dedol-hf/india-case-legal-rag huggingface dataset:
that  the Ordinance or the Act has deprived the  shareholder
of his "property" in the sense in which that word is used in
article  19 (1) (f) and article 31.  The curtailment of  the
incidental privileges, namely, the right to elect directors,
to pass resolutions and to apply for winding up may well  be
supported  as  a reasonable restraint on  the  exercise  and
enjoyment of the shareholder's right of property imposed  in
the  interests of the general public under article  19  (5),
namely,  to secure the supply of an essential commodity  and
to prevent unemployment.
      Learned  counsel  for the petitioner,  however,  urges
that the Ordinance and the Act have infringed the sharehold-
er's  right to property in that he has been deprived of  his
valuable  right  to elect directors, to give  directions  by
passing resolutions and, in case of apprehension of loss, to
present a petition for the winding
923
up of the company.  These rights, it is urged, are by  them-
selves  "property"  and it is of this  "property"  that  the
shareholder is said to have been deprived bythe State  under
a law which does not provide for payment of compensation and
which is, as such, an infraction of the shareholder's funda-
mental  right  to property under article 31 (2).  Two  ques-
tions  arise on this argument.  Are these rights  "property"
within  the meaning of the two articles I have  mentioned  ?
These  rights, as already stated, are, no doubt,  privileges
incidental  to  the ownership of the share which  itself  is
property,  but it cannot, in my opinion, be said that  these
rights, by themselves, and apart from the share are "proper-
ty" within the meaning of those articles, for those articles
only  regard that as "property" which can by itself  be  ac-
quired,  disposed  of or taken possession of. The  right  to
vote for the election of directors, the right to pass  reso-
lutions and the right to present a petition  for winding  up
are personal rights flowing from the ownership of the  share
and  cannot  by themselves and apart from the share  be  ac-
quired or disposed of or taken possession of as contemplated
by  those  articles.  The second question is  assuming  that
these  rights  are by themselves "property ",  what  is  the
effect of the Ordinance and the Act on such "property".   It
is  nobody's case that the Ordinance  or the Act has  autho-
rised any acquisition by the State of this "property" of the
shareholder or that there has in fact been any such acquisi-
tion.  The only question then is whether this "property"  of
the  shareholder, meaning thereby only the rights  mentioned
above,  has been taken possession of by the State.  It  will
be noticed that by the Ordinance or the Act these particular
rights of the shareholder have not been entirely taken away,
for he can still exercise these rights subject 0 course,  to
the  sanction of the Government.  Assuming,   however,  that
the  fetters  placed on these rights are tantamount  to  the
taking  away of the rights altogether, there is  nothing  to
indicate  that  the Ordinance or the Act has,  after  taking
away the rights from the shareholder,
924
vested them in the State or in any other person named by  it
so  as to enable the State or any other person to   exercise
those rights of the shareholder.  The Government undoubtedly
appoints  directors under the Act, but such  appointment  is
made in exercise of the the powers vested in the  Government
by  the  Ordinance  or the Act and not in  exercise  of  the
shareholder's right.  As already indicated, entry 43 in  the
Union List authorises Parliament to make laws with  respect,
amongst other things, to the regulation of trading  corpora-
tions.  There was, therefore, nothing to prevent  Parliament
from  amending the Companies Act or from passing a  new  law
regulating  the management of the company by providing  that
the directors, instead of being elected by the shareholders,
should  be  appointed by the Government.  The  new  law  has
undoubtedly cut down the existing rights of the  shareholder
and thereby deprived the shareholder of his unfettered right
to  appoint directors or to pass resolutions  giving  direc-
tions  or to present a winding up petition.   Such  depriva-
tion,  however, has not vested the rights in the  Government
or  its  nominee.  What has happened to the  rights  of  the
shareholder  is that such rights have been  temporarily  de-
stroyed or kept in abeyance. The result, therefore, has been
that  although the shareholder has been for the  time  being
deprived  of  his "property", assuming these  rights  to  be
"property",  such "property" has not been acquired or  taken
possession  of  by the Government.  If this  be  the  result
brought  about by the Ordinance and the Act, do they  offend
against  the fundamental rights guaranteed by article  31  ?
Article  31 (1) formulates the fundamental right in a  nega-
tive form prohibiting the deprivation of property except  by
authority of law.  It implies that a person may be  deprived
of his property by authority of law.  Article 31 (2) prohib-
its the acquisition or taking  possession of property for  a
public  purpose under any law, unless such law provides  for
payment  of compensation.  It is suggested that clauses  (1)
and  (2)o[  article  31 deal with the  same  topic,  namely,
compulsory acquisition or taking possession
      925
of property, clause (2) being only an elaboration of  clause
(1).   There appear to me to be two objections to this  sug-
gestion.   If  that  were  the  correct  view,  then  clause
(1).must  be held to be wholly redundant and clause (2),  by
itself, would have been sufficient. In the next place,  such
a view would exclude deprivation of property otherwise  than
by acquisition or taking of possession.  One can conceive of
circumstances  where the State may have to deprive a  person
of  his property without acquiring or taking  possession  of
the same. For example, in any emergency, in order to prevent
a  fire spreading, the authorities may have to  demolish  an
intervening  building. This deprivation of property is  sup-
ported  in  the United States of America as an  exercise  of
"police  power ".This deprivation of property  is  different
from  acquisition or taking of possession of property  which
goes  by the name of "eminent domain" in the American   Law.
The construction suggested implies that our Constitution has
dealt  with only the law of "eminent domain ", but  has  not
provided  for deprivation of property in exercise of  police
powers'  '.  I am not prepared to adopt  such  construction,
for  I do not feel pressed to do so by the language used  in
article  31. On the contrary, the language of clause (1)  of
article 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. I think  clause  (1)
enunciates  the  general principle that no person  shall  be
deprived of his property except by authority of law,  which,
put  in  a positive form, implies that a person may  be  de-
prived  of his property, provided he is so deprived  by  au-
thority  of  law. No question of compensation  arises  under
clause  (1). The effect of clause (2) is that  only  certain
kinds  of  deprivation  of property,  namely  those  brought
about by acquisition or taking possession of it, will not be
permissible  under  any law, unless such  law  provides  for
payment of compensation.  If the deprivation of property  is
brought  about  by means other than  acquisition  or  taking
possession  of  it, no compensation is  required,   provided
that  such  deprivation  is by
926
authority of law.  In this case, as already stated, although
the  shareholder has been deprived of certain  rights,  such
deprivation has been by authority of law passed by a  compe-
tent  legislative authority.  This deprivation  having  been
brought  about otherwise than by acquisition or taking  pos-
session  of  such rights, no question  of  compensation  can
arise   and,  therefore,  there can be no  question  of  the
infraction  of fundamental rights under article 31 (2).   It
is  clear,  therefore,  that so far as  the  shareholder  is
concerned there has been no infringement of his  fundamental
rights  under  article  19 (1) (f) or article  31,  and  the
shareholder  cannot  question the constitutionality  of  the
Ordinance or the Act on this ground.
    As  regards the company it is contended that  the  Ordi-
nance  and  the Act by empowering the State to  dismiss  the
managing agent, to discharge the directors elected  by   the
shareholders  and  to appoint new directors have  in  effect
authorised  the State to take possession of the  undertaking
and assets of the company through the new directors appoint-
ed  by  it without paying any compensation  and,  therefore,
such law is repugnant to article 31 (2) of our Constitution.
It  is, however, urged by the learned Attorney-General  that
the  mills  and all other assets now in the  possession  and
custody of the new directors who are only servants or agents
of  the  said  company are, in the eye of the  law,  in  the
possession  and custody of the company and have  not  really
been  taken  possession  of by the  State.   This  argument,
however,  overlooks the fact that in order that the  posses-
sion of the servant or agent may be juridically regarded  as
the  possession of the master or principal, the  servant  or
agent  must be obedient to, and amenable to  the  directions
of, the master or principal.  If the master or principal has
no hand in the appointment of the servant or agent or has no
control  over  him or has no power to dismiss  or  discharge
him,  as  in this case, the possession of  such  servant  or
agent  can hardly, in law, be regarded as the possession  of
the company(1).  In this view of the
(1) See Elements of Law by Markby. 6th Edition. Para 371. p.
192.
927
matter there is great force in the argument that the proper-
ty of the company has been taken possession of by the  State
through  directors who have been appointed by the  State  in
exercise  of the powers conferred by the Ordinance  and  the
Act  and  who  are under the direction and  control  of  the
State and this has been done without payment of any  compen-
sation.  The appropriate legislative authority was no  doubt
induced to enact this law, because,  as the  preamble to the
Ordinance stated, on account of mismanagement and neglect, a
situation had arisen in the affairs of the company which had
prejudicially-affected  the production of an essential  com-
modity and had caused serious unemployment amongst a certain
section  of  the community, but, as stated by Holmes  J.  in
Pennsylvania  Coal  Company v. Mahon(1),  "A  strong  public
desire  to  improve the public condition is  not  enough  to
warrant  achieving  the  desire by a shorter  cut  than  the
constitutional. way of paying for the change."  Here, there-
fore, it may well be argued that the property of the company
having been taken possession of by the State in exercise  of
powers conferred by a law which does not provide for payment
of  any compensation, the fundamental right of  the  company
has, in the eye of the law, been infringed.
If  the  fundamental right of the company has  been  in-
fringed, at all, who can complain about such infringement  ?
Primafacie  the company would be the proper person  to  come
forward  in vindication of its own rights. It is  said  that
the directors having been dismissed, the company cannot act.
This, however, is a misapprehension, for if the Act be  void
on  account  of its being  unconstitutional,  the  directors
appointed  by the shareholders have never in law  been  dis-
charged and are still in the eye of the law the directors of
the  company,  and there was nothing to  prevent  them  from
taking  proceedings in the name of the company at their  own
risk  as to costs.  Seeing that the directors have not  come
forward to make the application on behalf of the company and
in its name the question arises whether
(1) 260 U,S. 393.
928
an individual shareholder can complain.  It is well  settled
in the United States that no one but those whose rights  are
directly  affected by a law can raise the question   of  the
constitutionality   of   that  law.  Thus  in    McCabe   v.
Atchison(1) which  arose  out of a suit filed by five Negros
against five Railway Companies to restrain them from  making
any distinction in service on account of race pursuant to an
Oklahoma Act known as ' 'The Separate Coach Law," in uphold-
ing the dismissal of the suit Hughes J. observed :--
    "It is an elementary principle that in order to  justify
the granting of this extraordinary relief, the complainants'
need of it and the absence of an adequate remedy at law must
clearly appear.  The complaint cannot succeed because  some-
one  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  justi-
fies judicial interference."
In that case there was no allegation that anyone of  the
plaintiffs had ever travelled on anyone of the rail roans or
had requested any accommodation in any of the sleeping  cars
or  that  such request was refused. The same  principle  was
laid  down  in Jeffrey Manufacturing  Company  v.  Blagg(2),
Hendrick  v.  MaCyland(3) and Newark Natural  Gas  and  Fuel
Company  v. The City of Newark(1).  In each of  these  cases
the Court declined to permit the person raising the question
of constitutionality to do so on the ground that his  rights
were not directly affected by the law or Ordinance in  ques-
tion.   On the other hand, in Truax v. Raich(5) and  in  Bu-
chanan  v. Warley(5) the Court allowed the plea  because  in
both the 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 eighty per cent. native born  citi-
zens was
     (1) 235 u.s. 151.      (4) 242 u.s. 403.
     (2) 235 u.s. 571.      (5) 239 u.s. 33.
     (3) 235 U.S. 610       (6) 245 u.s. 60.
929
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  en-
forced, would compel the employer to discharge the  employee
and,  therefore, the employee was directly affected  by  the
statute.   In the second of the two last mentioned  cases  a
city  Ordinance  prevented  the occupation of a  plot  by  a
colored 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 have 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  con-
stitutional  rights  involved only  the rights  of  coloured
persons  and the vendor was a white 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.   It is, therefore, clear that the  constitutional
validity  of a law can be challenged only by a person  whose
interest  is  directly affected by the law.   The   question
then  arises   whether  the infringement  of  the  company's
rights  so directly affects its shareholders as  to  entitle
any  of  its  shareholders to  question  the  constitutional
validity  of the law infringing the company's  rights.   The
question  has been answered in the negative by  the  Supreme
Court of the United States in Darnell v. The State of  Indi-
ana(1).  In  that case the owner of a share in  a  Tennessee
corporation  was  not allowed to complain  that  an  Indiana
law discriminated against Tennessee corporations in that  it
did not make any allowance, as it did in the case of Indiana
corporations, where the corporation
(1) 226 U.S. 388.
119
930
  had property  taxed within the State.  This is in   accord
with the well established legal principle that a corporation
is  a  legal 'entity capable of holding pro   perty  and  of
suing  or being sued and the corporators   are not, in  con-
templation of law, the owners of the  assets of the corpora-
tion.   In all the cases referred to  above the question  of
constitutionality was raised in   connection with the  equal
protection  clause  in  the   Fourteenth  Amendment  of  the
American  Federal Constitution.  If  such  be  the  require-
ments  of  law  in  connection  with the  equal   protection
clause   which corresponds to  our article  14, it   appears
to  me  to follow  that only a person who is the   owner  of
the property can  raise the question  of   constitutionality
under  article  31 of  a  law  by   which he is so  deprived
of his property.  If direct interest is necessary to  permit
a  person to raise the question of  constitutionality  under
article  14,  a  direct  interest in the  property  will,  I
apprehend, be necessary  to entitle a person to challenge  a
law  which is said to  infringe the right to  that  property
under  article  31.  In my opinion, although  a  shareholder
may,  in a sense  be interested to see that the  company  of
which  he is a  shareholder is not deprived of its  property
he  cannot,  as held in Darnell v. Indiana(1), be  heard  to
complain,   in  his own name and on his own behalf,  of  the
infringement  of  the fundamental right to property  of  the
company,  for,  in law, his own right to  property  has  not
been  infringed  as  he is not the owner  of  the  company's
properties.  An interest in the company owning an  undertak-
ing  is  not  an interest in the  undertaking  itself.   The
interest  in  the company which owns an undertaking  is  the
"property" of the shareholder under  article 31 (2), but the
undertaking  is the property of the company and not that  of
the  shareholder  and the latter cannot be said  to  have  a
direct interest in the property of the company. This is  the
inevitable  result  of attributing a legal personality to  a
corporation.  The proceedings for a writ in the nature of  a
writ  of  habeas corpus appear to be somewhat different  for
the
(1) 226 u.S. 338
931
rules governing those proceedings permit, besides the person
imprisoned, any person, provided he is not an utter  strang-
er,  but is at least a friend or relation of the  imprisoned
person, to apply for that particular writ. But that  special
rule  does  not appear to be applicable to the  other  writs
which  require a direct and tangible interest in the  appli-
cant to support his application. This must also be the  case
where  the  applicant  seeks to raise the  question  of  the
constitutionality of a under articles 14, 19 and 31.
    For  the reasons set out  above the  present  petitioner
cannot  raise  the  question of  constitutionality  of   the
impugned law under article 31.  He cannot  complain  of  any
infringement   of  his own rights as a shareholder,  because
his  "property" has  not  been acquired or taken  possession
of  by the State although he has been deprived of his  right
to vote and to present a winding up petition by authority of
law.   Nor can he complain of an infringement of the  compa-
ny's right to property because he is not, in the eye of law,
the  owner of the property in question and  accordingly  not
directly  interested in  it.  In certain  exceptional  cases
where  the  company's property is injured  by  outsiders,  a
shareholder  may,  under the English law, alter  making  all
endeavours to induce the persons in charge of the affairs of
the company to take steps, file a suit on behalf of  himself
and other shareholders for redressing the wrong done to  the
company, but that principle does not apply here for this  is
not a suit, nor has it been shown that any attempt was  made
by the petitioner to induce the old directors to take  steps
nor  do these proceedings purport to have been taken by  the
petitioner  on behalf of himself and the other  shareholders
of the.company.
    The only other ground on which the Ordinance and the Act
have been challenged is that they infringe the the fundamen-
tal  rights  guaranteed by article 14 of  the  Constitution.
"Equal  protection of the laws",  as observed by Day  3.  in
Southern Railway Company v. Greene (1), "means subjection to
equal laws, applying
(1) 216 U.S. 400
932
alike to all in the same situation".  The inhibition of  the
article that the State shall not deny to any person equality
before  the  law  or the equal protection of  the  laws  was
designed to protect all persons against legislative discrim-
ination amongst equals and to prevent any person or class of
persons  from  being singled out as a  special  subject  for
discriminating and hostile legislation.  It does not, howev-
er, mean that every law must have universal application, for
all persons are not, by nature, attainment or circumstances,
in the same position.  The varying needs of different class-
es  of persons often require separate treatment and  it  is,
therefore, established by judicial decisions that the  equal
protection clause of the Fourteenth Amendment of the  Ameri-
can Constitution does not take away from the State the power
to classify persons for  legislative purposes.  This classi-
fication may be on  different bases.  It may be geographical
or according to objects or occupations or the like.  If  law
deals equally with all of a certain well-defined class it is
not  obnoxious and it is not open to the charge of a  denial
of  equal protection  on the ground that it has no  applica-
tion to  other  persons,  for  the  class for whom the   law
has  been  made is different from other persons and,  there-
fore,  there  is no discrimination amongst  equals.   It  is
plain that every classification is in some degree likely' to
produce  some inequality, but mere production of  inequality
is  not by itself enough. The inequality produced, in  order
to  encounter  the challenge of the  Constitution,  must  be
"actually  and palpably unreasonable and  arbitrary."   Said
Day J. in Southern Railway Company v. Greene(1) :---"  While
reasonable  classification is permitted, without doing  vio-
lence to the equal protection of the laws, such  classifica-
tion  must be based upon some real and substantial  distinc-
tion,  bearing a reasonable and just relation to the  things
in respect to which such classification is imposed; and  the
classification  cannot  be arbitrarily  made   without   any
substantial  basis.   Arbitrary selection, it has been said,
cannot  be  justified by calling it  classification".  Quite
conceivably there may be a law
933
relating to a single individual if it is made apparent that,
on  account of some special reasons applicable  only to  him
and inapplicable to anyone else, that single individual is a
class by himself.  In Middieton v. Texas  Power  and   Light
Company(1)   it was pointed  out that  there was  a   strong
presumption  that  a legislature  understood  and  correctly
appreciated the needs of its own people, that  its laws were
directed  to problems made manifest by experience  and  that
the  discriminations were based upon adequate  grounds.   It
was  also pointed out in that case that the burden was  upon
him who attacked a law for unconstitutionality.  In Lindsley
v. Natural Carbonic Gas Company(2) It was also said that one
who assailed the classification made in a law must carry the
burden  of showing that it did not rest upon any  reasonable
basis but was essentially arbitrary.   If there is a classi-