1950.  On  February
7, 1950, the new directors passed a resolution sanctioning a
call  for Rs. 50 on the preference shares. Thereupon a  suit
being Suit No. 438 of 1950 was filed in the High Court of
917
Bombay by one Dwarkadas Shrinivas against the new  directors
challenging  the validity of the Ordinance and the right  of
the  new directors to make the call. Bhagwati J.  who  tried
the suit held that the Ordinance was valid and dismissed the
suit.  An appeal (Appeal No. 48 of 1950) was taken from that
decision  which  was dismissed by a Division  Bench  (Chagla
C.J.  and  Gajendragadkar J.) on August 29,  1950.   In  the
meantime,  on April 7, 1950, the Ordinance was  replaced  by
Act  No. XXVIII of 1950.  The Act  substantially  reproduced
the provisions of the Ordinance except that the preambles to
the  Ordinance were omitted.  On May 29, 1950,  the  present
petition was filed by one Chiranjitlal Chowdhuri.
    The  petitioner claims to be a shareholder of  the  said
company holding 80 preference shares and 3 ordinary  shares.
The preference shares,  according to  him, stand in the name
of  the  Bank of Baroda to whom they are said to  have  been
pledged.  As those preference shares are not  registered  in
the  name  of the petitioner he cannot assert any  right  as
holder  of those shares. According to the  respondents,  the
petitioner  appears  on the register as holder of  only  one
fully  paid  up ordinary share.  For the  purposes  of  this
application,  then,  the petitioner's interest in  the  said
company  must be taken as limited to only one fully paid  up
ordinary share. The respondents are the Union of India,  the
State  of Bombay and the new directors besides  the  company
itself.  The  respondent  No. 5 having resigned,  he  is  no
longer a director and has been wrongly impleaded as respond-
ent.  The reliefs prayed for are that the Ordinance and  the
Act  are ultra vires and void, that the  Central  Government
and  the  State Government and the directors  be  restrained
from  exercising any powers under the Ordinance or the  Act,
that a writ of mandamus be issued restraining the new direc-
tors  from exercising any powers under the Ordinance or  the
Act or from in any manner interfering with the management of
the  affairs of the company under colour of or in  purported
exercise of any powers under the said Ordinance or Act.
918
    The  validity  of  the Ordinance and the  Act  has  been
challenged before us on the following grounds:--(i) that  it
was not within the legislative competence--(a) of the Gover-
nor-General  to  promulgate  the Ordinance, or  (b)  of  the
Parliament to enact the Act, and (ii) that the Ordinance and
the Act infringe the fundamental rights of the  shareholders
as  well  as those of the said company and  are,  therefore,
void and inoperative under article 13.
    Re  (i)-.-The present application has been made  by  the
petitioner under article 52 of the Constitution. Sub-section
(1) of that article guarantees the right to move this  Court
by appropriate proceedings for the enforcement of the rights
conferred by Part [1] of the Constitution.  Sub-section  (2)
empowers this Court to issue directions or orders or  writs,
including  certain specified writs, whichever may be  appro-
priate,  for the enforcement of any of the rights  conferred
by  that Part.  It is clear, therefore, that article 32  can
only  be invoked for the purpose of the enforcement  of  the
fundamental rights.  Article 32 does not permit an  applica-
tion  merely for the purpose of agitating the competence  of
the appropriate legislature in passing any particular enact-
ment  unless the enactment also infringes any of the  funda-
mental rights. In this case the claim is that the  fundamen-
tal rights have been infringed and, therefore, the  question
of legislative competence may also be incidentally raised on
this  application.  It does not appear to me, however,  that
there  is  any substance in this point for, in  my  opinion,
entry 33 of List I of the Seventh Schedule to the Government
of  India Act, 1935, and the corresponding entry 43  of  the
Union List set out in the Seventh Schedule to the  Constitu-
tion  clearly support these pieces of legislation as far  as
the  question of legislative competency is concerned.   Sec-
tions  83A and 83-B of the Indian Companies Act can only  be
supported  as  valid on the ground that  they  regulate  the
management of companies and are, therefore, within the  said
entry.   Likewise, the provisions of the Ordinance  and  the
Act relating to the appointment of directors by the
    919
Government  and the curtailment of the shareholders'  rights
as regards the election of directors, passing of resolutions
giving directions  with  respect  to  the management of  the
company  and  to present a winding up petition  are  matters
touching the management of the company and, as such,  within
the  legislative competence of the  appropriate  legislative
authority.  In my judgment, the Ordinance and the Act cannot
be held to be invalid on the ground of legislative  incompe-
tency of the authority promulgating or passing the same.
    Re  (ii)--The fundamental rights said to have  been  in-
fringed  are  the  right to acquire,  hold  and  dispose  of
property guaranteed to every citizen by Article 19(1)(f) and
the  right to property secured by article 31,  In  Gapalan's
case (1) 1 pointed out that the rights conferred by  article
19 (1) (a) to (e) and (g) would be available to the  citizen
until  he  was, under article 21, deprived of  his  life  or
personal  liberty according to procedure established by  law
and  that  the right to property guaranteed  by  article  19
(1)(f)  would likewise continue until the owner  was,  under
article  31, deprived of such property by authority of  law.
Therefore,  it will be necessary to consider  first  whether
the  shareholder or the company has been deprived of his  or
its property by authority of law under Article 31 for, if he
or it has been so deprived, then the question of his or  its
fundamental right under article 19 (1) (f) will not arise.
The relevant clauses of article 31 run as follows
    "31.   (1) No person shall be deprived of  his  property
save by authority of law.
    (2)  No  property, movable or immovable,  including  any
interest  in,  or in any company owning, any  commercial  or
industrial  undertaking,  shall be taken  possession  of  or
acquired  for public purposes under any  law  authorisingthe
taking  of such possession or such acquisition,  unless  the
law provides for compensation for the property taken posses-
sion of or acquired
 (1) [1950] S.C.R. 88
920
and  either fixes the amount of the compensation, or  speci-
fies  the principles on which, and the manner in which,  the
compensation is to be determined and given."
Article  31 protects every person, whether such'  person
is a citizen or not. and it is wide enough to cover a  natu-
ral person as well as an artificial person.  Whether or not,
having regard to the language used in article 5, a  corpora-
tion  can  be called a citizen and as such entitled  to  the
rights  guaranteed under article 19, it is quite clear  that
the corporation is protected by article 31, for that article
protects every "person" which expression certainly  includes
an artificial person.
    The  contention of the peitioner is that  the  Ordinance
and the Act have infringed his fundamental right to property
as  a  shareholder  in the said company.  Article  31,  like
article  19(1) (f), is concerned with "property ". Both  the
articles  are in the same chapter and deal with  fundamental
rights.   Therefore, it is reasonable to say that  the  word
"property"  must  be given the same  meaning  in  construing
those two articles.  What, then, is the meaning of the  word
"property"?   It may mean either the bundle of rights  which
the  owner  has over or in respect of a thing,  tangible  or
intangible,  or  it  may mean the thing itself  over  or  in
respect of which the owner may exercise these rights. It  is
quite  clear that the Ordinance or the Act has not  deprived
the  shareholder of his share itself.  The share  still  be-
longs  to  the  shareholder.  He is still  entitled  to  the
dividend that may be declared.  He can deal with or  dispose
of  the share as he  pleases.  The learned  Attorney-General
contends that even if the other meaning of the word "proper-
ty"  is  adopted, the shareholder has not been  deprived  of
his"  property" understood in that sense, that is to say  he
has  not been deprived of the entire bundle of rights  which
put  together constitute his "property ". According  to  him
the"  property" of the shareholder, besides and  apart  from
his  right  to elect directors, to pass  resolutions  giving
directions  to  the directors and to present  a  winding  up
petition, consists in his right to participate
921
in the dividends declared on the profits made by the working
of the company and, in case of winding up, to participate in
the  surplus that may be left after meeting the  winding  up
expenses  and  paying the creditors.  Those  last  mentioned
rights, he points out, have not been touched at all and  the
shareholder can yet deal with or dispose of his shares as he
pleases  and  is  still entitled to dividends  if  and  when
declared. Therefore, concludes the learned Attorney-General,
the shareholder cannot complain that he has been deprived of
his "property", for the totality of his rights have not been
taken  away.  The argument thus formulated appears to me  to
be  somewhat too wide, for it will then permit the  legisla-
ture  to authorise the State to acquire or take  possession,
without any compensation, of almost the entire rights of the
owner  leaving to him only a few subsidiary  rights.    This
result could not,  in  my opinion, have been intended by our
Constitution.  As said by Rich J. in the Minister for  State
for  the Army v. Datziel (i) while dealing with  section  31
(XXXI) of the Australian Constitution--
"Property,  in relation to land, is a bundle  of  rights
exercisable  with  respect to the land.  The  tenant  of  an
unencurnbered  estate  in fee simple in possession  has  the
largest possible bundle.  But there is nothing in the placi-
tum to suggest that  the  legislature  was intended to be at
liberty to  free  itself from the restrictive provisions  of
the placitum by taking care to seize something short of  the
whole bundle owned by the person whom it is expropriating."
The  learned Judge then concluded as follows  at p.  286
:-
    "It would in my opinion, be wholly inconsistent with the
language of the placitum to hold that whilst preventing  the
legislature   from  authorising  the acquisition of a  citi-
zen's  full title except upon just terms, it leaves it  open
to  the legislature to seize possession and enjoy  the  full
fruits  of possession indefinitely, on any terms it  chooses
or upon no terms at all."
(1) (1943-1944) 68 C,L.R. 261.
118
922
    In my judgment the question whether the Ordinance or the
Act  has  deprived the shareholder of  his  "property"  must
depend,  for  its answer, on whether it has taken  away  the
substantial bulk of the rights constituting his  "property".
In  other words,  if the rights taken away by the  Ordinance
or  the  Act are such as would render the  rights  left  un-
touched  illusory and practically valueless, then there  can
be  no question that in effect and substance the  "property"
of  the shareholder has been taken away by the Ordinance  or
the Act.  Judged by this test can it be said that the  right
to  dispose of the share and the right to receive  dividend,
if  any,  or to participate in  the surplus in the  case  of
winding up that have been left to the shareholder are  illu-
sory or  practically valueless, because the right to control
the  management  by directors elected by him, the  right  to
pass resolutions giving directions to the directors and  the
right  to present a winding up petition have, for  the  time
being,  been suspended ? I think not.  The right still  pos-
sessed  by  the shareholder are the most  important  of  the
rights constituting his "property", although certain  privi-
leges incidental to the ownership have been put in  abeyance
for the time being.  It is, in my opinion, impossible to say