dedol-hf/india-case-legal-rag huggingface dataset:
the powers conferred upon  them  by  the  impeached   enact-
ment which the court can be called  upon to enforce.   These
is really not much substance in this argument, for according
to  the petitioner the impugned Act is not valid at all  and
consequently the respondents cannot take their stand on this
very Act to defeat the application for a writ in the  nature
of  a  mandamus.  Any way, article 32  of  the  Constitution
gives  us very wide discretion in the matter of framing  our
writs  to suit the exigencies of particular cases,  and  the
application of the petitioner cannot be thrown out simply on
the
901
ground  that  'the  proper writ or direction  has  not  been
prayed for.
    Proceeding  now  to the merits of the  case,  the  first
contention  that has been pressed before us by  the  learned
Counsel for the petitioner is that the effect of the  Shola-
pur  Spinning and Weaving Company Limited (Emergency  Provi-
sions)  Act, has been to take away from the company and  its
shareholders, possession of -property and other interests in
commercial undertaking and vest the same in certain  persons
who  are appointed by the State, and the exercise  of  whose
powers  cannot be directed or controlled in any way  by  the
shareholders.  As  the taking of possession is not  for  any
public  purpose and no provision for compensation  has  been
made  by the law which authorises it, such law, it is  said,
violates  the fundamental  rights guaranteed  under  article
31 of the Constitution.
To  appreciate  the contention, it would  be  convenient
first  of all to advert to the provisions of the  first  two
clauses of article 31 of the Constitution.  The first clause
of article 31 lays down that "no person shall be deprived of
his   property save by authority of law" The  second  clause
provides:  "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 authorising  the
taking  of such possession or such acquisition,  unless  the
law provides for compensation for the property taken  posse-
sion  of  or  acquired and either fixes the  amount  of  the
compensation, or specifies the principles on which, and  the
manner  in which, the compensation is to be  determined  and
given."
    It  is a right inherent in every sovereign to  take  and
appropriate  private property belonging to individual  citi-
zens  for-public  use.  'this right, which is  described  as
eminent  domain  in American law, is like  the  power     of
taxation,  an  offspring of political necessity, and  it  is
supposed to be based upon an implied reservation by  Govern-
ment that private property acquired by its
902
citizens  under its protection may be taken or its use  con-
trolled for public benefit irrespective of the wishes of the
owner. Article 31 (2) of the Constitution prescribes a  two-
fold  limit  within which such superior right of  the  State
should be exercised. One limitation imposed upon acquisition
or taking possession of private property which is implied in
the  clause is that such taking must be for public  purpose.
The other condition is that no property can be taken, unless
the  law  which  authorises such  appropriation  contains  a
provision  for  payment of compensation in the  manner  laid
down in the clause.  So far as article S1 (2) is  concerned,
the  substantial question for our consideration is   whether
the  impugned  legislation  authorises any act amounting  to
acquisition or taking possession of private property  within
the meaning of the clause.
    It cannot be disputed that acquisition means and implies
the acquiring of the entire title of the expropriated owner,
whatever  the nature or extent of that title might be.   The
entire  bundle of rights which were vested in  the  original
holder  would  pass on acquisition to the  acquirer  leaving
nothing  in  the former. In taking possession on  the  other
hand,  the title to the property admittedly remains  in  the
original  holder, though he is excluded from  possession  or
enjoyment of the property.  Article 31 (,?) of the Constitu-
tion itself makes a clear distinction between acquisition of
property  and taking possession of it for a public  purpose,
though  it  places both of them on the same footing  in  the
sense  that a legislation authorising either of  these  acts
must  make  provision  for payment of  compensation  to  the
displaced  or expropriated holder of the property.   In  the
context  in which the word "acquisition" appears in  article
31  (2),  it can only mean and refer to acquisition  of  the
entire interest of the previous holder by transfer of  title
and  I have no hesitation in holding that there is  no  such
acquisition either as regards the property of the company or
of  the  shareholders in the present  case.   The  question,
therefore,  narrows down to this as to whether the  legisla-
tion in
903
question  has  authorised the taking of  possession  of  any
property or interest belonging to the petitioner.
    It  is argued by the learned Attorney-General  that  the
taking of possession as contemplated by article 31 (2) means
the  taking  of possession of the entire  bundle  of  rights
which  the previous holder had, by excluding him from  every
part or item thereof.  If the original holder is still  left
to exercise his possession with regard to some of the rights
which  were  within  the folds of his title,  it  would  not
amount to taking possession of the property for purposes  of
article  31 (2) of the Constitution.  Having laid down  this
proposition  of law, the learned Attorney-General has  taken
us  through the various provisions of the impugned  Act  and
the  contention advanced by him substantially is  that  nei-
ther the company nor the shareholders have been dispossessed
from their property by  reason of the enactment.  As regards
the properties of the company, the directors, who have  been
given  the custody of the property, effects  and  actionable
claims  of the company, are, it is said, to  exercise  their
powers not in their own right but as agents of the  company,
whose  beneficial  interest in all its assets has  not  been
touched  or taken away at all.  No doubt the affairs of  the
company  are to be managed by a body of directors  appointed
by the State and not by the company, but this, it is argued,
would  not  amount to taking possession of any  property  or
interest within the meaning of article 31 (2).  Mr. Chari on
the  other hand, has contended on behalf of  the  petitioner
that  after  the management is taken over by  the  statutory
directors, it cannot be said that the company still  retains
possession or control over its property and assets. Assuming
that  this State management was imposed in the interests  of
the shareholders themselves and that the statutory directors
are  acting as the agents of the company, the possession  of
the statutory directors could not, it is argued, be regarded
in  law  as possession of the company so long  as  they  are
bound  to  act in obedience to the dictates of  the  Central
Government and not of the company itself in the  administra-
tion of its affairs.  Possession of an
904
agent,  it is said, cannot juridically be the possession  of
the  principal, if the agent is to act not according to  the
commands or dictates of the principal, but under the  direc-
tion of an exterior authority.
    There  can be no doubt that there is force in this  con-
tention,  but as I have indicated at the outset, we are  not
concerned  in this case with the larger question as  to  how
far  the  inter-position  of this statutory  management  and
control  amounts  to taking possession of the  property  and
assets belonging to the company. The point for our consider-
ation  is a short one and that is whether by virtue  of  the
impugned  legislation any property or interest of the  peti-
tioner  himself, as a shareholder of the company,  has  been
taken  possession of by the State or an authority  appointed
under it, as contemplated by article 31 (2) of the Constitu-
tion.
    The  petitioner  as  a shareholder  has  undoubtedly  an
interest in the company. His interest is represented by  the
share he holds and  the  share is movable property according
to  the Indian Companies Act with all the incidence of  such
property attached to it. Ordinarily, he is entitled to enjoy
the  income  arising from the shares in the shape  of  divi-
dends; the share like any 'other marketable commodity can be
sold or transferred by way of mortgage or pledge. The  hold-
ing of the share in his name gives him the right to vote  at
the  election of directors and thereby take a  part,  though
indirectly, in the management of the company's affairs.   If
the  majority of shareholders sides with him, he can have  a
resolution passed which would be binding on the company, and
lastly,  he can institute proceedings for winding up of  the
company which may result in a distribution of the net assets
among the shareholders.
    It  cannot be disputed that the petitioner has not  been
dispossessed  in  any  sense of the term of  the  shares  he
holds.   Nobody  has taken the shares away  from  him.   His
legal  and beneficial interest in respect to the  shares  he
holds is left intact.  If the company declares dividend,  he
would  be  entitled to the same. He can  sell  or  otherwise
dispose of the shares at any
      905
time  at his option.  The impugned Act has affected  him  in
this way that his right of voting at the election of  direc-
tors has been kept in abeyance so long as  the management by
the  statutory  director continues;    and as  a  result  of
that,  his right to participate in   the management  of  the
company  has  been abridged to that extent.  His  rights  to
pass resolutions or to institute winding up proceedings have
also been restricted though they are not wholly gone;  these
rights can be exercised only with the consent or sanction of
the  Central  Government.   In my opinion,  from  the  facts
stated above, it cannot be held that the petitioner has been
dispossessed from the property owned by him. I may apply the
test  which Mr. Chari himself formulated.  If  somebody  had
taken possession of the petitioner's shares and was  clothed
with the authority to exercise all the powers which could be
exercised  by the holder of the shares under law, then  even
if  he purported to act as the petitioner's agent and  exer-
cise  these powers for his benefit, the possession  of  such
person would not have been the petitioner's possession if he
was bound to act not under the directions of the  petitioner
or in obedience to his commands but under the directions  of
some other person or authority. There is no doubt whatsoever
that    is not the position in the present case.   The  State
has not usurped the shareholders' right to vote or vested it
in any other authority.  The State appoints directors of its
own  choice but that it does, not in exercise of the  share-
holders' right to vote but in exercise of the powers  vested
in  it by the impugned Act.  Thus there has been no  dispos-
session  of the shareholders from their right of  voting  at
all.  The same reasoning applies to the other rights of  the
shareholders spoken of above, namely, their right of passing
resolutions   and of presenting winding up petition.   These
rights  have  been  restricted undoubtedly and  may  not  be
capable of being exercised to the fullest extent as long  as
the management by the State continues. Whether the  restric-
tions are such as would bring the case within
116
906
the  mischief of article 19 (1) (f) of the  Constitution,  1
will examine presently; but 1 have no hesitation in  holding
that they do not amount to dispossession of the shareholders
from  these  rights in the sense that the rights  have  been
usurped by other people who are exercising them in place  of
the displaced shareholders.
    In  the  view that I have taken it is not  necessary  to
discuss  whether we can accept as sound the  contention  put
forward  by  the  learned  Attorney-General  that  the  word
"property"  as used in article 31 of the  Constitution  con-
notes  the entire property, that is to say the  totality  of
the  rights  which  the ownership of  the  object  connotes.
According to  Mr. Setalvad, if a shareholder is not deprived
of the entirety of his rights which he is entitled to  exer-
cise by reason of his being the owner or holder of the share
and some rights, however insignificant they might be,  still
remain in him, there cannot be any dispossession as  contem-
plated by article 31(2).  It is difficult, in my opinion, to
accept  the contention formulated in such broad terms.   The
test  would  certainly be as to whether the owner  has  been
dispossessed  substantially from the rights held by  him  or
the  loss is only with regard to some minor  ingredients  of
the  proprietory  right.  It is relevant to  refer  in  this
connection to an observation made by Rich J. in a Full Bench
decision of the High Court of Australia,(1) where the  ques-
tion arose as to whether the taking of exclusive  possession
of  a property for an indefinite period of time by the  Com-
monwealth of Australia under Reg. 54 of the National Securi-
ty Regulation amounted to acquisition of property within the
meaning  of  placitum 31, section 51,  of  the  Commonwealth
Constitution.   The majority of the Full Bench answered  the
question  in the affirmative and the main reason upon  which
the  majority  decision was based is thus expressed  in  the
language of Rich J.--
    "Property,  in relation to land, is a bundle  of  rights
exercisable  with  respect to the land.  The  tenant  of  an
unencumbered  estate  in fee simple in  possession  has  the
largest possible bundle.  But there is nothing in
(1) See Minister of Stain for the Army v. Dalziel, 68 C L.R.
p. 261,
      907
the placitum 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 was expropriat-
ing."
    It  is not, however, necessary for my purpose to  pursue
the  matter any further, as in my opinion there has been  no
dispossession of the rights of a shareholder in the  present
case.
    Mr. Chari in course of his opening relied exclusively on
clause  (2) of article 31 of the Constitution.   During  his
reply,  however,  he laid some stress on clause (1)  of  the
article  as well, and his contention seems to be that  there
was  deprivation of property in the present case in  contra-
vention of the terms of this clause.  It is difficult to see
what exactly is the contention of the learned Counsel and in
which  way it assists him for purposes of the present  case.
It  has  been argued by the  learned  Attorney-General  that
clause  (1) of article 31 relates to a power different  from
that  dealt with under clause (2).  According to  him,  what
clause  (1) contemplates is confiscation or  destruction  of
property in exercise of what are known as 'police powers' in
American law, for which no payment of compensation is neces-
sary.  I do not think it proper for purposes of the  present
case  to enter into a discussion on this somewhat  debatable
point which has been raised by the learned Attorney-General.
In  interpreting  the  provisions of  our  Constitution,  we
should go by the plain words used by the Constitution-makers
and the importing of expressions like 'police power ;  which
is a term of variable and indefinite connotation in American
law can only make the task of interpretation more difficult.
It is also not necessary to express any opinion as to wheth-
er  clauses (1) and (2) of article 31 relate to exercise  of
different kinds of powers or they are to be taken as cumula-
tive  provisions  in  relation to  the  same  subjectmatter,
namely,  compulsory  acquisition of property.  If  the  word
"deprived"  as used in clause (1) connotes the idea  of  de-
struction  or  confiscation of property, obviously  no  such
thing has happened in the present
908
case.  Again if clauses (1) and (2) of article 31 have to be
read  together and "deprivation" in clause (1) is given  the
same meaning as compulsory acquisition in clause (2), clause
(1),  which  speaks neither of compensation  nor  of  public
purpose,  would  not by itself, and apart from  clause  (2),
assist  the  petitioner in any way. If the two  clauses  are
read  disjunctively,  the only question that  may  arise  in
connection  with clause (1) is whether or not the   depriva-
tion of property is authorised by law.  Mr. Chari has raised
a  question relating to the validity of the  legislation  on
the  ground of its not being covered by any of the items  in
the  legislative  list and to this question I  would  advert
later  on; but apart from this, clause (1) of article 31  of
the  Constitution seems to me to be   altogether  irrelevant
for purposes of the petitioner's case.
    This  leads  me to the consideration of the  next  point
raised  by  Mr. Chari, namely,  whether  these  restrictions
offend  against  the provision of article  19(1)(f)  of  the
Constitution.
    Article  19(1)  of the Constitution enumerates the  dif-
ferent forms of individual liberty, the protection of  which
is guaranteed by the Constitution. The remaining clauses  of
the  article  prescribe the limits that may be  placed  upon
these  liberties by law, so that they may not conflict  with
public   welfare  or   general  morality.  Article  19(1)(f)
guarantees  to all citizens ' the right to acquire, hold  or
dispose  of  property.' Any infringement of  this  provision
would  amount  to  a violation of  the  fundamental  rights,
unless it comes within the exceptions provided for in clause
(5)  of the article. That clause permits the  imposition  of
reasonable  restrictions  upon  the exercise  of  such  righ
teither  in the interests of the general public or  for  the
protection  of  the interests of any Scheduled  Tribe.   Two
questions,  therefore,  arise in  this  connection:   first,
whether  the  restrictions that have been imposed  upon  the
rights  of  the petitioner as a shareholder in  the  company
under  the Sholapur Act amount to infringement of  his.right
to  acquire, hold or dispose of property within the  meaning
of article 19(1)(f) of the Constitution and
     909
secondly,  if they do interefere  with such rights,  whether
they  are covered by the exceptions 1aid down in clause  (5)
of the article.
    So  far  as the first point is concerned,  it  is  quite
clear  that  there  is no restriction  whatsoever  upon  the
petitioner's  right to acquire and dispose of any  property.
The  shares  which he holds do remain his property  and  his
right  to dispose of them is not lettered in any way. If  to
'hold' a property means to possess it, there is no infringe-
ment  of this right either, for, as I have  stated  already,
the  acts complained of by the petitioner do not  amount  to
dispossession of him from any property in the eye of law. It
is argued that 'holding' includes enjoyment of all  benefits
that are ordinarily attached to the ownership of a property.
The enjoyment of the fruits of a property is undoubtedly  an
incident  of  ownership.   The pecuniary  benefit,  which  a
share.  holder  derives  from the shares he  holds,  is  the
dividend  and  there is no limitation  on  the  petitioner's
right in this respect.  The petitioner undoubtedly has  been
precluded  from exercising his right of voting at the  elec-
tion of directors so long as the statutory directors contin-
ue  to manage the affairs of the company. He cannot pass  an
effective  resolution  in concurrence with the  majority  of
shareholders without the consent or sanction of the  Central
Government and without such sanction, there is also a  disa-
bility  on him to institute any winding up proceedings in  a
court of law.
    In my opinion, these are rights or privileges which  are
appurtenant  to or flow from the ownership of property,  but
by themselves and taken independently, they cannot be  reck-
oned as property capable of being acquired, held or disposed
of as is contemplated by article 19 (1) (f) of the Constitu-
tion.  I do not think that there has been any restriction on
the  rights of a shareholder to hold, acquire or dispose  of
his  share  by reason of the impugned enactment  and  conse-
quently  article  19 (1) (f) of the Constitution  is  of  no
assistance to the petitioner.  In this view, the other point
does not arise for consideration, but I may state here  that
even if it is conceded for argument's sake that the
910
disabilities   imposed  by  the impugned legislation  amount
to restrictions on proprietory right, they may very well  be
supported as reasonable restraints imposed in the  interests
of  the  general  public, viz., to secure the  supply  of  a
commodity essential to the community and to prevent a  seri-
ous unemployment amongst a section of the people.  They are,
therefore, protected completely by clause (5)of article  19.
This disposes of the second point raised by Mr. Chari.
    The next point urged on behalf of the petitioner  raises
an important question of constitutional law which turns upon
the  construction of article 14 of the Constitution.  It  is
urged  by  the learned Counsel for the petitioner  that  the
Sholapur Act is a piece of discriminatory legislation  which
offends against the provision of article 14 of the Constitu-
tion.   Article 14 guarantees to all persons in the territo-
ry of India equality before the law and equal protection  of
the  laws and its entire object, it is said, is  to  prevent
any  person or class of persons from being singled out as  a
special  subject  of  discriminatory  legislation.    It  is
pointed  out  that  the law in this case  has  selected  one
particular company and its shareholders and  has taken  away
from  them  the right to manage their own affairs,  but  the
same treatment has not been meted out to all other companies
or shareholders situated in an identical manner.
     Article 14 of the Constitution, it may be  noted, corre-
sponds  to  the equal protection clause  in  the  Fourteenth
Amendment  of the American Constitution which declares  that
"no  State shall deny to any person within its  jurisdiction
the equal protection of the laws." We have been referred  in
course of the arguments on this point by the learned Counsel
on  both  sides to quite a number of cases  decided  by  the
American  Supreme  Court, where questions turning  upon  the
construction of the 'equal protection' clause in the  Ameri-
can  Constitution  came  up for  consideration.  A  detailed
examination of these reports is neither necessary nor  prof-
itable  for our present purpose but we think we can  cull  a
few general principles from some of the pronouncements of
911
the American Judges which might appear to us to be consonant
with reason and help us in determining the true meaning  and
scope of article 14 of our Constitution.
    I  may  state here that so far as the violation  of  the
equality clause in the Constitution is concerned, the  peti-
tioner,  as a shareholder of the company, has as much  right
to  complain  as the company itself, for his  complaint   is
that   apart   from   the discrimination  made  against  the
company,   the   impugned   legislation  has   discriminated
against  him  and  the other shareholders  of  the   company
as   a   group  vis-a-vis  the  shareholders  of  all  other
companies governed by the Indian Companies Act who  have not
been treated in a similar way.  As the discriminatory treat-
ment has been in respect to the shareholders of this company
alone, any one of the shareholders, whose interests are thus
vitally affected, has a right to complain and it is  immate-
rial  that there has been nodiscrimination inter se  amongst
the shareholders themselves.