dedol-hf/india-case-legal-rag huggingface dataset:
companies  in this country is embodied in the Companies  Act
and is primafacie within the inhibition of article 14.
    It is argued, however, that article 14 does not make  it
incumbent on the Legislature always to make laws  applicable
to all persons generally, and that it is open to the  Legis-
lature  'to classify persons and things and subject them  to
the operation of a particular law according to the aims  and
objects  which  that  law is designed  to  secure.   In  the
present case, Parliament,
114
890
it was said, came to the conclusion, on the materials placed
before  them,  that the affairs of the  company  were  being
grossly  mismanaged  so  as to result in  the  cessation  of
production  of an essential commodity and serious  unemploy-
ment  amongst  a section of the community.  In view  if  the
detriment  thus caused to public economy, it  was  competent
for Parliament to enact a measure applicable to this company
and its shareholders alone, and Parliament must be the judge
as  to whether the evil which the impugned Act was  designed
to remedy prevailed to such an extent in this company as  to
call for special legislation. Reliance was placed in support
of this argument on certain American decisions dealing  with
the  equal protection clause of the Fourteenth Amendment  of
the  Federal Constitution.  It is, however,  unnecessary  to
discuss  those  decisions here, for it  is  undeniable  that
equal protection of the laws cannot mean that all laws  must
be  quite  general in their character  and  application.'  A
legislature  empowered to make laws on a wide range of  sub-
jects  must  of necessity have the power of  making  special
laws  to attain particular objects and must, for  that  pur-
pose, possess large powers of distinguishing and classifying
the  persons or things to be brought under the operation  of
such  laws, provided the basis of such classification has  a
just and reasonable relation to the object which the  legis-
lature has in view. While, for instance, a classification in
a  law regulating labour in mines or factories may be  based
on  age or sex, it may not b`e based on the colour of  one's
skin.   It is also true that the class of persons to whom  a
law is made applicable may be large or small, and the degree
of harm which has prompted the enactment of a particular law
is a matter within the discretion of the law-makers.  It  is
not  the  province of the court to canvass  the  legislative
judgment in such matters. But the issue here is not  whether
the  impugned  Act was ill-advised or not justified  by  the
facts on which it was based, but whether it transgresses the
explicit  constitutional  restriction on  legislative  power
imposed by article 14.
   891
    It  is obvious that the legislation is  directed  solely
against  a  particular  company  and  shareholders  and  not
against any class or category of companies and no  question,
therefore, of reasonable legislative classification  arises.
If a law is made applicable to a class of persons or  things
and  the classification is based upon differentia  having  a
rational  relation to the object sought to be  attained,  it
can be no objection to its constitutional validity that  its
application  is  found to affect only one person  or  thing.
For instance, a law may be passed imposing  certain restric-
tions  and  burdens on joint stock companies  with  a  share
capital  of, say, Rs. 10 crores and upwards, and it  may  be
found that there is only one such company for the time being
to  which the law could be applied. If other such  companies
are brought into existence in future the law would apply  to
them  also,  and no discrimination would thus  be  involved.
But the impugned Act, which selects this particular  company
and  imposes upon it and its shareholders burdens and  disa-
bilities on the ground of mismanagement and neglect of  duty
on the part of those charged with the conduct of its  under-
taking, is plainly discriminatory in character and is, in my
judgment,  within the constitutional inhibition  of  article
14.   Legislation based upon mismanagement or other  miscon-
duct  as the differentia and made applicable to a  specified
individual  or  corporate body is not far removed  from  the
notorious  parliamentary  procedure  formerly  employed   in
Britain   of   punishing individual delinquents  by  passing
bills  of attainder, and should not, I think, receive  judi-
cial encouragement.
    It  was next urged that the burden of proving  that  the
impugned Act is unconstitutional lay on the petitioner,  and
that,  inasmuch as he has failed to adduce any  evidence  to
show that the selection of this company and its shareholders
for special treatment under the impugned Act was  arbitrary,
the  application must fail.  Whilst  all  reasonable    pre-
sumption  must undoubtedly be made in support of the consti-
tutional validity of a law made by a competent  legislature,
the circumstances of the present case would seem, to my
892
mind to exclude such presumption. Hostile discrimination  is
writ  large  over the face of the impugned Act and  it  dis-
closes no grounds for such legislative intcrvcntion. For all
that  appears no compelling public intercsts were  involved.
Even  the  preamble to the original Ordinance  was  omitted.
Nor  did respondents 1 and 2 file any  counter-statement  in
this  proceeding explaining the circumstances which  led  to
the  enactment of such an extraordinary measure.   There  is
thus  nothing in the record even by way of allegation  which
the petitioner need take steps to rebut.  Supposing,  howev-
er, that the impugned Act was passed on the same grounds  as
were  mentioned in the preamble to the  repealed  Ordinance,
namely, mismanagement  and  neglect prejudicially  affecting
the production of an essential commodity and -causing  seri-
ous  unemployment  amongst a section of the  community,  the
petitioner could hardly be expected to assume the burden  of
showing,  not that the company's affairs were properly  man-
aged,  for  that is not his case, but that there  were  also
other  companies  similarly mismanaged, for  that  is  what,
according  to the respondents, he should prove in  order  to
rebut the presumption of constitutionality.  In other words,
he should be called upon to establish that this company  and
its shareholders were arbitrarily singled out for the  impo-
sition  of the statutory disabilities.  How could the  peti-
tioner discharge such a burden ? Was he to ask for an inves-
tigation  by  the Court of the affairs of  other  industrial
concerns  in  India where also there were strikes  and  lock
outs  resulting in unemployment and cessation of  production
of essential  commodities? Would these companies be  willing
to submit to such an investigation ?  And even so, how is it
possible  to prove that the mismanagement and neglect  which
is  said to have prompted the legislation in regard to  this
company was prevalent in the same degree in other  companies
?  In  such  circumstances, to cast upon  the  petitioner  a
burden of proof which it is as needless for him to assume as
it  is  impracticable to discharge is to lose sight  of  the
realities of the case.
     893
    Lastly,  it was argued that the constitutionality  of  a
statute  could not be impugned under article 32 except by  a
person  whose  rights were infringed by the  enactment.  and
that, inasmuch as there was no infringement  of the individ-
ual right of a shareholder, even assuming that there was  an
injury  to the company as a corporate body,  the  petitioner
was  not  entitled to apply for relief under  that  article.
Whatever  validity the argument may have in relation to  the
petitioner's  claim  based on the alleged  invasion  of  his
right  of  property under article 31, there  can  be  little
doubt  that, so far as his claim based on the  contravention
of  article 14 is concerned, the petitioner is  entitled  to
relief  in his own right  As has been pointed  out  already,
the impugned Act deprives the shareholders of the company of
important  rights  and safeguards which are enjoyed  by  the
shareholders of other joint stock companies in Indian  under
the Indian Companies Act.  The petitioner is thus denied the
equal protection of the laws in his capacity as a sharehold-
er,  and none the less so because the other shareholders  of
the company are also similarly affected.  The petitioner  is
thereled  to seek relief under article 32 of  the  Constitu-
tion.
    In  this  view it becomes unnecessary  to  consider  the
questions  raised under articles 19 and 31 of the  Constitu-
tion.
In the result]t, I would allow the application.
    MUKHERJEA  J.--This is an application presented  by  one
Chiranjitlal  Chowdhuri,  a   shareholder  of  the  Sholapur
Spinning  and Weaving Company Limited (hereinafter  referred
to  as  the  company), praying for a writ  of  mandamus  and
certain other reliefs under article 32 of the  Constitution.
The  company,  which has its registered  office  within  the
State  of  Bombay and is governed by the provisions  of  the
Indian  Companies Act, was incorporated with  an  authorised
capital  of  Rs. 48 lakhs divided into 1590, fully  paid  up
ordinary  shares of Rs. 100 each, 20 fully paid up  ordinary
shares of Rs. 500 each and 32,000 partly paid up  cumulative
preference shares of Rs. 100 each.  The
894
present paid up capital of the company is Rs. 32 lakhs  half
of which is represented by the fully paid up ordinary shares
and the other half by the partly paid up cumulative  prefer-
ence  shares. The petitioner states in his petition that  he
holds  in  his own right three ordinary  shares  and  eighty
prefercnce  shares in the company, though according  to  his
own  admission  the ,preference shares do not stand  in  his
name but have been registered in the name of the Baroda Bank
Limited with which the shares are pledged. According to  the
respondents, the petitioner is the registered holder of
one single ordinary share in the company.
It  appears  that  on July 27, 1949, the  directors  of  the
company gave a notice to the workers that the mills would be
closed, and pursuant to that notice, the mills were in  fact
closed on the 27th of August following. On January 9,  1950,
the Governor-General of India promulgated an Ordinance which
purported  to make special  provisions for  the proper  man-
agement and administration of the company. It was stated  in
the   preamble  to the Ordinance that "on  account  of  mis-
management  and neglect, a situation has arisen in  the  af-
fairs  of the Sholapur Spinning and Weaving Company  Limited
which has prejudicially affected the production of an essen-
tial commodity and has caused serious unemployment amongst a
certain section of the community ", and it was on account of
the emergency arising from this situation that the promulga-
tion  of the Ordinance  was  necessary.  The  provisions  of
the  Ordinance, so far as they are material for our  present
purpose, may be summarised as follows:
   Under section 3 of the Ordinance, the Central  Government
may, at any time, by notified order, appoint as many persons
as  it  thinks fit, to be directors of the company  for  the
purpose of taking over its management and administration and
may  appoint  one  of such directors  to  be  the  Chairman.
Section  4  provides that on the issue of a  notified  order
under  section  3 all the directors of the  company  holding
office  as  such immediately before the issue of  the  order
shall  be deemed to  have vacated  their  offices.  and  any
existing
895
contract of management between the company and any  managing
agent  thereof  shall be deemed  to  have  terminated.   The
directors  thus  appointed  shall be for  all  purposes  the
directors  of the company duly constituted under the  Compa-
nies  Act  and shall alone be entitled to exercise  all  the
powers of the directors of the company.  The powers and  the
duties of the directors are specified in section 5 and  this
section inter alia empowers the directors to vary or cancel,
with  the previous sanction of the Central  Government,  any
contract  or agreement entered into between the company  and
any other person if they are satisfied that such contract or
agreement  is detrimental to the interests of  the  company.
Section  10  lays down that no  compensation  for  premature
termination of any contract could be claimed by the managing
agent  or  any other contracting party. It  is  provided  by
section  12 that so long as the management by the  statutory
directors  continues,  the shareholders would  be  precluded
from nominating or appointing any person to be a director of
the  company and any resolution passed by them will  not  be
effective unless it is approved  by the Central  Government.
This  section lays down further that during this  period  no
proceeding for winding up of the company, or for appointment
of a receiver in respect thereof could be instituted in  any
court,  unless it is sanctioned by the  Central  Government,
and the Central Government would be competent to impose  any
restrictions  or limitations as regards application  of  the
provisions  of the Indian Companies Act to,  be  affairs  of
the  company.   The only other material  provision  is  that
contained in section 15, under which the Central  Government
may, by notified order, direct that all or any of the powers
exercisable  by it under this Ordinance  may   be  exercised
by  the  Government of Bombay.
    In  accordance with the provisions of  section  15  men-
tioned above, the Central Government, by notification issued
on the same day that the Ordinance was promulgated, delegat-
ed  all  its powers exercisable under the Ordinance  to  the
Government of Bombay,
896
On the next day, the Government of Bombay appointed respond-
ents 3 to 7 as directors of the company in terms of  section
3  of the Ordinance.  On the 2nd of March, 1950,    the  re-
spondent No. 9 was appointed a director and   respondent No.
5  having  resigned  his office in the  meantime,   the  re-
spondent  No.  8 was appointed in his place. On the  7th  of
April,  1950,  the  Ordinance was repealed and  an  Act  was
passed  by  the Parliament of India, known as  the  Sholapur
Spinning and Weaving Company (Emergency Provisions)Act which
re-enacted  almost in identical terms all the provisions  of
the  Ordinance and provided further that all  actions  taken
and orders made under the Ordinance shall be deemed to  have
been taken or made under the corresponding provisions of the
Act.   The preamble to the Ordinance was not however  repro-
duced in the Act.
    The  petitioner in his petition has challenged the  con-
stitutional validity of both the Ordinance and the Act.   As
the  Ordinance is no longer in force and all its  provisions
have been incorporated in the Act, it will not be  necessary
to  deal with or refer to the enactments  separately.   Both
the  Ordinance and the Act have been attacked  on  identical
grounds  and it is only  necessary  to   enumerate   briefly
what these grounds are.
    The  main ground put forward by the petitioner  is  that
the pith and substance of the enactments is to take  posses-
sion of and control over the mills of the company which  are
its valuable assets and such taking of possession of proper-
ty  is entirely beyond the powers of the Legislature.   'The
provisions of the Act, it is said, amount to deprivation  of
property  of  the  shareholders as well as  of  the  company
within the meaning of article 31 of the Constitution and the
restrictions  imposed on the rights of the  shareholders  in
respect to the shares held by them constitute an unjustifia-
ble  interference with their rights to hold property and  as
such  are  void under article 19 (1) (f). It is  urged  that
there was no public purpose for which the Legislature  could
authorise the taking possession or acquisition of
     897
property and such acquisition or taking of possession  with-
out payment of compensation  is  in violation of the  funda-
mental rights guaranteed by article 31 (2) of the  Constitu-
tion.   It is said further that the enactment denies to  the
company  and its  shareholders equality before the law.  and
equal protection of laws and thus offends against the provi-
sions  of  article 14 of the Constitution.  The  only  other
material point raised is that the legislation is beyond  the
legislative competency of the Parliament and is not  covered
by any of the items in the legislative lists.
    On these allegations, the petitioner prays, in the first
instance. that it may be declared that both the Act and  the
Ordinance are ultra vires and void and an injunction may  be
issued  restraining the respondents from exercising  any  of
the powers conferred upon them by the enactments.  The third
and  the material prayer is for issuing a writ of  mandamus,
"restraining  the  respondents  1 to 9  from  exercising  or
purporting  to exercise any powers under the said  Ordinance
or Act and from in any manner interfering with  the  manage-
ment  or affairs of the company under colour of or any  pur-
ported  exercise  of any powers under the Ordinance  or  the
Act,"  The other prayers are not material for our purpose.
    Before I address myself to the  merits of  this applica-
tion  it  will be necessary to  clear  up   two  preliminary
matters in respect to which arguments were advanced at  some
length  from the Bar.  The first point relates to the  scope
of  our enquiry in the present case and raises the  question
as to what precisely are the matters that have to be  inves-
tigated and determined on this application of the  petition-
er.  The second point relates to the form of relief that can
be prayed for and granted in a case of this description.
    Article 32 (1) of the Constitution guarantees to  every-
body  the right to move this court, by appropriate  proceed-
ing,  for  enforcement of the fundamental rights  which  are
enumerated  in Part 1II of the Constitution.  Clause (2)  of
the article lays down that the
115
898
Supreme  Court shall have the power to issue  directions  or
orders  or  writs including writs in the  nature  of  habeas
corpus,  mandamus, prohibition, quo warranto and  certiorari
whichever  may be appropriate for the enforcement of any  of
the rights conferred by this part.
    Thus  anybody who complains of infraction of any of  the
fundamental  rights  guaranteed by the  Constitution  is  at
liberty  to move the Supreme Court for  the  enforcement  of
such rights and this court has been given the power to  make
orders  and issuue directions or writs similar in nature  to
the prerogative writs of English law as might be  considered
appropriate  in  particular cases.  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  compels the inference that they  are  applicable
only  to natural persons.  An incorporated  company,  there-
fore,  can  come  up to this court for  enforcement  of  its
fundamental rights and so may the individual shareholders to
enforce their own; but it would not be open to an individual
shareholder  to complain of an Act which affects the  funda-
mental  rights of the company except to the extent  that  it
constitutes  an infraction of his own rights as  well.  This
follows  logically from the rule of law that  a  corporation
has a distinct legal personality of its own with rights  and
capacities,  duties and  obligations separate from those  of
its  individual  members.  As the rights are  different  and
inhere  in different legal entities, it is not competent  to
one  person to seek to enforce the rights of another  except
where the law permits him to do so.  A well known  illustra-
tion of such exception is furnished by the procedure that is
sanctioned  in an application for a writ of  habeas  corpus.
Not  only the man who is imprisoned or detained in  confine-
ment  but  any  person, provided he is   not   an   absolute
stranger,  can  institute proceedings to obtain  a  writ  of
habeas corpus for the purpose of liberating another from  an
illegal imprisonment.
899
    The  application before us under article 32 of the  Con-
stitution  is on behalf of an individual shareholder of  the
company.   Article 32, as its provisions show,. is  not  di-
rectly  concerned with the determination  of  constitutional
validity of particular legislative enactments.  What it aims
at is the enforcing of fundamental rights  guaranteed by the
Constitution,  no  matter  whether the  necessity  for  such
enforcement  arises out of an action of the executive or  of
the legislature.  To make out a case under this article,  it
is  incumbent  upon the petitioner to establish  not  merely
that  the law complained of is beyond the competence of  the
particular  legislature as not being covered by any  of  the
items  in  the  legislative lists, but that  it  affects  or
invades  his fundamental rights guaranteed by the  Constitu-
tion,  of which he could seek enforcement by an  appropriate
writ  or  order.  The rights that could  be  enforced  under
article 32 must ordinarily  be the rights of the  petitioner
himself  who  complains I of infraction of such  rights  and
approaches  the court for relief.  This being the  position,
the  proper  subject  of our  investigation  would  be  what
rights,  if any, of the petitioner as a shareholder  of  the
company  have been violated by the impugned legislation.   A
discussion of the fundamental rights of the company as  such
would be outside the purview of our enquiry.  It is  settled
law  that in order to redress a wrong done to  the  company,
the  action  should prima facie be brought  by  the  company
itself.  It cannot be said that this course is not  possible
in  the  circumstances of the present case.  As the  law  is
alleged  to  be   unconstitutional, it is open  to  the  old
directors  of  the company who have been ousted  from  their
position  by reason of the enactment to maintain  that  they
are  directors still in the eye of law, and on that  footing
the majority of shareholders can also assert 'the rights  of
the  company  as  such.  None of them,  however,  have  come
forward to institute any proceeding on behalf of the  compa-
ny.   Neither  in form nor in substance does   the   present
application   purport to be one made by the company  itself.
Indeed, the company
900
is one of the respondents,  and opposes the petition.
    As  regards  the other point, it would appear  from  the
language  of article 32 of the Constitution that.  the  sole
object  of  the article is the  enforcement  of  fundamental
rights  guaranteed  by   the   Constitution.   A  proceeding
under   this   article  cannot really have any  affinity  to
what  is  known  as  a  declaratory suit.  The first  prayer
made  in  the petition, n  seeks relief in the  shape  of  a
declaration  that  the   Act is invalid  and  is  apparently
inappropriate to an application under article 32; while  the
second purports to be framed for a relief by way of  injunc-
tion consequent upon the first.  As regards the third  pray-
er, it has been contended by Mr. Joshi, who appears for  one
of the respondents, that having regard to the nature of  the
case and the allegations made by the petitioner himself, the
prayer  for a writ of mandamus, in the form in which it  has
been made, is not tenable. What is argued is that a writ  of
mandamus  can  be prayed for, for enforcement  of  statutory
duties  or to compel a person holding a public office to  do
or forbear from doing something which is incumbent upon  him
to do or forbear from doing under the provisions of any law.
Assuming that the respondents in the present case are public
servants,  it is said that the statutory duties which it  is
incumbent  upon them to discharge are precisely  the  duties
which are laid down in the impugned Act itself.   There   is
no legal obligation on their part to abstain from exercising