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Dwarkadas Shrinivas Vs. the Sholapur Spg. and Wvg. Co. Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtMumbai High Court
Decided On
Case NumberO.C.J. Appeal No. 48 of 1950
Judge
Reported inAIR1951Bom86; (1951)53BOMLR218; ILR1951Bom473
ActsConstitution of India - Articles 14, 19, 19(1), 19(5), 31, 31(1), 31(2); Sholapur Spinning and Weaving Company (Emergency Provisions) Ordinance, 1950 - Sections 4
AppellantDwarkadas Shrinivas
RespondentThe Sholapur Spg. and Wvg. Co. Ltd. and ors.
Appellant AdvocateNoshirwan P. Engineer and ;M.N. Javeri, Advs.
Respondent AdvocateM.L. Maneksha and ;C.K. Daphtary, Adv. General (for Nos. 1 to 8), ;M.C. Setalvad and ;G.N. Joshi, Advs. (for No. 9)
DispositionAppeal dismissed
Excerpt:
sholapur spinning and weaving company (emergency provisions) ordinance, 1950, section 4 (d) - validity of-power to make call on preference shares validity of,-constitution of india, article 14, 19, 31-'property', meaning of-'take possession of', meaning of-'deprivation', meaning of-right of management, whether property under article 31 of constitution-incorporeal rights whether included in 'property'.; the sholapur spinning and weaving company (emergency provisions) ordinance, 1950, is valid and does not offend against article 14 of the constitution. the power given to the new directors of the company under section 4(d) of the ordinance to make a call on preference shares is legal, intra vires and valid.; the right to acquire, hold and dispose of property under article 19 of the.....chagla c.j.1. the sholapur spinning & weaving co., ltd., was incorporated with an authorised capital of rs. 48,00,000 divided into 1590 fully paid up ordinary shares of rs. 1,000 each and 20 fully paid up ordinary shares of rs, 500 each & 32,000 partly paid up redeemable cumulative first preference shares of rs. 100 each. therefore, the present paid up capital of the company is rs. 32,00,000, rs. 16,00,000 being fully paid up ordinary shares & rs. 16,00,000 being partly paid up preference shares, rs. 50 being unpaid on each of the 32,000 cumulative preference shares. on 27-7-1949, the directors of the mills gave a notice to the workers that the mills would be closed, & pursuant to this notice the mills were in fact closed on 27-8 1949. on 5-10-1949, govt. appointed a controller under the.....
Judgment:

Chagla C.J.

1. The Sholapur Spinning & Weaving Co., Ltd., was incorporated with an authorised capital of RS. 48,00,000 divided into 1590 fully paid up ordinary shares of Rs. 1,000 each and 20 fully paid up ordinary shares of Rs, 500 each & 32,000 partly paid up redeemable cumulative first preference shares of Rs. 100 each. Therefore, the present paid up capital of the company is Rs. 32,00,000, Rs. 16,00,000 being fully paid up ordinary shares & Rs. 16,00,000 being partly paid up preference shares, Rs. 50 being unpaid on each of the 32,000 cumulative preference shares. On 27-7-1949, the directors of the mills gave a notice to the workers that the mills would be closed, & pursuant to this notice the mills were in fact closed on 27-8 1949. On 5-10-1949, Govt. appointed a Controller under the Essential Supplies Emergency Powers Act, 1946, & on 9 11-1949, the Controller asked the directors of the company to make a call of RS. 50 per share on the preference share holders, the amount remaining unpaid on each of the preference shares. The directors refused to comply with this requisition. Thereupon the Govt. of India on 9-1-1950, promulgated an Ordinance under Section 42, Govt. of India Act. This Ordinance, the particular provisions of which we shall presently consider, enabled the Central Govt. to take over the control of the mills & to appoint their own directors. The Ordinance also empowered the Central Govt. to delegate all its powers to the Provincial Govt. & under that power of delegation on 9-1-1950, the Central Govt. delegated all its powers to the Govt. of Bombay, & under these delegated powers the Govt. of Bombay appointed certain directors who are the defts. to the suit filed by the pltf. from which this appeal arises. These newly appointed directors passed a resolution on 7-2-1950; making a call of RS. 50 on each of the preference shares payable at the times stated in the resolution, & pursuant to this resolution a notice waa addressed on 22-2-1950, to the pltf; to pay the call on or before 3-4-1950. The pltf. thereupon filed this suit in a representative capacity on behalf of himself & other preference share-holders challenging the validity of the Ordinance & challenging the right of the directors to make the call. The suit was tried by Bhagwati J. who held that the Ordinance was valid, that the directors had the right to make the call, & that the pltf. was not entitled to any of the reliefs claimed by him in the suit. He thereupon dismissed the suit. From that order of dismissal the pltf has come in appeal before us.

2. It ie open to the pltf. to challenge any provision of the Ordinance bo the extent that it affects his rights, or even challenge the Ordinance as a whole if he can satisfy us that the Ordinance is void & thereby no rights 'are conferred upon the directors to make any call upon him. It is necessary, therefore, to look at the provisions of the impugned legislation. The preamble of the Ordinance states that 'on account of mismanagement & neglect a situation has arisen in the affair of the Sholapur Mills which has prejudicially affected the production of an essential commodity & has caused serious unemployment amongst a certain section of the community,' and it further goes on to state that 'whereas an emergency has arisen which renders it necessary to make special provision for the proper management and administration of the company, the Governor-General is pleased to promulgate an Ordinance under Section 42, Govt. of India Act.' Section 2 of the Ordinance deals with definitions. Section 8 empowers the Central Govt. to appoint as many persons as it thinks fit to be directors of the company for the purpose of taking over its management & administration. Section 4 deals with the effect of appointment of directors of the company by the Central Govt. & the effect is : (1) That all the directors of the company who were holding office im.mediately before the issue of the order appointing new directors shall be deemed to have vacated their offices; (2) any contract of management between the company & any managing agent thereof shall be deemed to have terminated; (3) it is a direction to the directors to take such steps as may be necessary to take into their custody or under their control all the property and effects and actionable claims to which the company is or appears to be entitled; and (4) the directors appointed under this Ordinance shall be for all purposes the directors of the company daly constituted under the Companies Act & these directors shall alone be entitled to exercise all the powers of the directors of the company, whether such powers are derived from the Companies Act or from the memorandum or articles of association or otherwise. Section 5 deals with powers & duties of directors, & this section gives various powers to the directors for the purpose of efficiently managing the business of the company, & it then sets out certain powers in particular & these powers are the power to raise funds, to carry out such repairs as may be necessary, the power to employ persons, & the power to cancel or vary, either unconditionally or subject to such conditions as they think fit to impose, any contract or agreement entered into between the company & any other person, provided the directors are satisfied that such contract or agreement is detrimental to the interests of the company. Section 6 provides for a statement of affairs which has got to be made to tbe directors containing various particulars as to the financial position of the company Section 7 gives powers to the directors bo institute proceedings against past directors. Section 8 provides for a penalty for withholding documents or property from the newly appointed directors. Section 9 deals with filling up of casual vacancies. Section 10 provides that no managing agent shall be entitled to any compensation for the premature termination of his contract under this Ordinance, Section 11 deals with the cancellation of the appointment of directors appointed under the Ordinance, & it states that if at any time it appears to the Central Govt. that the purpose of the order appointing the directors has been fulfilled or that for any other reason it is unnecessary that the order shall remain in force, it may direct the directors to call a meeting of the share-holders of the company for the purpose of nominating a new body of directors & on such nomination the Central Govt. may by order cancel the appointment of directors made under the Ordinance, & on the cancellation of such appointment the directors shall be divested of the management & administration of the company & such management & administration shall vest in the new body of directors. Section 12 provides that notwithstanding anything contained in the Companies Act or in the memorandum or articles of association of the company, (1) it shall not be lawful for the share-holders of the company or any other person to nominate or appoint any person to be a director of the company; (2) no resolution passed at any meeting of the shareholders of the company shall be given effect to unless approved by the Central Govt.; and (8) no proceeding for the winding up of the company or for the appointment of a receiver in respect thereof shall lie in any Ct. unless by or with the sanction of the Central Govt. Subsection (2) of Section 12 provides that subject to these provisions & subject to such exception, restrictions & limitations as the Central Govt. may, by notified order, specify, the Companies 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. Section 13 deals with the effect of the Ordinance notwithstanding the provision of any other law in operation Section 14 declares that the directors shall be deemed to be public servants, Section 15 deals with the delegation of powers by the Central Govt. to the Govt. of Bombay. Section 16 is in the nature of an indemnity clause. Section 17 is the rule-making section.

3. Now it is not disputed by Mr. Engineer on behalf of the pltf. that the Legislature had the legislative competence to enact this law. If the Legislature had the competence, then equally so had the Governor General under Section 42. Legislative competence is to be found in List I of the Govt. of India Act, Entry No. 33. But the Ordinance is challenged on the ground that it contravenes Section 299(2) of the Govt. of India Act & also contravenes certain of the fundamental rights secured to the citizen under our new Constitution. As we shall point out, it is unnecessary to consider the effect of Section 299, Govt. of India Act, because it is common ground between the parties that if the impugned legislation contravenes the provisions of Article 31(2) of the Constitution, then it would be void to the extent of that contravention, & as Article 31(2) is wider in its terms than Section 299, Govt. of India Act, it will be sufficient if we consider Article 31(2) & it would not be necessary to decide whether the impugned legislation contravenes Section 299 (2),

4. It would be best perhaps to dispose of one objection to this legislation which lies in a very narrow compass & which does not present any difficulty whatsoever. It has been urged by Mr. Engineer that the Ordinance is contrary to Article 14 of the Constitution which lays down the principle of equality of law. As we have had occasion to say before in Fram Nusserwanji Balsara v. State of Bombay, : AIR1951Bom210 (the Prohibition case), the effect of Article 14 is that all laws must operate equally upon the citizens of the country. What is pointed out is that under the Ordinance one mill is singled out for the purpose of the drastic provisions contained in the Ordinance & no class is constituted by the Ordinance to which its provisions would apply. It is clear from the preamble of the Ordinance that the reason why this piece of legislation was applied only to the Sholapur Mills was that because of mismanagement & negligence a situation had arisen which affected the production of an essential commodity & had caused serious unemployment amongst a certain section of the community. It is not suggested that the Legislature is not entitled to deal with individual cases which come before its attention. Mr. Engineer would be right if he could point out to us that there were cases of other mills where a similar situation had arisen & the Legislature had deliberately dealt only with one mill & refused to deal with the other mills. Mr. Engineer is right that if a particular law is applicable to several members of a class, then that legislation must apply to the class as a whole and cannot be made applicable to certain individuals comprising that class. But we have nothing whatsoever before us to suggest that in this unfortunate class of mills which do not recognise their public duty & which permit situations to arise because of their mismanagement & negligence any other mills fall except the 1951 Bom./12 Sholapur Mills. In our opinion, the contention, of the pltf. that the impugned legislation is bad as offending Article 14 is entirely untenable.

5. The more substantial & serious challenge upon the legislation is based on Article 31(2) of the Constitution, & in order to appreciate that challenge it is necessary to consider the various articles in the Constitution which safeguards to the citizen the right to property. Undoubtedly, the right to property is one of the most important rights in any civilized country & our Constitution has been very careful in guaranteeing this right in certain cases to its citizens & in other cases to all those who reside in our country. The right to property is first dealt with in Article 19 which deals with right to freedom with regard to various matters like freedom of speech & expression, right of assembly, right of association right of movement throughout the country, right to reside & settle in any part of India, right to practise any profession & to carry on any occupation, trade or business & also the right to acquire, hold & dispose of property. This right to acquire, hold & dispose of property is not an unqualified right. It is competent to the Legislature to impair that right, but that impairment is only possible provided the restrictions placed upon the right are reasonable & they are in the interests of the general public or for the protection of the interests of any scheduled tribe. Having dealt with these general rights to freedom, the Constitution proceeds to deal with individual rights, & Article 31 falls under the individual & specific fright to property. Sub-clause (1) of Article 31 provides that no person shall be deprived of his property save by authority of law, & Sub-clause (2) provides:

'No property, movable or immovable, including any interest in, or in any company owning, any commercial or industrial undertaking, shall be taken possession of or acquired for public purposes under any law authorising the taking of such possession or such acquisition, unless the law provides for compensation, for the property taken possession of or acquired & either fixes the amount of the compensation or specifies the principles on which, & the manner in which, the compensation is to be determined & given.'

Then follow four other sub-clauses which are not relevant to consider for the purpose of this discussion. The argument of Mr. Engineer briefly put is that the Legislature has acquired or taken possession of property without making provision for any compensation and in so doing it has offended against Article 31(2), & therefore the provisions of the Ordinance containing the acquisition or taking possession of property are void, & as these provisions are inextricably intertwined with the other provisions of the Ordinance, the Ordinance as a whole is void. The S. C. in A. K. Gopalan v. The State of Madras, : 1950CriLJ1383 had recently occasion to consider the scheme of the Constitution with reference to Article 19 & Article 21, & the view taken by the learned Judges (at least those who constituted the majority) was that as far as the right to freedom contained in Article 19, viz. (d), to move freely throughout the territory of India & (e) to reside & settle in any part of the territory of India, related to the freedom of a person whose liberty had not been taken away under Article 21 of the Constitution. It would seem, therefore, on the same analogy that the right to acquire, hold & dispose of property guaranteed to the citizen under Article 19(f) would only be operative in the case of those whose property has not been taken away under Article 31. That must be so logically because if a man has been deprived of property under Article 31(1) or 31(2) no question of his acquiring, holding & disposing of that property could possibly arise under Article 19. This right can only be made justiciable provided the Legislature has not validly taken action under Article 31 & it is only then that the question might arise whether any restrictions placed upon that right under Sub-clause (5) of Article 19 are reasonable restrictions or not.

6. The first question we have to consider with regard to the applicability of Article 31(2) is as to what is the nature of property that the Constitution is contemplating when it lays down certain provisions for safeguarding that property. Mr. Engineer has asked us to construe 'property' in its widest connotations. He has gone to the length of suggesting that inasmuch as property consists of various attributes & indicia, the acquisition or taking possession of any one of these attributes or indicia would attract the application of Article 31(2). Now in order to give a correct interpretation to the expression 'property' used in the Constitution, one must look at Article 19 & Article 31 together, because it is clear that' 'property' is not used in different senses in Article 19 & Article 31. Mr. Engineer is right that property may be not necessarily tangible property; it may also be intangible property & may include incorporeal rights. But the question is whether when Article 31(2) speaks of property being acquired or taken possession of by the State for a public purpose the Constituent Assembly was thinking of each & every attribute of property or whether property was intended to mean the totality of rights which go to constitute property, 'When we find in Article 19 (0 the right to acquire, hold & dispose of property, 'property' can only mean all the attributes & indicia which result in the legal conception of property.

The right of dominion, the right of possession, the right of control, would all be included in the expression 'property'. One does not speak of acquiring, holding & disposing of one individual attribute of property. One acquires, holds or disposes of all those qualities which together & in combination constitute 'property' in law. If that be so, then in Article 81(2) the same meaning & intendment must be given to the expression 'property.' Therefore, it is only when the State is acquiring from a subject or taking possession of from a subject property in this sense of the term that there is an obligation upon it to pay compensation. The further requirement which is also essential is that the acquisition or taking possession of must be for public purposes. Indeed, it is only for public purposes that any property can be acquired or taken possession of. Although Article 31(2) does not in terms state that acquisition or taking possession of can only be for public purposes, reading that clause as a whole it is clear that it is implicit in the power conferred upon the Legislature to legislate for the purposes of acquisition or taking possession of property. In our opinion, it is also necessary that the property referred to in Article 81(2) must be property which is capable of being acquired or taken possession of. However wide the definition of 'property' in general may be, in this particular context 'property' can only mean that kind of property which is capable of being acquired or taken possession of. Further, it also follows as a corollary that if the property is capable of being acquired of or taken possession of, it is also property, the loss of which can be compensated for. The learned Judge below has taken the view, & with respect rightly, that the property contemplated by Article 31(2) must be property capable of being taken possession of. But he does not accept the view that it must be property for the loss of which compensation can be given. With respect to the learned Judge, these are not two different characteristics of property as he has understood it. As I just stated these are complementary to each other. Something; which can be acquired, something which can be taken possession of, must necessarily be property for which compensation can also be given by the Legislature. This interpretation of 'property' does not lead to any difficulty or anomaly nor, does it in any way abridge the liberty of the subject because if the totality of the rights are not acquired or taken possession of but only some of the rights are interfered with, then clearly the subject can ask for the assistance of the Ct. under Article 19(f) of the Constitution because without an acquisition or taking possession of the totality of rights the interference with some of the rights of ownership would result in restrictions upon ownership, & whether those restrictions are reasonable or not would have to be determined by the Ct.

7. We have nest to consider what is the meaning to be given to the expression 'acquire' & 'take possession of' used in Article 31(2). Under Section 299, Govt. of India Act, the Act merely provided for the compulsory acquisition for public purposes of land, etc. & provided for payment of compensation. Our new Constitution has widened the ambit of cases where the subject would be entitled to compensation & under Article 31(2), even though there may be no acquisition, even if possession is taken of property belonging to the subject, compensation has got to be paid or fixed as required by Article 31(2). As far as 'acquisition' is concerned, the expression does not present any considerable difficulty. It is not seriously disputed by Mr. Engineer that acquisition in every case must mean transfer of ownership. If ownership in a property is transferred from A to B, whether B is another individual or the State, then any law providing for such acquisition must also provide for compensation. But the difficulty arises with regard to the other expression 'taking possession of property'. It is a curious anomaly in our Constitution to which the Attorney General has drawn our attention that when we turn to the Lists appended to the Constitution providing for the legislative competence of the Legislatures, in List I, Entry No. 33, the subject of legislation is described as 'acquisition or requisitioning of property for the purposes of the Union.' In Entry No. 36 of List II the subject of legislation is described as 'acquisition or requisitioning of property, except for the purposes of the Union, subject to the provisions of Entry No. 42 of List III,' When we turn to Entry No. 42 in List III, the subject of legislation is described as

'principles on which compensation for property acquired or requisitioned for the purposes of the Union or of a State or for any other public purpoae is to be determined & the form & the manner in which such compensation is to be given.'

From these Entries it seems to be clear that the legislative competence of the Union & the State Legislatures is confined to legislating about acquisition & requisition, but not about taking possession of property belonging to a subject. The Attorney General suggests that we must read 'taking possession of' as meaning 'requisitioning', & he points out to us that under the Govt. of India Act the power of the Provincial Legislature to legislate about compulsory acquisition of land arose from Entry No. 9 in List II. Bhagwati J. in Tain Bug Taim v. Collector of Bombay 47 Bom. L. R. 1010 : A. I. R. 1946 Bom. 216 : 47 Cri. L. J. 594 held that the power of requisitioning did not flow from Entry No. 9 & the Provincial Legislature was not competent to legislate about requisitioning of land. Thereupon a notfn. was issued under S. 104, the residuary section, empowering the Provincial Legislature to legislate about requisitioning, From this legislative history the Attorney General wants us to draw the inference that when the Constituent Assembly used the expression 'taking possession' it intended to mean the same thing as 'requisitioning', a topic of legislation which was well understood & appreciated before our Constitution was enacted. In our opinion, that argument of the Attorney General cannot be accepted because the very argument which he advances in support of that particular interpretation of 'taking possession' really compels us to accept the view which found favour with the learned Judge below. If the Constituent Assembly had this legal history present before it & knew that the expression 'requisitioning' had been incorporated in the Constitution by a notfn. under Section 104, it is difficult to understand why it advisedly used an expression which is wider in its signification unless it intended that the right to compensation should not be merely restricted to cases o acquisition & requisitioning but should cover cases which may fall outside these two categories. Therefore, in our opinion, the expression 'taking possession of' is not synonymous with 'requisitioning', but has a wider connotation than the former expression. But even so, in our opinion, when possession is taken as contemplated by Article 31(2), the person taking possession of the property must take possession of the whole bundle of rights that goes to constitute 'property.' The distinction between 'acquisition' & 'possession' ia that whereas in the case of the former there is a transfer of ownership & a transfer of title in the latter case there is no transfer of owner-ship or title.

8. Also, in our opinion, just as in the case of acquisition undoubtedly the beneficial interest is transferred from the person from whom the property is acquired to the party in whose favour the acquisition is made, similarly in the case of possession the person in possession must have transferred to him the beneficial interest in the property although the title may not be divested. Therefore, Article 31(2) deals only with cases where property as defined by us is acquired or taken possession of for public purposes. But there may be cases where there is neither transfer of ownership nor a transfer of possession & the Legislature may choose to extinguish the title of a subject in certain property or may even destroy the property thereby putting an end to its existence. Clearly such a case would not fall under Article 31(2).

9. Turning to Article 31(1), it prohibits the deprivation of property except by authority of law, & as the Attorney General has fairly conceded there are two possible interpretations that can be put upon this clause. One is to read 'deprivation' as meaning the same thing as 'acquisition' or 'taking possession' used In Article 31(2). The other interpretation is that 'deprivation' is wider in its signification than 'acquisition' or 'taking possession.' It seems to us that the second view is more logical & more consistent with the situations that may arise with which the Legislature may have to deal. If the first view were to be accepted, then there would be no provision at all for a case where the Legislature may wish to deprive a subject of his property without; acquiring it or taking possession of it. The second view also presents some difficulty. But that difficulty, when one Carefully looks into the matter, is really only on the surface. It is true that under the second interpretation it would be open to the Legislature to deprive a subject of his property, which deprivation may not be of the nature of acquisition or taking possession, without giving any compensation to the subject at all & at first blush it may appear that this would be conferring upon the Legislature dictatorial powers of considerable magnitude. But when one appreciates the principles underlying the American Constitution on which to a considerable extent our own Constitution was based, one must recall to mind the two important and different principles which apply to acquisition of property or taking of property--the expression the American Constitution used in the cases of the United States. There a property may be acquired either on the principle of eminent domain or in exercise of police power. It is only in the former case that the State is liable to compensate the subject. In the latter case no compensation need be paid to the subject. Therefore, applying the same principle, we have the principle of eminent domain reproduced in Article 31(2) & we have the principle of police power reproduced in Article 31(1). We are not suggesting that our Legislature had been given the wide police powers which are to be found in the American Constitution. It is perfectly true that our Legislatures have to be confined to the legislative powers to be found in the three Lists which are embodied in the Seventh Schedule. But we are only speaking of the principle underlying the provision of Article 31(1). Therefore, although it may seem that the powers are drastic, it is clear that these powers of depriving the subject of his property without compensating him would only arise provided the Legislature is satisfied that in public interest the property of a subject has to be destroyed or his title would have to be extinguished.

10. If this be the true position under our Constitution as to the right of property that a citizen has, we must now consider the true nature & effect of the Ordinance which has been challenged by the pltf. The Ordinance substantially interferes with the control & management of the Sholapur Mills. It brings about the termination of the office of the old directors & provides for the appointment of new ones, it terminates the managing agency contract of the managing agents, & it places restrictions upon the free exercise of the right of vote of the share-holders. What we have to decide is whether, if this be the general scheme of the Ordinance, there are any specific provisions in if which result in property being acquired or taken possession of which would require compensation at the hands of the Legislature. Mr. Engineer has pointed out to us various provisions which according to him clearly result in property being taken possession of by the State. It is not Mr. Engineer's case--& it cannot be--that there is any transfer of ownership from the company to the State or any property of the company has been acquired by the State. Therefore the narrow question that we have to consider is whether under any of the provisions of the Ordinance any property belonging to the company, the share-holders, the directors, or the managing agents, has been taken possession of by the State which requires compensation. With regard to the company, Mr. Engineer contends that under the Ordinance the company has been dispossessed of its property & the directors have been put in possession. That, in our opinion, is not a correct reading of the provisions of the Ordinance. The juridical possession of the company has not been in the slightest degree affected or interfered with by the Ordinance. Notwithstanding the appointment of the new directors, the juridical possession remains the same, & the Ordinance in terms provides that the directors shall have custody of the property, effects & actionable claims of the company. Even such custody the directors would have not in their own right but as agents of the company. Therefore, if would not be true to say that the company has been dispossessed of any property at all & possession has been taken of that property by anyone under the Ordinance. Then it is suggested that the shareholders have been deprived of their right to property by certain provisions of the Ordinance. A shareholder, as the very name implies, has a share in the assets of the company & he has certain rights on the winding up of the company. He has also a certain right in the management & control of the company & that right he exercises by means of the appointment of directors & by giving directions to the directors at meetings of the company by means of his vote. It is pointed out that not only he has lost the right of appointing directors under the articles of association, but his right to control & manage the company has been taken away, because even though he had passed resolutions at general meetings, those resolutions would only be given effect to provided they received the sanction of the Central Govt. It is perfectly true that under the Ordinance the right of the shareholders to control & manage the company has been controlled & regulated. We would go further & say that that right has been even restricted. But in the first instance the right of management is not such property as is contemplated by Article 31. This is not a property which can be acquired or taken possession of & even if it was such property, what the Ordinance does is merely to place a restriction upon the use of that property and such restriction would come under Article 19, & in our opinion it would be a reasonable restriction in the public interest under Sub-clause (5) of Article 19 Then it is urged that the directors have been deprived of their office & the new directors appointed by the Govt. have taken possession of their office. A director acts in that capacity under a contract with the company & the contract that subsists between him & the company is a contract of employment. It is a contract that the director shall render personal services to the company in return for the remuneration fixed under the articles of association or by a resolution that may be passed at the meeting of the company. Therefore, undoubtedly, the directors whose office abruptly came to an end had a certain benefit under the contract between themselves & the company. The question is whether such a benefit would be 'property' within the meaning of Article 31. Now, it is not every benefit under a contract that can be acquired or taken possession of. Such a contract ordinarily cannot be transferred or assigned; such a contract cannot be specifically performed; and the only result of a breach of such a contract is to entitle a person who complains of the breach to damages. Therefore, when the directors appointed under the articles of association were deprived of their office, there was no acquisition or taking possession of by the new directors appointed under the Ordinance. It is difficult to see how the new directors took possession of the office occupied by the former directors. The title of the old directors was extinguished, their tenure of office was cut short, & now directors were appointed under the Ordinance. But there certainly was not a taking possession of the office which the old directors occupied. The same considerations apply to the question of the premature termination of the managing agents. Under the articles of association & indeed under the Companies Act itself, the control & supervision of the company is vested in the directors. Under Article 127, Messrs. Morarka & Go. were appointed the managing agents, & under Article 121 the general conduct and management of the business of the company was given to these managing agents, but subject to the control & supervision of the directors. Therefore, in terminating this contract of managing agency, a contract of personal service was brought to an end. Undoubtedly, Morarka & Co. had the benefit of this contract; it had certain rights under that contract; but in our opinion neither this benefit nor the rights conatitute property within the meaning of Article 31(2). It could not be said of this managing agency contract that it could have been disposed of by Mesars. Morarka & Co. as every property either under Article 19 or Article 31 can be disposed of in order to attract the provisions of those articles.

11. In this connection our attention was drawn to a decision of this Ct. reported in Commissioner of Inc.-tax v. Sir Purshottamdas 48 Bom. L. R. 141 : A. I. R 1946 Bom. 401 where Sir Leonard Stone & myself had to consider whether a certain sum spent by Sir Purshottamdas Thakurdas in defending a suit filed by Shamdasani that his appointment as a director of the Eeserve Bank of India was invalid, was a permissible deduction under Section 12(2), Income-tax Act, & we took the view that this amount was not a capital expenditure inasmuch as it was hot an expenditure incurred in creating or in orginating the source of income or in bringing it into being, but in preserving it when it was already there. It was in these circumstances that we held that the office of a director was an asset. Mr. Engineer relies on this decision for the purpose of asking us to hold that an office of a director is a property which would attract the application of Article 31(2). As we have already pointed out, 'property' as used in the Constitution must be read & interpreted in its own context & in that context it does not & cannot mean what property may mean when it has got to be considered in the context of the Income-tax Act & for the purpose of determining a specific issue which arose before the Ct. Mr. Engineer has also relied on a decision of a D. B. of this Ct. reported in Bhundal Panda v. Pandol Pos Patil, 12 Bom. 221, where it was held by Sir Charles Sargent & Nanabhai Haridas J. that a right to a fishery was an immoveable property & a suit would lie to recover possession of that right under Section 9, Specific Relief Act. This is an authority for the proposition that an obstruction to an incorporeal right may result in possession being taken of that incorporeal right, and if Mr. Engineer relies on this decision for the contention that incorporeal right may be property & possession may be taken o such incorporeal right, there can be no quarrel with that contention. It is not merely, as we have said before, corporeal or tangible property that is necessarily included in the expression 'property' in the Constitution. Incorporeal right may well be property for the purposes of those articles, but even that incorporeal right must be such right as is capable of being acquired & it must have the indicia which are indicated in Article 19, viz., it must be a right which can be acquired, held & disposed of.

12. We might also consider whether if there was taking possession of any property in this case, the taking possession was for public purpose. The Attorney. General has drawn our attention to the fact that under the Ordinance no public use was to be made of the mills which were to be controlled by the Central Govt. The profits, if any, were made, were to be used for the benefit of the mills & the shareholders, & the public did not come in for any benefit, & the Attorney General wants us from those facts to hold that even if there was an acquisition or taking possession of property, it was not for public purpose, We are not prepared to accept that contention & put that narrow interpretation upon the expression 'public purpose' used in Article 31(2). The very preamble of the Ordinance shows that the object of enacting the Ordinance was the production of essential commodities & the removal of serious unemployment amongst a section of the community. It would not be right to curtail & restrict the right of the Legislature to acquire property for public purposes to cases where the property acquired or taken possession of must necessarily be used by the public or a section of the public. If the purpose of acquisition or taking possession of is a public purpose, if by reason of that acquisition or taking possession of the public as a whole or a section of the public is going to benefit, then in our opinion the acquisition or taking possession of would be an acquisition or taking possession of for public purposes. It cannot be disputed in this case that the object of the Ordinance & the object of controlling the mills was the benefit of the public. In the production of essential commodities the public as a whole would benefit, in the doing away with unemployment a large & important section of the public, viz. the labouring class, would also benefit, & therefore, in our opinion, if Mr. Engineer was right in his other contentions, he would succeed (sic) under Article 31(2) because undoubtedly what has been done by the Central Govt. by its Ordinance is for public purposes as contemplated by Article 31(2).

13. The result, therefore, is that in our opinion the Ordinance enacted by the Governor General was valid and the power given to the directors under Section. 4 (d) of the Ordinance to make a call was legal, intra vires & valid. We, therefore, agree with the view taken by the learned Judge that the challenge made to the Ordinance by the pltf. cannot be sustained, & in the result the appeal must fail & is dismissed.

14. Applt. to pay the costs of resps. 1 to 8. No order as to costs of resp. 9, Certificate under Article 132 to the applt.


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