CHIRANJIT LAL CHOWDHURI v. THE UNION OF INDIA AND OTHERS.

Citation: [1950] 1 S.C.R. 869; 1950 INSC 36

Court: Supreme Court of India

Bench: HARILAL JEKISUNDAS KANIA , M. PATANJALI SASTRI , BIJAN KUMAR MUKHERJEA , SUDHI RANJAN DAS , SIR SYED FAZL ALI

Judgment date: 1950-12-04

Case summary

1950 INSC 36. Supreme Court of India judgment dated 1950-12-04. CHIRANJIT LAL CHOWDHURI v. THE UNION OF INDIA AND OTHERS. Read the judgment and case details...

Judgment text

- S. C. R. SUPREME COURT REPORTS CHIRANJIT LAL CHOWDHURI v. THE UNION OF INDIA AND OTHERS. 869 [SHRI HARILAL KANIA, C. J. , SAIYID FAZL ALI, PATANJALI SASTRI, MuKHERJEA and DAS JJ. ] Sholapllr Spinning and Weaving Company (Emergency Pro· enalised this particular con1pany 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. , d1tbitante). -In so far as the petitioner's rights as a shareholder were curtailed be was entitled to apply for relief under Art. 32 in bis own right on the ground that the Act denied to him the equal protection of the laws and therefore contravened Art. 14 even tboush the other shareholders did not join him in the application. Per MUKRERJEA J .

-The fundamental rights guamnteed by the Constitution are available not merely to individual citizens but to corpol'ate bo:lies as well except where tho language of the provision or the nature of the right compels the inference that they are applicable only to natural persons. An incorporated company, therefore, can come up to the Supreme Court for en- forcement ol its fundamental rights and so may the individual shareholders to enforce their own; but as the company and its shareholilers are in law separate entities, it \Yould not b9 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. Io 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 funda~en~al 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, o( which he could seek en- forcement by a. n appropriate writ or order. Under Art. 32 the Su1Jreme Court has a. very wlde discretion in the matter of framing \Vrits to suit the exigencies of particular cases and an application under the article cannot be thrown out simply on the grnund that the proper writ or direction has not been prayed for. In the context in which th9 word 11 a. cquisitio:i '' is used in Art. 31 .

2) it means and implies the acquiring o( the entire title of the expropriated owner whatever the nature or extent of that right might be. S. C. R. SUPREME COURT REPORTS 873 The guarantee against the denial of equal protection or 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 rliscrimination 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 con- notes, and whether clause (1) of Art. 31 contemplates only codis- cation or destruction of property in exercise of what are known as police powers in American law for which no compensation is necessary. DAS J.

-Tbe 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 com- pany are still preserved hy a:i Act even though corhin pridleges incidental to the ownership of the shares have been put in abey- ance, the sba,reholders cannot be said to have been deprived of their "property'' in the sense in which tl.. ia. t word is used in Art. 19(1) (f) and Art. 31. If on the face of the Jaw there is no classification at all, or at any rate, none on the basis of any nppnrent difference specially peculiar to the individual or class affected by the law, it is only an instance of an arbitrary selection of an individual or class for rliscrirninating and hostile legislation and, therefore, no presump- tion 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 un- reasonable and arbitrary and thereby discharging the initial onus. The right to vote, to elect directors, to pass resolutions 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 posBession of by the Government in this case within Art. 31 (2). The language of clause (1) of Art. 31 is wider than that of clause (2), for d no sense in Government taking charge of it. If anything, it will mean the Government will have to waste money which belongs to the taxpayer on an uneconomic unit.

(3) There must be a technical report as regards the condition of the plants, machinery, etc. which either as they stand, or after necessary repairs and recondi- tioning can be properly utilised. (4) Lastly ,-and this is of considerable importance- there must be a proper enquiry held before Govern- ment take any action. The enquiry should show that \lS 1960 Chiranjitlal Chowdhi•ri v. The Unio11 of India and Oth~rs. Fa1:l Ali J. 1950 Chiranjitlal Chowdhuri v. Th~ Un. ion of India and Ot/~er!. 882 SUPREME COURT REPORTS [1950) managing agents have so misbehaved that they are no longer fit and proper persons to remain in charge of such an important undertaking. "(') It appears from the same proceedings that the Sholapur mill is one of the largest mills in Asia and employs 13,000 workers. Per shift, it is capable of producing 25 to 30 thousand pounds of yarn, and also one lakh yards of cloth. It was working two shifts when it was closed down on the 29th August, 1949.

The closure of the mill meant a loss of 25 lakhs yards of cloth and one and a half lakhs pounds of yarn per month. Prior to 1947, the highest dividend paid by the company was l~s. 525 per share and the lowest Rs. 100, and, in 1948, when the management was taken over by the managing agents who have been removed by the impugned Act, the accounts showed a loss of Rs. 30 lakhs, while other textile companies had been able to show very _substantial profits during the same period. Another fact which is brought out in the proceed- ings is that the managing agents had acquired control over the majority of the shares of the company and a large number of shareholders who were dissatisfied with the management had been rendered powerless and they could not make their voice heard.

By reason of the preponderance of their strength, the managing agents made it impossible for a controller under the Essential Supplies Act to function and they also made it diffi- cult for the company to run smoothly under the normal law. It was against. this background that the Act was passed, and it is evident that the facts which were placed before the Legislature with regard to. the Shola- pur mill were of an extraordinary character, and fully justified the company being treated as a class by itself. There were undoubtedly other mills which were open to the charge of mismanagement, but the criteria adopted by the Government which, in my opinion, cann;it be said to be arbitrary or unreasonable, is not applicable (l) Parlia. ments. ry DebateA, Volume III, Nn. 14~ 31st March lO:SO, pp, 2894. 5. ·~ ·- S. C. R. SUPREME COURT REPORTS 883 to any of them.

As we have seen, one of the criteria was that a mere allegation of mismanagement should not be enough and no drastic step such as is envisaged in the Act should be taken without there being a complete enquiry. In the case of the Sholapur mill, a complete enquiry had been made and the revelations which were made as a result of such enquiry were startling. \Ve are familiar with the expression "police power" which is in vogue in the United States of America. This expression simply denotes that in special cases the State can step in where its intervention seems· necessary and impose special burdens for general bene- fit. As one of the judges has pointed out, " the regu- lations may press with more or less weight upon one than upon another, but they are designed not to impose unequal or unnecessary restrictions upon any- one, but to promote, with as little individual incon- venience as possible, the general good.

"(') It need not be emphasized that the princi pies underlying what is known as police power in the United States of America arc not peculiar to that country, but are recognized in every modern civilized State. Professor Willis dealing with the question of classification in exercise of police power makes the following observa- tions: "There is no rule for determining when classifica- tion for the police power is reasonable. It is a matter for judicial determination, but in determining the question of reasonableness the Courts must find some economic, political or other social interest to be secured, and some relation of the classification to the objects sought to be accomplished. In doing this the Courts may consider matters of common knowledge, matters of common report, the history of the times, and to sustain it they will assume every state of facts which can be conceived of as existing at the time of legisla- tion.

The fact that only one person or one object or one business or one locality is affected is not proof of denial of the equal protection of the laws. For such (I) Per Field J, in Barbier v. Connolly. 118 US. 27, 19CO Chiranjit1al Chowdhurt v. The Union of India and Other a. Fa•l . Iii J. 1950 Chirn. njitlai Chowdhurt v, Ths Uoiion. of India and Othsra, FIUl Ali J. 884 SUPREME COURT REPORTS [1950) proof it must be shown that there is no reasonable basis for the classification. "(') In this particular case, the Government initially took control of the Sholapur Company by means of an Ordinance (Ordinance No. II of 1950), of which the preamble runs as follows:- ".

Whereas on account of mismanagement and neglect a situation has arisen in the affairs of the Sholapur Spinning and Weaving Company, Limited, which has prejudicially affected the production of an essential · commocjity and has caused serious unemployment amongst a certain section of the community; And whereas an emergency has arisen which renders it necessary to ·make special provision for the proper management and administration of the aforesaid Com- pany; Now, therefore, ........................ " In the course of the Parliamentary debate, reference was made to the fact that the country was facing an acute cloth shortage, and one of the reasons which apparently influenced the promulgation of the Ordi- nance and the passing of the Act was that the mismanagement of the company had gravely affected the production of an essential commodity.

The facts relating to the mismanagement of this mill were care- fully collected and the mischief caused by the sudden closing of the mill to the shareholders as well as to the general public were fully taken into consideration. Therefore, it seems to me that to say that one parti- cular mill has been arbitrarily and unreasonably selected and subjected to discriminatory treatment, would be an entirely wrong proposition. Article 14 of the Constitution, as already stated, lays down an important fundamental right, which should be closely and vigilantly guarded, but, in construing it, we should not adopt a doctrinaire approach which might choke all beneficial legislation. The facts to which I have referred are to be found in a public document, and, though some of them may (1) Constitutional La. w by Prof. Willis (1st Edition) p. 580. S. C. R.

SUPREME COURT REPORTS 885 require further investigation forming as they do part of a OJ:ie-sided version, yet they furnish good prima facie grounds for the exercise of the utmost caution in deciding this case and for not departing from the ordinary rule as to the burden of proof. In the last resort, this petition can be disposed of on the simple ground that the petitioner has not discharged the onus which lies upon him, and I am quite prepared to rest my judgment on this ground alone. I think that the petitioner has faiied to make out any case for granting the writs or directions asked for, and the petition should therefore be dismissed with costs. PATANJALI SASTRI J. -This is an application under article 32 of the Constitution seeking relief against alleged infringement of certain fundamental rights of the petitioner. The petitioner is a shareholder of the Sholapur Spinning and Weaving Company, Limited, Sholapur, in the State of Bombay, (hereinafter referred to as "the Company").

The authorised share capital of the Company consisted of 1590 fully paid up ordinary shares of Rs. 1,000 each, 20 fully paid up ordinary shares of Rs. 500 each and 32,000 partly paid up redeemable cumulative preference shares of Rs. 100 each, of which Rs. 50 only was paid up. Of these, the petitioner held one ordinary share in his own name and 80 preference shares which, however, having been pledged with the Bank of Baroda Ltd. , now stand registered in the Bank's name. The company was doing flourishing business till dis- putes arose recently between the management and the employees, and in or about August, 1949, the mills were temporarily closed and the company, which was one of the largest producers of cotton textiles, ceased production. Thereupon, the Governor-General inter- vened by p110mulgating on the 9th January, 1950, an Ordinance called the Sholapur Spinning and Weaving Company (Emergency Provisions) Ordinance (No.

II of 1950), which empowered the Government of India to 1950 ChiranfitlaE Chowdhuri v. The Uiiio'I of I11d1a al'ld Others. Fad Ali J, Patanfa. ti Bastri J, 1950 Ohira>i;'itlal Chow,lhu. ri v. The U•ii'ln of India a-id Others. Patri. njali Sastrt J. SSS SUPREME COURT REPORTS [1950] take over the control and management of the company and its properties and effects by appointing their own Directors and to delegate all or any of their powers to the Provincial Government. In exercise of the powers thus delegated, the Government of Bombay appointed respondents 3 to 9 as Directors to take charge of the management and administration of the properties and affairs of the company. Subsequently, on 10th April, 1950, the Ordinance was repealed and was replaced by an Act of Parliament containing similar provisions, namely the Sholapur Spinning and Weaving Company (Emergency Provisions) Act (No. XXVllI of 1950) (hereinafter referred to as the "impugned Act").

The petitioner complains that the impugned Act and the action of the Government of Bombay pursuant thereto have infringed the fundamental rights confer- red on him by articles 14, 19 and 31 of the Constitution with the result that the enactment is unconstitutional and void, and the interference by the Government in the affairs of the company is unauthorised and illegal. He accordingly seeks relief by way of injunction and mandamus against the Union of India and the State of Bombay impleaded as respondents 1 and 2 respective. ly in these proceedings and against respondents 3 to 9 who are now in management as already stated. The company is impleaded pro forma as the 10th respondent. Before discussing the issues involved, it is necessary to examine the relevant provisions of the impugned Act in order to see in what manner and to what extent the petitioner's rights have been affected thereby.

The preamble to the repealed Ordinance stated that "on account of mismanagement and neglect a situation has arisen in the affairs of the Sholapur Spinning and Weaving Company, Limit. ed, which has prejudicially affected the production of an essential commodity and has caused serious unemployment amongst a certain section of the community and that an emergency has arisen which renders it necessary to make special provision for the proper management and administration of the aforesaid • ' S. C. R. SUPREME COURT REPORTS 887 Company. " This preamble was not reproduced in the impugned Act. Section 3 empowers the Central Government to appoint as many persons as it thinks fit to be directors of the company "for the purpose of taking over its management and administration.

" Section 4 states the effect of the order appointing directors to be that (1) the old directors shall be deemed to have vacated their office, (2) the contract with the managing agents shall be deemed to have been termi- nated, (3) that the properties and effects of the company shall be deemed to be in the custody of the new directors who are to be " for all purposes " the directors of the company and "shall alone be entitled to exercise all the powers of the directors of the com- pany whether such powers are derived from the Companies Act or from the memorandum or articles of ·association or otherwise. " Section 5 defines the powers of the new directors. They are to manage the business of the company "subject to the control of the Central Government" and shall have the power to raise funds offering such security as they think fit, to carry out necessary repairs to the machinery or other.

property in their custody and to employ the necessary persons and define the necessary conditions of their service. Section 12 provides for the restoration of the management to directors nominated by the share- holrlers when the purpose of the Government's inter- vention has been fulfilled. Section 13 is important and reads thus: " 13. Application of the Companies Act. -(I) Notwithstanding anything contained in the Companies Act or in the memorand11m or articles of association of the company (a) it shall not be lawful for the sharehrilders of the company or any other person to nominate or appoint any person to be a director of the company; (b) no resolution passed at any meeting of the shareholders of the company shall be given effect to unless approved by the Central Government; (c) no proceeding for the winding up of the company or for the appointment of a receiver in respect thereof shall lie in any Court unless by or \\ith the sanction of the Central Government.

(2) Subject ' 1950 Chirt't•njitlal Chowdhurt v. The Union of Ind a and Others, Pa. lan;ali Sastri J. 1960 Chiranjit7al ChowdhurS v. The Union of India and Othera. Patanjali Sastri J. 888 SUPREME COURT REPORTS (1950) to the provisions contained in sub-section (1) and to the other provisions of this Act, and subject to such exceptions, restrictions and limitations as the Central Government may, by notified order, specify, the Com- panies Act shall continue to apply to the company in the same manner as it applied thereto before the issue of the notified order under section 3. " By section 14 the provisions of the Act are to have effect "notwith- standing anything inconsistent therewith contained in any other law or in any instrument having effect by virtue of any law other than this Act.

" Section 16 provides for delegation of powers to the Government of Bombay to be exercised subject to the directions of the Central Government, and section 17 bars suits or other proceedings against the Central Government or the Government of Bum bay or any director "for any damage caused or likely to be caused by anything which is in good faith done or intended to be done in pursuance of this Act. " As a result of these provisions all the properties and . effects of the company passed into the absolute power and control of the Central Government or its delegate the Government of Bombay, and the normal function- ing of the company as a corporate body came to an end. The shareholders have been reduced to the position of interested, if helpless, onlookers while the business is carried on against their will and, may be, to their disadvantage by the Government's nominees. The declared purpose of this arrangement was, accord.

ing to the Preamble of the repealed Ordinance to keep up the production of an essential commodity and to avert serious unemployment amongst a certain section of the community. The question accordingly arises whether the im- pugned Act, which thus affects the petitioner and his co-shareholders, while leaving untouched the share- holders of all other companies, including those engaged in the production of essential commodities, denies to the petitioner the equal protection of the laws under article 14 of the Constitution. The correct approach to -· S. C. R. SUPREME COURT REPORTS 889 this question is first to see what rights have been confer. red or protection extended to persons similarly situated. The relevant protection is to be found in the provisions of the Indian Companies Act which regulates the rights and obligations of the shareholders of incorporated companies in India.

Section 21 of the Act assures to the shareholders the protection of the stipulations contained in the memorandum and articles of associa- ticn by constituting them a binding contract, so that neither the company nor the shareholders have the power of doing anything inconsistent therewith. The\ basic right of the shareholders to have their under- taking managed and conducted by the directors of their own choice is ensured by section 83B. Their . right to exercise control and supervision over the\ management by the directors by passing resolutions J at their general meeting is regulated by various pro- visions of the Act. The important safeguard of winding up the company in certain unfavourable circumstances either through court or by the shareholders themselves voluntarily is provided for in sections 162 and 203.

All these rights and safeguards, on the faith of which the shareholders embark their money in their undertaking, are abrogated by the impugned Act in the case of the shareholrlers of this company alone. In fact, the Central Government is empowered to exclude, restrict or limit the operation of any of the provisions of the Companies Act in relation to this company. It is thus plain that the impugned Act denies to the shareholders of this particular company the protection of the law relating to incorporated joint stock companies in this country as 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 1he Legislature always to make laws applicable to all persons generally, and that it is open to the Legislature 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 1950 OhiranJ1tlal Chowdhuri v. The Union of India and Others. Patanjali Sastri J, 1950 Ohiranfit1al Chowdhuri ·- The Union of India and Other a, Pala~. iali Sastri J, 890 SUPREME COURT REPORTS [1950] it was said, came to the conclusion, on the materials placed before theni, 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 unemployment amongst a section of the com- munity. In view of 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 companv as to call for special legislation.

Reliance was pl::tced 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 subjects must of necessity have the power qf making special laws to attain particular objects and must. for that purpose, 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 legislature 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 be 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 re:;triction on legislative power imposed by arti iion of India and Others. Mukherjea J. 894 SUPREME COURT REPORTS [1951) 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 preference shares.

The petitioner states in his petition that he holds in his own right three ordinary shares and eighty preference 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 lnd1a promulgated an Ordinance which purported to make special provisions for the proper management 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 affairs of the Sholapur Spinning and Weaving Company Limited which has prejudicially affected the produc- tion of an essential commodity and has caused serious unemployment amongst a certain section of the com- munity ", and it was on account of the emergency arising from this situation that the promulgation 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 Govern- ment 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 imme- diately before the issue of the order shall be deemed to have vacated their offices, and any existing l S. C. R. SUPREME COURT REPORTS 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 consti- tuted under the Companies 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 con- tract or agreement entered into between the company and any other person if they are satisfied that such contract or agreement is rletrimental to the interests of the company.

Section 10 lays down that no compen- sation for premature termination of any contract could be claimed by the managing agent or any other con- tracting 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 Jays down further that during this period no proceeding for winding up of the company, or for appointment of a recei,·er in respect thereof could be instituted in any court, unless it is sanctioned by the Central Government, ancl the Central Government would be competent to impose any restrictions or limitations as regards application of the provisions of the Indian Companie3 Act to the affairs of the comμany.

The only other material provision is that contained in section 15, under which the Central Government may, by no. lilied order, direct that all or any of the powers exercisable by it under this Ordin ance may be exercised by the Government of Bombay. In accordance with the provisions of section 15 men~ion~d above, the Central Government, by noti- ficat10n issued on the same day that the Ordinance was promulgated, delegated ail its powers exercisable Q. nder the Ordinance to the Government of Bombay. 1950 ChiraJJjitlaZ Chowdhurt v. The Unioti of Indin and Oth~ra. Mukherjea J. 1950 Chiranj1tlal Chowdhuri •• The U11ion of India and Others. Mukherjea J. 896 SUPREME COURT REPORTS [1950] On th. e next day, the Government of Bombay appofnt- ed respondents 3 to 7 as directors of the company in terms of section 3 of the Ordinance. On the 2nd of March, 1950, the respondent No. 9 was appointed a director and respondent No. 5 having resigned his office in the meantime, the respondent 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 pro- visions 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 reproduced in the Act. The petitioner in his petition has challenged the constitutional 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 nece8sary 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 possession of and control over the mills of the company which are its valuable assets and such taking of possession of property is entirely beyond the powers of the Legislature. The provisions of the Act, it is said, amount to deprivation of property of the share- holders 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 unjustifiable 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 . 261. S. C. R.

SUPREME COURT REPORTS 907 the placitum to suggest that the legislature was intend- ed 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 expropriating. " . 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 contravention 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 er destruction of property in exercise of what are known as ' police powers ' in American law, for which no payment of compensation is necessary. I do not think it proper for purposes of the present case to enter into a discussion on this some- what 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 whether clauses (1) and (2) of article 31 relate to exercise of different kinds of powers or they are to be taken as cumulative provisions in relation to the same subject- matter, namely, compulsory acquisition of property. If the word "deprived" as used in clause (1) connotes the idea of 'destruction or confiscation of property, obviously no such thing has happened in the present 1950 Chiranjtllai ChowdhurS v, The Union of India and Othera. . Mukherjea J. 1950 Ohiraajitlal Chowdhuri v. The Union of India and Others. Mukherjea J, 908 SUPREME COURT REPORTS [1950) 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 compen- sation nor of public purpose, wonld 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 deprivation 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 different forms of individual liberty, the protection of which is guaranteed by the Constitution.

The remain- ing 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(l)(f) of the Constitution and ,_ --. S. C.

R. SUPREME COURT REPORTS 909 secondly, if they do interefere with such rights, whether they are covered by the exceptions laid 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 peti- tioner'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 fettered in any way. If to 'hold' a property means to possess it, there is no infrin~ement 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 divi.

dend and there is no ! imitation on the petitioner's right in this respect. The petitioner undoubtedly has been precluded from exercising his right of voting at the election of directors so long as the statutory direc- tors continue 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 disability on him to insti- tute 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 pro· perty, but by themselves and taken independently, they cannot be reckoned as property capable of being acquired, held or disposed of as is contemplated by article 19 (1) (f) of the Constitution.

r 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 consequently article 19 (! ) (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 1960 Chiranjitlal Ohowdhuri v. The Uniori of India and Others, A1. ukherj~a. J. 1950 Chiran. jitlal Chawdhur' v. The Union of India and Other ii Mukherj('a J, 910 SUPREME COURT REPORTS [1950) 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 commu- nity and to prevent a serious 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 dis- criminatory legislation which offends against the pro- vision of article 14 of the Constitution. Article 14 guarantees to all persons in the territory 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, corresponds to the equal protection clause in the Four- teenth 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 American Consti. tution came up for consideration.

A detailed examina- tion of these reports is neither necessary nor profitable for our present purpose but we think we can cull a few general principles from some of the pronouncements of S. C. R. SUPREME COURT REPORTS 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 Con- stitution. I may state here that so far as the violation of the equality clause in the Constitution is concerned, the petitioner, 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 legis- lation 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 treatment has been in respect to the sharholders of this company alone, any one of the shareholders, whose interests are thus vitally affected, has a right to complain and it is immaterial that there has been no- discrimination inter se amongst the shareholders them. selves. It must be admitted that the guarantee againstthe denial of equal protection of the laws does not mean that identically the same rules of law should be made applicable to all persons within the territory of India in spite of differences of circumstances and conditions. As has been said by the Supreme Court of America, "equal protection of laws is a pledge of the protection of equal laws(')," and this means "subjection to equal laws applying alike to all in the same situation('). " In other words, there should be no discrimination between one person and another if as regards the subject-matter of the legislation their position is the same. I am unable to accept the argument of Mr.

Chari that a legislation relating to one individual or one family or one body corporate would per se violate the guarantee of the equal protection rule. There can certainly be a law applying to one person or to one group of persons and it cannot be held to be n) Yt('k Wo v. Hopkins, llA US . 1t 269. (2) Southern Railway Company v. Gr .. ne, 216 U. S. 4QO. 41'. 1960 Ohir11. njitlal Chowdhuri •• Th~ Union of India and· Others, Mukherj~a J. 1950 Chiran}itlal Chowdhuri v. Th6 Un. ion of India anci Other a. Mukh~rjea J, 912 SUPREME COURT REPORTS [1950] unconstitutional if it is not discriminatory in its character('). It would be bad law "if it arbitrarily selects one individual or a class of individuals, one corporation or a class of corporations and visits a penalty upon them, which is not imposed upon others guilty of like delinquency(').

" The legislature un- doubtedly has a wide field of choice in determining and classifying the subject of its laws, and if the law deals alike with all of a certain class, it is normally not obnoxious to the charge of denial of equal protection; but the classification should never be arbitrary. It must always rest upon some real and substantial dis- tinction bearing a. reasonable and just relation to the things in respect to which the classification is made; and classification made without any substantial basis should be regarded as invalid('). The question is whether judged by this test the the impugned Act can be said to have contravened the provision embodied in article 14 of the Constitu- tion. Obviously the Act purports to make provi- sions which are of a drastic character and against the general law of the land as laid down in the Indian Companies Act, in regard to the admini- stration and management of the affairs of one com- pany in Indian territory.

The Act itself gives no reason for the legislation but the Ordinance, which was a precursor of the Act, expressly stated why the legis- lation was necessary. It said that owing to mis- management and neglect, a situation had arisen in the affairs of the company which prejudicially affected the production of_ an essential commodity and caused serious unemployment amongst a certain section of the community. Mr. Chari's contention in substance is that there are various textile companies in India situated in a similar manner as the Sholapurcompany, against which the same charges could be brought and for the control and regulation of which all the reasons that are mentioned in the preamble to the Ordinance O} Willis ronstitutional Law, p. 5flO. 121Gulf0. &! S. Ti'. R. Co. v. Ellis, 163 U. S. Ito, al 1r9, \3) Southern Rallway Co. v. Greene, 216 U. S. 40J. nt 41'2. S. C. R. SUPREME . COURT REPORTS 913 could be applied.

Yet, it is said, the legislation has been passed with regard to this one company alone. The argument seems plausible at first sight, but on a closer examination I do not think that I can accept it as sound. It must be conceded that the Legislature has a wide discretion in determining the subject matter of its laws. It is an accepted doctrine of the American Courts and which seems to me to be well founded on principle, that the presumption is in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a transgression of constitutional princi- ples. As was said by the Supreme Court of America in Middleton v. Texas Power and Light Company('), "It must be presumed that a Legislature understands and correctly appreciates the needs of its own people, that its Ia ws are directed to problems made manifest by experience and that its discri- minations are based upon adequate grounds.

" This being the position, it is for the petitioner to establish facts whicb would prove that the selection of this particular subject by the Legislature is unreasonable and based upon arbitrary grounds. No allegations were made in the petition and no materials were placed before us to show as to whether there are other companies in India which come precisely under the same category as the Sholapur Spinning and Weav- ing Company and the reasons for imposing control upon the latter as mentioned in the preamble to the Ordinance are applicable to them as well. Mr. Chari argues that these are matters of common knowledge of which we should take judicial notice. I do not think that this is the correct line of approach.

It is quite true that the Legislature has, in this instance, proceed- ed against one company only and its shareholders; but even one corporation or a group of persons can be taken as a class by itself for the purpose of legislation, pro- vided it exhibits some exceptional features which are not possessed by others. The courts should prima f acie (II 219 U. S. 1. ;2, alp. 157, I ! 7 1950 Ohiranjttlal Chowdhuri v. The Union of India and Other a. Mukherjea J, 1960 Chiranjttlal Ckowdhuri v. The Union of Itidia and Othera. Mukhdrfea J. 914 SUPREME COURT REPORTS [1950] lean in favour of constitutionality and should support the legislation if it is possible to do so on any reason- able ground, and it is for the party who attacks the val. idity of the legislation to place all materials before the court which would go to show that the selection is arbitrary and unsupportable. Throwing out of vague hints that there may be other instances of similar nature is not enough for this purpose.

We have not even before us any statement on oath by the petitioner that what has been alleged against this particular company may be said against other companies as well. If there was any such statement, the respondents could have placed before us the whole string of events that led up to the passing of this legislation. If we are to take judicial notice of the existence of similar other badly managed companies, we must take notice also of the facts which appear in the parliamentary proceedings in connection with this legislation which have been referred to by my learned brother, Fazl Ali J. in his judgment and which would go to establish that the facts connected with this corporation are indeed excep- tional and the discrimination that has been made can be supported on just and reasonable grounds. I purposely refrain from alluding to these facts or basing my deci- sion thereon as we had no opportunity of investigating them properly during the course of the hearing.

As matters stand, no proper materials have been placed before us by either side and as I am unable to say that the legislature cannot be supported on any reason- able ground, I think it to be extremely risky to over- throw it on mere suspicion or vague conjectures. If it is possible to imagine or think of cases of other companies where similar or identical conditions might prevail, it is also not impossible to conceive of some- thing" peculiar" or " unusual" to this corporation which led the legislature to intervene in its affairs. As has been laid down by the Supreme Court of America, '' The Legislature is free to recognise degrees of harm and it may confine its restrictions to those cases where the need is deemed to be the clearest"('). We should (1) Radice v. Now York, 261 U. S. 291. S. C. R. SUPREME COURT REPORTS 915 bear in mind that a corporation, which is engaged in production of a commodity vitally essential to the community, has a social character of its own, and it must no.

t be regarded as the concern primarily or only of those who invest their money in it. If its possibilities are large and it had a prosperous and useful career for a long period of time and is about to collapse not for any economic reason but through sheer perversity of the controlling authority, one cannot say that the legis- lature has no authority to treat it as a class by itself and make special legislation applicable to it alone in the interests of the community at large. The combina· tion of circumstances which are present here may be of such unique character as could not be existing in any other institution. But all these, I must say, are matters which require investigation on proper materials which we have not got before us in the present case.

In these circumstances I am constrained to hold that the present application must fail on the simple ground that the petitioner made no attempt to discharge the prima facie burden that lay upon him and did not place before us the materials upon which a proper decision on the point could be arrived at. In my opinion, therefore, the attack on the legislation on the gound of the denial of equal protection of law cannot succeed. The only other thing that requires to be considered is the argument of Mr. Chari that the law in question is invalid as it is not covered by any of the items . in the legislative list. In my opinion, this argument has no substance. What the law has attempted to do is to regulate the affairs of this company by laying down certain special rules for its management and adminis- tration. It is fully covered by item No. 43 of the Union List which speaks inter alia of "incorporation, regulation and winding up of trading corporations.

" The result is that the application fails and is dis- missed with costs. DAS J. -As I have arrived at a conclusion different from that reached by the majority of this Court, I Chiran. jitlal Chowdhuri .. The Union of India and Other a. ,. Wukherjea. J. DaaJ. 1950 Chiranjitlal Ohowdhuri v. The Union of India and Oth•r1. DasJ. 916 SUPREME COURT REPORTS [1950) consider it proper, out of my respect for the opinion of my learned colleagues, to state the reasons for my conclusions in some detail. On January 9, 1950, the Governor-General of India, acting under section 42 of the Government of India Act, 1935, promulgated an Ordinance, being Ordinance No. II of 1950, concerning the Sholapur Spinning and Weaving Company, Limited, (hereafter referred to as the said company). The preambles and the provisions of the Ordinance have been referred to in the judgment just delivered by Mukherjea J. and need not be recapitulated by me in detail.

Suffice it to say that the net result of the Ordinance was that the managing agents of the said company were dismissed, the directors holding office at the time automatically vacated their office, the Government was authorised to nominate directors, the rights of the shareholders of this company were curtailed in that it was made unlawful for them to nominate or appoint any director, no resolution passed by them could be given effect to without the sanction of the Government and no proceeding for winding up could be taken by them without such sanction, and power was given to the Government to further modify the provisions of the Indian Companies Act in its application to the said company. On the very day that the Ordinance was promulgat- ed the Central Government acting under section 15 delegated all its powers to the Government of Bombay. On January IO, 1950, the Government· of Bombay appointed Respondents Nos. 3 to 7 as the new directors. On March 2, 1950, Respondent No.

5 having resigned, Respondent No. 8 was appointed a director in his place and on the same day Respondent No. 9 was also appointed as a director. In the mean- time the new Constitution had come into force on January 26, 1950. On February 7, 1950, the new directors passed a resolution sanctioning a call for H. s. SO on the preference shares. Thereupon a suit being Suit No. 438 of 1950 was filed in the High Court of S. C. R. SUPREME COURT REPOH. TS 917 Bombay by one Dwarkadas Shrinivas against the new directors challenging the validity of the Ordinance and the right of the new directors to make the call. Bhagwati J. who tried the suit held that the Ordinance was valid and dismissed the suit. An appeal (Appeal No. 48 of 1950) was taken from that decision which was dismissed by a Division Bench (Chagla C. J. and Gajendragadkar J. ) on August 29, 1950. In the mean- time, on April 7, 1950, the Ordinance was replaced by Act No. XXVIII of 1950.

The Act substantially reproduced the provisions of the Ordinance except that the preambles to the Ordinance were omitted. On May 29, 1950, the present petition was filed by one Chiranjitlal Chowdhuri. The petitioner claims to be a shareholder of the said company holding 80 preference shares and 3 ordinary shares. The preference shares, according to him, stand in the name of the Bank of Baroda to whom they are said to have been pledged. As those preference shares are not registered in the name of the petitioner he cannot assert any right as holder of those shares. According to. the respondents, the petitioner appears oil the register as holder of only one fully paid up ordinary share. For the purposes of this application, then, the petitioner's interest in the said company must be taken as limited to only one fully paid up ordinary share. The respondents are the Union of India, the State of Bombay and the new directors besides the company itself. The respondent No.

5 having resigned, he is no longer a director and has been wrongly im- pleaded as respondent. The reliefs prayed for are that the Ordinance and the Act are itltra vires and void, that the Central Government and the State Government and the directors be restrained from exercising any powers under the Ordinance or the Act, that a writ of mand- amus be issued restraining the new directors from exercising any powers under the Ordinance or the Act or from in any manner interfering with the manage- ment of the affairs of the company under colour of or in purported exercise of any powers under the said Ordinance or Act. 19~0 Chiranjitlal Chowdhuri v. Tha Union of India and Other&. DaaJ. 1950 Ohiranjitlal Ohowdhuri v. The Union of India and Other a.

Das J, 918 SUPREME COURT REPORTS [1950) The validity of the Ordinance and the Act has been challenged before us on the following grounds :-(i) that it was not within the legislative competence-(a) of the Governor-General to promulgate the Ordinance, or (b) of the Parliament to enact the Act, and (ii) that the Ordinance and the Act infringe the fundamental rights of the shareholders as well as those of the said company and are, therefore, void and inoperative under article 13. Re (i) -The present application has been made by the petitioner under article 32 of the Constitution. Sub-section (1) of that article guarantees the right to move this Court by appropriate proceedings for the enforcement of the rights conferred by Part III of the Constitution. Sub-section (2) empowers this Court to issue directions or orders or writs, including certain specified writs, whichever may be appropriate, for the enforcement of any of the rights conferred by that Part.

It is clear, therefore, that article 32 can only be invoked for the purpose of the enforcement of the fundamental rights. Article 32 does not permit an application merely for the purpose of agitating the competence of the appropriate legislature in passing any particular enactment unless the enactment also infringes any of the fundamental rights. In this case the claim is that the fundamental rights have been infringed and, therefore, the question of legislative competence may also be incidentally raised on this application. It does not appear to me, however, that there is any substance in this point for, in my opinion, entry 33 of List I of the Seventh Schedule to the Government of India Act, 1935, and the corresponding entry 43 of the Union List set out in the Seventh Schedule to the Constitution clearly support these pieces of legislation as far as the question of legislative competency is concerned.

Sections 83·A and 83-B of the Indian Companies Act can only be supported as valid on the ground that they regulate the manage- ment of companies and are, therefore, within the said entry. Likewise, the provisions of the Ordinance and the Act relating to the appointment of directors by the • S. C. R. SUPREME COURT REPORTS 919 Government and the curtailment of the shareholders' rights as rega. rds the election of directors, passing of resolutions giving directions with respect to the management of the company and to present a wind- ing up petition are matters touching the manage- ment of the company and, as such, within the legislative competence uf the appropriate legislative authority. In my judgment, the Ordinance and the Act cannot be held to be invalid on the ground of legislative incompetency of the authority promulgat- ing or passing the same.

Re (ii)- The fundamental rights said to have been infringed are the right to acquire, hold and dispose of property guaranteed to every citizen by Article 19(1)(f) and the right to property secured by article 31. In Gapalan' s case (I) I pointed out that the rights con- ferred by article 19 (1) (a) to (e) and (g) would be available to the citizen until he was, under article 21, . deprived of his life or personal liberty accordin~ to procedure established by law and that the right to property guaranteed by article 19 (1) (f) would like. wise continue until the owner was, under article 31, deprived of such property by authority of law. There- fore, it will be necessary to consider first whether the shareholder or the company has been deprived of his or its property by authority of law under Article 31 for, if he or it has been so deprived, then the question of his or its fundamental right under article 19 (1) (f) will not arise . The relevant clauses of article 31 run as follows :- " 31.

(1) No person shall be deprived of his pro- perty save by authority of law. (2) No property, movable or immovable, includ- ing 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 compen- sation for the property taken possession of or acquired Ill {19SOJ 8. 0,R. 86. 1950 Chirartjitlal Chowdhuri v. The Union of India and Othera. DasJ. 1950 Chiranjitlal Ohowdhu. ri v. The Union of India and Other&, Das J. 920 SUPREME COURT REPORTS [1950] 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. Article 31 protects every person, whether such per- son is a citizen or not, and it is wide enough to cover a natural person as well as an artificial person.

Whether or not, having regard to the language used in article 5, a corporation can be called a citizen and as such entitled to the rights guaranteed under article 19, it is quite clear that the corporation is protected by article 31, for that article protects every "person" which ex- pression certainly includes an artificial person. The contention of the petitioner is that the Ordinance and the Act have infringed his fundamental right to property as a shareholder in the said company. Article 31, like article 19( I) (f), is concerned with " property ". Both the articles are in the same chapter and deal with fundamental rights. Therefore, it is reasonable to say that the word" property" must be given the same meaning in construing those two articles. What, then, is the meaning of the word " property"?

It may mean either the bundle of rights which the owner has over or in respect of a thing, tangible or intangible, or it may mean the thing itself over or in respect of which the owner may exercise those rights. It is quite clear that the Ordinance or the Act has not deprived the shareholder of his share itself. The share still belongs to the shareholder. He is still entitled to the dividend that may be declared. He can deal with or dispose of the share as he pleases. The learned Attorney-General contends that even if the other meaning of the word "property" is adopted, the shareholder has not been deprived of his " property" understood in that sense, that is to say he has not been deprived of the entire bundle of rights which put together constitute his "property".

According to him the" property" of the shareholder, besides and apart from his right to elect directors, to pass resolutions giving directions to the directors and to present a winding up petition, consists in his right to participate ' - ...... , .. • S. C. R. SUPREME COURT REPORTS 821 in the dividends declared on the profits made by the working of the company and, in case of winding up, to participate in the surplus that may be left after meeting the winding up expenses and paying the creditors. Those last mentioned rights, he points out, have not been touched at all and the shareholder can yet deal with or dispose of his shares as he pleases and is still entitled to dividends if and when declared. There- fore, concludes the learned Attorney-General, the share- holder cannot complain that he has been deprived of his "property", for the totality of his rights have not been taken away.

The argument thus formulated appears to me to be somewhat too wide, for it will then permit the legislature to authorise the State to acquire or take possession, without any compensation, of almost the entire rights of the owner leaving to him only a few subsidiary rights. This result could not, in my opinion, have been intended by our Constitution. As· said by Rich J. in the Minister for State for the Army v. Datziel ( 1 ) while dealing with section 31 (XXXI) of the Australian Constitution- " Property, in relation to land, is a bundle of rights exercisable with respect to the land. The tenant of an unencumbered estate in fee simple in possession has the largest possible bundle. But there is nothing in 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 is expropriating.

" The learned Judge then concluded as follows at p. 286:- "lt would, in my opinion, be wholly inconsistent with the language of the placitum to hold that whilst preventing the legislature from authorising the acquisition of a citizen's full title except upon just terms, it leaves it open to the legislature to seize pos- session and enjoy the full fruits of possession indefi- nitely, on any terms it chooses or upon no terms at all. "· 11). (1943-194,41 68 c. r •. R. 261. 118 1950 Ohiraajitlal Ohowdkuri v. The Union of India and OtherJJ, Das J. 1950 ChiranjiUal Cf! owdhuri v. The Union of India and Others. DasJ. 922 SUPREME COURT REPORTS [1950] In my judgment the question whether the Ordinance or the Act has deprived the shareholder of his "pro- perty" must depend, for its answer, on whether it has taken away the substantial bulk of the rights con- stituting his "property".

In other words, if the rights taken away by the Ordinance or the Act are such as would render the rights left untouched illusory and practically valueless, then there can be no ques- tion that in effect and substance the "property" of the shareholder has been taken away by the Ordinance or the Act. Judged by this test can it be said that the right to dispose of the share and the right to receive dividend, if any, or to participate in the surplus in the case of winding up that have been left to the shareholder are illusory or practically valueless, because the right to control the manage- ment by directors elected by him, the right to pass resolutions giving directions to the directors and the right to present a winding up petition have, for the time being, been suspended? I think not. The right still possessed by the shareholder are the most impor.

tant of the rights constituting his "property", although certain privileges incidental to the ownership have been put in abeyance for the time being. It is, in my opinion, impossible to say 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 direc- tQrs, 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 shareholder'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 appre- hension of loss, to present a petition for the winding - S. C. R. SUPREME COURT RE! 'ORTS 923 up of the company. These rights, it is urged, are by themselves " pwperty" and it is of this " property " that the shareholder is said to have been deprived by the State under a law which does not provide for payment of compensation and which is, as such, an infraction of the shareholder's fundamental right to property under article 31 (2). Two questions 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" property" within the meaning of those articles, for those articles only regard that as "property" which can by itself be acquired, disposed of or taken possession of. The right to vote for the election of directors, the right to pass resolutions 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 acquired. or disposed of or taken possession of as contemplated by those articles. The second ques- tion 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 authorised any acquisition by the State of this "property" of the shareholder or that there has in fact been any such acquisition. l The only question then is whether this "property" of the shareholder, meaning thereby only the ngh ts 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 of course, to the sanction of the Government. Assuming, however, that the fetters placed on tuese rights are tantamount to the taking away of the rights altogetl1er, there is nothing to indicate that the Ordinance or the Act has, after taking away the rights from the shareholder, ! 950 Chiranjitlal Chowdhuri v. The Union of India and Others. DasJ, 1950 Ohiranjitlai Ghowdhuri v. The Union of India and Othera. Das J.

924 SUPREME COURT REPORTS [1950] 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 corporations. 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 Jaw 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 directions or to present a winding up petition. Such deprivation, 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 destroyed or kept in abeyance. The result, therefore, has been that although the share· holder has been for the time being deprived of his "property", assuming these rights to be "property", such "property" has not been acquired or taken pos- session 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 negative 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) prohibits the acquisi- tion or taking possession of property for a public purpose under any Jaw, unless such law provides for payment of compensation. It is suggested that clauses (1) and (2) of article 31 deal with the same topic, namely, compulsory acquisition or taking possession S. C. R. SUPREME COURT REPORTS 925 of property, clause (2) being only an elaboration of clause (1). There appear to me to be two objections to this suggestion. If that were the correct view, then clause (1) ;must be held to be wholly reduudant 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 supported in the United States of America as an exercise of " police power". This deprivation of pro- perty is different from acq llisition 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 pro- vided for deprivation of property in exercise of' 'police powers". I am not prepared to adopt such construc- tion, 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 deprived of his property, provided he is so deprived by authority 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 acqui- sition or taking possession of it, no compensation is required, provided that such deprivation is by 1950 Chiranjitlal GhowdhurS v. The Uniott ·of India and Othera, Da. oJ. 1960 Chiran. iitlal Chowdhuri v. Th~ Union of India·and Others. Das J. 926 SUPREME COURT REPORTS [1950] 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 competent legislative authority. This deprivation having been brought about otherwise than by acquisition or taking possession of such rights, no question of compensation can arise and, therefore, there can be no question of the infraction of funda- mental rights under article 31 (2). It is clear, there- fore, that so far as the shareholder is concerned there has been no infringement of his fundamental rights under article 19 (lJ (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 Ordinance 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 com- pany through the new directors appointed by it with- out 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 posses- sion 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 com- pany and have not really been taken possession of by the State.

This argument, however, overlooks the fact that in order that the possession 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 dis- charge him, as in this case, the possession of such servant or agent can hardly, in law, be regarded as the possession of the company(l). In this view of the \1 1 81:Jt:1 E. lemeutil ofL<1. w by Markby, 6th Editioo, Pa. ra. 071, p, 192. S. C. R.

SUPREME COURT REPORTS 927 matter there is great force in the argument that the property of the company has been taken possession of by the State through directors who have been appointed by the State in exercise oi 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 compensation. The appro- priate 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 produc- tion of an essential commodity and had caused serious unemployment amongst a certain section of the com. ruunity, but, as stated by Holmes]. in Pennsylvania Coal Company v.

Mahon('), "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, therefore, 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 infringed, at all, who can complain about such infringe- ment ? Prima f acie 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 misappre- hension, for if the Act be void on account of its being unconstitutional, the directors appointed by the share- holders have never in law been discharged 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 (! ) l60 u,s. 393 • •. • 1950 Ohiranjitlal Chowdhuri v. The Union of Ttid1a and Others. Das J. SUPREME COURT REPORTS [1950] an individual shareholder can complain. It is well settled in the United States that no one but those Ohiranjit! al whose rights are directly· affected by a law can raise Chowdhuri v. the question of the constitutionality of that law. 1950 Tho Union of Thus in McCabe v.

Atchison(') which arose out India and of a suit filed by five Negros against five Railway Others, Companies to restrain them from making any distinction Das J, in service on account of race pursuant to an Oklahoma Act known as "The Separate Coach Law," in upholding the dismissal of the suit Hughes ]. 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 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 Uustifies judicial interference. " In that case there was no allegation that anyone of the plaintiffs had ever travelled on anyone of the rail roads or had requested any

Source: Supreme Court eSCR. Dataset: Dattam Labs, CC BY 4.0. Text extracted automatically; compare with the source PDF for layout and accuracy.