dedol-hf/india-case-legal-rag huggingface dataset:
affairs  of the Sholapur Spinning and Weaving  Company  Ltd.
which had prejudicially affected the production of an essen-
tial commodity and had caused serious unemployment amongst a
certain section of the community, and that an emergency  had
thereby  arisen which rendered it necessary to make  special
provision  for the proper management and  administration  of
the said company, promulgated an Ordinance, which was subse-
quently  reenacted in the form of an Act of the  Legislature
called  the sholpur Spinning and Weaving Company  (Emergency
Provisions)Act,  1950, the net result of which 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 appoint  new
directors,  the  rights of the shareholders of  the  company
were  curtailed  in the matters of  voting,  appointment  of
directors,  passing of resolutions and applying for  winding
up,  and power was also given to the Government  to  further
modify  the Indian Companies Act in its application  to  the
company; and in accordance with the provisions of the  Ordi-
nance  new  directors were appointed by the  Government.   A
shareholder of the company made an application under Art. 32
of the Constitution for a declaration that the Act was  void
and  for enforcement of his fundamental rights by a writ  of
mandamus  against the Central Government, the Government  of
Bombay  and the directors, restraining them from  exercising
any  powers  under  the Act and from  interfering  with  the
management  of the company, on the ground that the  Act  was
not within the Legislative competence
870
of  the  Parliament  and infringed  his  fundamental  rights
guaranteed by Arts. 19 (1) (f), 31 and 14   of the Constitu-
tion  and  was  consequently void under  Art.  13.       The
company was made a respondent and opposed the petition.
 Held  per KANIA C.J., FAZL ALI, MUKHERJEA and  DAS  JJ.-
(i)  that the impugned Act did not infringe any  fundamental
right  of  the petitioner under Art. 31 (1), as if  did  not
deprive  the company or the petitioner of any property  save
under authority of law;
  (ii) that the impugned Act did not infringe any  fundamen-
tal right guaranteed by Art. 31 (2.) inasmuch as it did  not
authorise  the "acquisition" of any property of the  company
or  of  the shareholders or "the taking possession"  of  the
property of the petitioner, namely, the shares which he held
in the company, though he was disabled from exercising  some
of  the  rights which an ordinary shareholder in  a  company
could  exercise in respect of his shares, such as the  right
to vote, to appoint directors, and to apply for winding  up;
and,  if the Act had authorised the "taking  possession"  of
the property of the company, the petitioner was not entitled
to any relief on that score under Art. 32;
    (iii)  that, as the Act did not impose any  restrictions
on the petitioner's right "to acquire, hold and dispose  of"
his  shares, there was no infringement of Art. 19  (1)  (f);
and  assuming that the restrictions imposed on the right  of
voting etc. were restrictions on the right to acquire,  hold
or dispose of property within Art. 19 (1) (f), such restric-
tions were reasonable restrictions imposed in the  interests
of  the public, namely, to secure the supply of a  commodity
essential to the community and to prevent serious  unemploy-
ment  amongst  a section of the people, and  were  therefore
completely protected by cl. (5) of Art. 19.
    Held  also per KANIA C.J., FAZL ALI, and  MUKHERJEA  JJ.
(PATANJALI SASTRI AND DAS JJ. dissenting).--that though  the
Legislature  had proceeded against one company only and  its
shareholders, inasmuch as even one corporation or a group of
persons can be taken to be class by itself for the  purposes
of legislation, provided there is sufficient basis or reason
for  it and there is a strong presumption in favour  of  the
constitutionality/of  an  enactment, the burden was  on  the
petitioner  to  prove that there were also  other  companies
similarly situated and this company alone had been discrimi-
nated against, and as he had failed to discharge this burden
the impugned Act cannot be held to have denied to the  peti-
tioner the right to equal protection of the laws referred to
in Art. He and the petitioner was not therefore entitled  to
any relief under Art. 32.
Per  PATANJALI  SASTRI J.--As the impugned  Act  plainly
denied  to the shareholders of this particular  company  the
protections of the law relating to incorporated Joint  Stock
Companies  as embodied in the Indian Companies Act.  it  was
Prima facie within
     871
the  inhibition of Art. 14; and, even though when a  law  is
made  applicable  to a class of persons or  things  and  the
classification  is  based on differentia having  a  rational
relation  to the object sought to be attained, it can be  no
objection  to its constitutional validity that its  applica-
tion is found to affect only one person or thing. since  the
impugned Act selected a particular company and imposed  upon
it  and  its shareholders burdens and  disabilities  on  the
ground  of mismanagement and neglect of duty on the part  of
those  charged with the conduct of its undertaking no  ques-
tion  of  reasonable classification arose and  the  Act  was
plainly discriminatory in character and within the constitu-
tional  inhibition of Art. 14.  Whilst all  reasonable  pre-
sumptions must undoubtedly be made in favour of the  consti-
tutional  validity of a law made  competent legislature,  no
such presumption could be raised in this case as on the face
of  it the Act was discriminatory and the  petitioner  could
not  be  called  upon to prove  that  similar  mismanagement
existed  in other companies. The issue was not  whether  the
impugned  Act was ill-advised or not justified by the  facts
on  which it was based but whether it transgressed  the  ex-
plicit  constitutional  restriction  on  legislative   power
imposed by Art. 14.
    Per  DAs J.--The impugned Act, ex facie, is nothing  but
an  arbitrary  selection  of a particular  company  and  its
shareholders for discriminating and hostile treatment,  and,
read  by itself, is palpably an infringement of Art.  14  of
the  Constitution.  Assuming that mismanagement and  neglect
in  conducting  the affairs of a company can be a  basis  of
classification  and that such a classification would bear  a
reasonable relation to the conduct of all delinquent  compa-
nies and shareholders and may therefore create no  inequali-
ty,  a  distinction cannot be made  between  the  delinquent
companies inter se or between shareholders of equally delin-
quent  companies,  and one set cannot he  punished  for  its
delinquency while another set is permitted to. continue,  or
become,  in like manner, delinquent without  any  punishment
unless  there  be some other apparent  difference  in  their
respective  obligations  and  unless there  be  some  cogent
reason why prevention of mismanagement is more imperative in
one  instance than in the other. The argument that the  pre-
sumption being in favour of the Legislature, the onus is  on
the  petitioner to show that there are other individuals  or
companies  equally  guilty  of  mismanagement  prejudicially
affecting  the  production  of an  essential  commodity  and
causing serious unemployment amongst, certain section of the
community  does not, in such circumstances, arise,  for  the
simple reason that here there has been no classification  at
all  and,  in any case, the basis of classification  by  its
very nature is much wider and cannot, in its application, be
limited only to this company and its shareholders; and  that
being so, there is no reason to throw on the petitioner  the
almost  impossible  burden of proving that there  are  other
companies which are in fact precisely and in all particulars
similarly situated.  In any event the petitioner,
872
may  well claim to have discharged the onus of showing  that
this company and its shareholders have been singled out  for
discriminating  treatment  by showing that the Act,  on  the
face of it, has adopted a basis of classification which,  by
its  very nature, cannot be exclusively applicable  to  this
company  and its shareholders but which may be  equally  ap-
plicable  to other companies and their shareholders and  has
penalised  this  particular company  and  its  shareholders,
leaving  out other companies and their shareholders who  may
be  equally guilty of the alleged vice of mismanagement  and
neglect  of  the  type referred to in the  preamble  in  the
Ordinance.
Per  PATANJALI  SASTRI, MUKHERJEA and  DAS  JJ.  (KANIA,
C.J,, dubitante).--In so far as the petitioner's rights as a
shareholder  were  curtailed he was entitled  to  apply  for
relief  under Art. 30, in his own right on the  ground  that
the  Act denied to him the equal protection of the laws  and
therefore  contravened Art. 14 even though the other  share-
holders did not join him in the application.
Per  MUKHERJEA J.--The fundamental rights guaranteed  by
the  Constitution  are available not  merely  to  individual
citizens  but to corporate bodies as well except  where  the
language  of the provision or the nature of the right,  com-
pels the inference that they are applicable only to  natural
persons.  An incorporated company, therefore, can come up to
the Supreme Court for enforcement of its fundamental  rights
and so may the individual shareholders to enforce their own;
but as the company and its shareholders are in law  separate
entities, it would not be open to an individual  shareholder
to complain of a law which affects the fundamental right  of
the  company  except to the extent that  it  constitutes  an
infraction of his own rights as well.  In order to redress a
wrong  to  the  company the action  should  prima  facie  be
brought by the company itself.
Article 32 of the Constitution is not directly concerned
with  the  determination of the constitutional  validity  of
particular enactments, what it aims at is the enforcement of
fundamental  rights  guaranteed by the Constitution  and  to
make  out  a case under the Article it is incumbent  on  the
petitioner  to establish not merely that the law  complained
of  is beyond the competence of the Legislature but that  it
affects or invades his fundamental rights guaranteed by  the
Constitution,  of  which  he could seek  enforcement  by  an
appropriate writ or order.
    Under Art. 32 the Supreme Court has a very wide  discre-
tion  in the matter of framing writs to suit the  exigencies
of  particular  cases and an application under  the  article
cannot  be thrown out simply on the ground that  the  proper
writ or direction has not been prayed for.
    In  the context in which the word "acquisition" is  used
in  Art.  31 i2) it means and implies the acquiring  of  the
entire  title of the expropriated owner whatever the  nature
or extent of that right might be,
     873
    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.   It  means only that there  should  be  no
discrimination between one person and another if as  regards
the subject-matter of the legislation their position is  the
same.
        Quaere  :  Whether the word "property"  in  Art.  31
means the totality of the rights which the ownership of  the
property connotes, and whether clause (1) of Art. 31 contem-
plates  only  confiscation  or destruction  of  property  in
exercise of what are known as police powers in American  law
for which no compensation is necessary.
    DAS  J.--The  question  whether an Act  has  deprived  a
person of his "property" must depend on whether it has taken
away  the  substantial bulk of the rights  constituting  his
property.  Where the most important rights possessed by  the
shareholders of a company are still preserved by an Act even
though certain privileges incidental to the ownership of the
shares have been put in abeyance, the shareholders cannot be
said to have been deprived of their "property" in the  sense
in which that word is used in Art. 19(1) (f) and Art. 31.
If on the face of the law there is no classification  at
all,  or at any rate none on the basis of any apparent  dif-
ference  specially peculiar to the individual or  class  af-
fected  by the law, it is only an instance of  an  arbitrary
selection  of an individual or class for discriminating  and
hostile  legislation and, therefore, no presumption can,  in
such  circumstances, arise at all-  Assuming, however,  that
even  in such a case the onus is thrown on the  complainant,
there can be nothing to prevent him from proving, if he can,
from  the  text of the law itself, that it is  actually  and
palpably unreasonable and arbitrary and thereby  discharging
the initial onus.
    The  right to vote, to elect directors, to pass  resolu-
tions  and  to present an application for  winding  up,  are
privileges incidental to the ownership of a share, but  they
are  not  by  themselves apart from  the  share,  "property"
within the meaning of Art. 19 (1) (f) and Art. 31; and  even
assuming that they are "property" such rights cannot be said
to have been acquired or taken possession of by the  Govern-
ment  in  this  case within Art. 31 (2).   The  language  of
clause (1) of Art. 31 is wider than that of clause (2),  for
deprivation of property may well be brought about  otherwise
than  by acquiring or taking possession of it and in such  a
case no question payment of compensation arises.
   FAZAL  ALI  MUKHERJEA and DAS JJ.--Except in  the  matter
writs in the nature of habsas corpus no one but those  whose
rights are directly affected by a law can raise the question
of  the  constitutionality of a law and claim  relief  under
Art. 39.  A corporation being a different  entity  from  the
shareholders, a
112
874
share-holder  cannot complain on the ground that the  rights
of the company under Arts. 19 (1) (f) or 31 are infringed.
FAZL  ALl J.--A classification which is  arbitrary  and
which  is made without any basis is no classification and  a
proper classification must always rest upon some  difference
and  must hear a reasonable and lust relation to the  things
in respect of which it is proposed.  But the presumption  is
always  in favour of the constitutionality of  an  enactment
and the burden is upon him who attacks it to show that there
has been a clear transgression of constitutional principles.
Though  Art. 14 lays down an important  fundamental  'right,
which  should be closely and vigilantly guarded,  a  doctri-
naire approach which might choke all beneficial  legislation
should not be adopted, in construing it. i
     A.K. Gapalan v. The State ([1950] S.C.R. 87),  Minister
of State for the Army v. Dalziel (68 C.L.R 261), Yick Wo  v.
Hopkins (118 U.S. 356), Southern Railway Co. v. Greene  (216
U.S. 400), Gulf C. & S.F. Co.  Ellis (165 U.S. 150), Middle-
ton v. Texas Power and Light & Co. (249 U.S. 152), Badice v.
New York (264 U.S. Pennsylvania Coal Co. v. Mahon (960  U.S.
3931, McCabe v. Archison (235 U.S. 151), Jeffrey Manufactur-
ing Co. v. Blang (935 U.S. 571), Newark Natural Gas and Fuel
Co.  v.  City of Nework U.S-403), Truax v. Raich  (939  U.S.
33), Buchanan v. W'arley (245 U.S. 60) Darnell v. The  State
of  Indiana (226 U.S. 388), Lindely v. Natural Carbonic  Gas
Co.  (220 U.S. 618), and Barbier v. Connolly (113  U.S.  27)
referred to.
JUDGMENT:
ORIGINAL JURISDICTION: Petition No. 72 of 1950.
Petition under article 32 of the Constitution of India for a
writ of mandamus.
     V.K.T.  Chari, J.S. Dawdo, Alladi Kuppuswami, and  C.R.
Pattabhi Raman, for the petitioner.
     M.C. Setalvad, Attorney-General for India (G. N.  Joshi
with him) for opposite party Nos. 1 and 2.
G.N. Joshi, for opposite party Nos. 3 to 5 and 7 to 10.
     1950.  December  4.  The Court  delivered  Judgment  as
follows.
   KANIA  C.J.--This is an application by the holder of  one
ordinary share of the Sholapur Spinning and Weaving  Company
Ltd. for a writ of mandamus and certain other reliefs  under
article  32  of the Constitution of India.   The  authorized
capital  of  the  company is Rs. 48 lakhs  and  the  paid-up
capital  is Rs. 32 lakhs, half of which is made up of  fully
paid ordinary shares of Rs. 1,000 each.
875
I have read the judgment prepared by Mr. Justice Mukher-
jea.  In respect of the arguments advanced to challenge  the
validity of the impugned Act under articles 31 and 19 of the
Constitution  of India, I agree with his line  of  reasoning
and conclusion and have nothing more to add.
    On  the  question  whether the  impugned  Act  infringes
article 14, two points have to be considered.  The first  is
whether  one individual shareholder can, under  the  circum-
stances  of  the case and particularly when one of  the  re-
spondents  is the company which opposes the petition,  chal-
lenge  the  validity of the Act on the ground that it  is  a
piece  of  discriminatory  legislation,  creates  inequality
before  the law and violates the principle of equal  protec-
tion  of  the laws under article 14 of the  Constitution  of
India.  The  second is whether in fact  the  petitioner  has
shown  that the Act runs contrary to article 14 of the  Con-
stitution.   In this case having regard to my conclusion  on
the  second  point, I do not think it is necessary  to  pro-
nounce  a definite opinion on the first point. I agree  with
the  line  of reasoning and the conclusion  of  Mr.  Justice
Mukherjea as regards the second point relating to the  inva-
lidity of the Act on the ground that it infringes article 14
of the Constitution and have nothing more to add.
    In  my  opinion  therefore this petition  fails  and  is
dismissed with costs.
FAZL-  ALI J.--I am strongly of the opinion that this  peti-
tion should be dismissed with costs.
The  facts  urged in the petition and the points  raised  on
behalf  of the petitioner before us are fully set  forth  in
the judgments of my brethren, Sastri, Mukherjea and Das JJ.,
and  I do not wish to repeat them here. It is sufficient  to
say  that the main grounds on which the   Sholapur  Spinning
and  Weaving  Company (Emergency Provisions) Act, 1950  (Act
No.  XXVIII of 1950), which will hereinafter be referred  to
as "the Act", has been assailed, is that it infringes  three
fundamental rights, these being:--
876
(1)  the  right  to property secured by article  31  of  the
Constitution;
    (2) the right to acquire, hold and dispose of  property,
guaranteed to every citizen by article 19 (1) (f); and
    (3) the right to equal  protection of the laws,  guaran-
teed by article 14.
    It  has  been held in a number of cases  in  the  United
States of America that no one except those whose rights  are
directly  affected  by a law can raise the question  of  the
constitutionality of that law.  This principle has been very
clearly  stated by Hughes J. in McCabe v.  Atchison(1),   in
these  words  :---"It is an elementary  principle  that   in
order to justify the granting of this extraordinary  relief,
the complainant's need of it and the absence of an  adequate
remedy  at law must clearly appear.  The complainant  cannot
succeed because someone else may be hurt.  Nor does it  make
any  difference  that other persons who may be  injured  are
persons  of  the same race or occupation. It  is  the  fact,
clearly established, of injury to the complainant -- not  to
others--which  justifies  judicial  interference."  On  this
statement of the law, with which I entirely agree, the scope
of the discussion on this petition is greatly restricted  at
least  in  regard to the first two fundamental  rights.  The
company  and the shareholders are in law separate  entities,
and if the allegation is made that any property belonging to
the  company has been taken possession of without  compensa-
tion  or the right enjoyed by the company under  article  19
(1)  (f) has been infringed, it would be for the company  to
come  forward to assert or vindicate its own rights and  not
for any individual shareholder to do so.  In this view,  the
only question which has to be answered is whether the  peti-
tioner  has  succeeded  in showing that there  has  been  an
infringement  of his rights as a shareholder under  articles
31  and 19 (1) (f) of the Constitution.  This  question  has
been  so elaborately dealt with by Mukherjea J., that  I  do
not  wish to add anything to what he has said in  his  judg-
ment,  and  all that is necessary for me to say  is  that  I
adopt his conclusions,
(1) 235 u.s. 151.
     877
without  committing  myself  to the acceptance  of  all  his
reasonings.
    The  only serious point, which in my opinion, arises  in
the case is whether article 14 of the Constitution is in any
way infringed by the impugned Act.  This article corresponds
to  the equal protection clause of the Fourteenth  Amendment
of  the Constitution of the United States of America,  which
declares that "no State shall deny to any person within  its
jurisdiction  the equal protection of the laws".   Professor
Willis dealing with this clause sums up the law as  prevail-
ing in the United States in regard to it in these words:--
    "Meaning and effect of the guaranty--The guaranty of the
equal  protection of the laws means the protection of  equal
laws.  It  forbids class legislation, but  does  not  forbid
classification  which  rests  upon  reasonable  grounds   of
distinction.   It  does not prohibit legislation,  which  is
limited either in the objects to which it is directed or  by
the  territory  within which it is to operate.   'It  merely
requires  that  all persons subjected  to  such  legislation
shall  be treated alike under like circumstances and  condi-
tions  both in the privileges conferred and in the  liabili-
ties  imposed.' 'The inhibition of the amendment  ....   was
designed  to  prevent any person or class  of  persons  from
being  singled out as a special subject  for  discriminating
and  hostile legislation'. It does not take from the  states
the power to classify either in the adoption of police laws,
or tax laws, or eminent domain laws, but permits to them the
exercise  of a wide scope of discretion, and nullifies  what
they  do  only  when it is  without  any  reasonable  basis.
Mathematical  nicety and  perfect equality are not required.
Similarity,  not identity of treatment, is enough.   If  any
state  of  facts can reasonably be conceived  to  sustain  a
classification, the existence of that state of facts must be
assumed.  One  who assails a classification must  carry  the
burden of showing that it does not rest upon any  reasonable
basis."(')
    Having  summed up the law in this way, the same  learned
author adds :--"Many different classifications
(1)  Constitutional  Law by Prof.  Willis,  (1st  Edition).
p.579.
878
of persons have been upheld as constitutional. A law  apply-
ing to one person  or one class of persons is constitutional
if there is  sufficient basis or reason for it."  There  can
be   no  doubt   that article 14 provides one  of  the  most
valuable and important guarantees in the Constitution  which
should  not be allowed to be whittled down, and,  while  ac-
cepting  the  statement  of Professor Willis  as  a  correct
exposition  of the principles underlying this  guarantee,  1
wish to lay particular emphasis on the principle  enunciated
by him that any classification which is arbitrary and  which
is made without any basis is no classification and a  proper
classification  must  always rest upon some  difference  and
must  bear a reasonable and just relation to the  things  in
respect of which it is proposed.
    The  petitioner's case is that the shareholders  of  the
Sholapur company have been subjected to discrimination  visa
vis the shareholders of other companies, inasmuch as section
13  of the Act subjects them to the  following  disabilities