Skip to content


Pilani Investment Corporation Limited and anr. Vs. Union of India (Uoi) and anr. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Petn. No. 850 of 1979
Judge
Reported inAIR1981MP140; 1981MPLJ62
ActsConstitution of India - Articles 13, 14, 19, 19(1), 29D, 31, 31A, 31A(1), 31B and 368; Constitution (39 Amendment) Act, 1975; Industries (Development and Regulation) Act, 1951 - Sections 18A, 18AA, 18C, 18FA, 18FB, 18FB(1), 18FB(2), 18FB(3) to 18FB(5) and 29D; ;Industries (Development and Regulation) (Amendment) Act, 1979
AppellantPilani Investment Corporation Limited and anr.
RespondentUnion of India (Uoi) and anr.
Appellant AdvocateS.S. Ray, ;P.L. Dubey, ;S.K. Dubey, ;Anil Bhatnagar, ;Praveen Kumar and ;C.C. Dwivedi, Advs.
Respondent AdvocateA.M. Mathur, Adv. General, ;K.K. Adhikari and ;S.C. Jain, Advs.
Cases Referred(See Swadeshi Cotton Mills Co. Ltd. v. State Industrial Tribunal
Excerpt:
- - and whereas the central government is satisfied that in relation to the said industrial undertaking it is necessary so to do in the interests of the general public with a view to preventing fall in the volume of production of the scheduled industry, namely bicycles and bicycle chains industry; --(1) the central government if it is satisfied, in relation to an industrial undertaking or any part thereof, the management or control of which has been taken over under section 18a, whether before or after the commencement of the industries (development and regulation) amendment act, 1971, or under section 18aa or section 18fa, that it is necessary so to do in the interests of the general public with a view to preventing fall in the volume of production of any scheduled industry, it may,.....g.p. singh, c.j.1. by this petition under article 226 of the constitution, the petitioners challenge two orders issued by the central government under section 18fb(1)(b) of the industries (development and regulation) act, 1951 and four orders issued under section 18fb(2) extending the operation of the said orders up to 1st january, 1981. the petitioners also, challenge the constitutional validity of sections 18fb and 29d of the act.2, petitioner no. 1 is an investment holding company and carries on the business of investment and financing monies for business and commercial purposes. petitioner no. 2 is a shareholder of the petitioner-company. respondent no. 3 is a company having a factory at worli, bombay, and another factory at ghaziabad in uttar pradesh. the respondent company carries.....
Judgment:

G.P. Singh, C.J.

1. By this petition under Article 226 of the Constitution, the petitioners challenge two orders issued by the Central Government under Section 18FB(1)(b) of the Industries (Development and Regulation) Act, 1951 and four orders issued under Section 18FB(2) extending the operation of the said orders up to 1st January, 1981. The petitioners also, challenge the constitutional validity of Sections 18FB and 29D of the Act.

2, Petitioner No. 1 is an investment holding company and carries on the business of investment and financing monies for business and commercial purposes. Petitioner No. 2 is a shareholder of the petitioner-company. Respondent No. 3 is a company having a factory at Worli, Bombay, and another factory at Ghaziabad in Uttar Pradesh. The respondent company carries on the business of manufacturing bicycles, auto-engines and bicycle parts. The said industry is a scheduled industry under the Act. In June 1970, the petitioner company advanced a clean loan of Rs. 8.5 lacs to the respondent-company repayable on demand on interest at the rate of 10 per cent per annum. Another loan of Rupees 5 lacs was advanced by the petitioner-company on the same terms in February. 1971. Besides these loans the petitioner-company in October, 1970 executed a guarantee in favour of the State Bank of India up to limit of Rs. 15 lacs in respect of loans advanced by the State Bank to the respondent company on cash credit facilities. By two orders passed on 3rd January, 1974 under Section 18A of the Act, the management of the whole of the undertakings of the respondent company at Bombay and Ghaziabad was taken over for a period of five years. This period was extended from time to time. The undertakings of the respondent company are still managed by the Board of Management authorised under Section 18A of the Act by the Central Government. By two separate orders issued on 29th January, 1974, under Section 18FB(1)(b) of the Act, the Central Government suspended the operation of all contracts, agreements, etc. in force immediately before the date of issue of the orders (other than those relating to secured liabilities to banks and financial institutions) to which the said industrial undertakings of the respondent company or the company was a party for a period of one year. The orders in so far as relevant read as follows:

'And whereas the Central Government is satisfied that in relation to the said industrial undertaking it is necessary so to do in the interests of the general public with a view to preventing fall in the volume of production of the scheduled industry, namely Bicycles and Bicycle chains industry;

Now, therefore, in exercise of the powers conferred by Clause (b) of Sub-section (1) of Section 18FB of the Act, the Central Government hereby declares that the operation of all contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force immediately before the date of issue of this Order (other than those relating to secured liabilities to banks and financial institutions) to which the said industrial undertaking or the owning such industrial undertaking is a party or which may be applicable to such industrial undertaking or company shall remain suspended for a period of one year and that all the rights, privileges, obligations and liabilities, accruing or arising thereunder before the said date shall remain suspended for the said period.'

The period of continuance of the aforesaid orders was extended from time to time up to 2nd January, 1979 under Section 18FB(2). By two orders passed on 1st January, 1979, the period of the operation of these orders was extended up to and inclusive of 1st January, 1980. On 19th January, 1975 the petitioner company filed a suit in the Court of the District Judge, Gwalior, against the respondent company for recovery of Rupees 19,22,260.97, the amount due on the two loans. The District Judge by his order dated 30th July, 1977 rejected the plaint under Order 7, Rule 11 of the Civil P. C. on the ground that the sail was barred by the orders of suspension of contracts issued by the Central Government under Section 18FB(1)(b). In the hope that the orders would expire on 2nd January, 1979, the petitioner company again filed a suit on 7th November, 1978 in the Court of the District Judge for recovery of Rs. 24,26,969/-which was the amount then due on the loans. The Central Government, however, on 1st January, 1979 issued two orders extending the period of the operation of the orders of suspension up to 1st January, 1980. Under Section 18FB(2) as it then stood, an order of suspension passed under Section 18FB(1)(b) could remain in operation only for an aggregate period of five years. By Ordinance No. 6 of 1978 which came into force on 30th December, 1978 the maximum aggregate period of five years under Section 18FB(2)(b) was raised to eight years. The Ordinance was replaced by the Amending Act No. 17 of 1979. The petitioners then filed the present petition on 2nd April, 1979. During the pendency of this petition the Central Government issued two orders on 28th December, 1979 extending the period of the operation of the orders of suspension of contracts etc. under Section 18FB(1)(b) up to and inclusive of 1st January, 1981. The petitioner then amended the petition so as to include the relief for challenging these orders also.

3. The Industries (Development and Regulation) Act 1951 as originally enacted by Act No. 65 of 1951, came into force on 8th May, 1952 by a notification of the same date issued under Section 1(3) of the Act. Chapter III-A of the Act which provides for direct management or control of industrial undertakings by the Central Government in certain cases, was inserted in the Act by Act No. 26 of 1953. Section 18A in this Chapter authorises the Central Government to assume management or control of an industrial undertaking in respect of which an investigation has been made under Section 15. Chapter III-A was included at Item 19 in the Ninth Schedule to the Constitution by Section 5 of the Constitution (Fourth Amendment) Act, 1955. The Act was again drastically amended by Act No. 72 of 1971 which came into force on 1st November, 1974. This Act added Section 18AA in Chapter III-A authorising the Central Government to take over the management of industrial undertakings without investigation under Section 15. The Amending Act also added Chapter III-AA which contains Section 18FA empowering the Central Government to authorise with the permission of the High Court to take over management or control of industrial undertakings owned by companies in liquidation. The Amending Act further added Chapter III-AB which bears the heading 'Power to provide relief to certain industrial undertakings.' Chapter III-AB so added consists of only one section, namely Section 18FB which reads as follows:

'18FB. Power of Central Government to make certain declarations in relation to industrial undertakings, the management or control of which has been taken over under Section 18A, Section 18AA or Section 18FA.-- (1) The Central Government if it is satisfied, in relation to an industrial undertaking or any part thereof, the management or control of which has been taken over under Section 18A, whether before or after the commencement of the Industries (Development and Regulation) Amendment Act, 1971, or under Section 18AA or Section 18FA, that it is necessary so to do in the interests of the general public with a view to preventing fall in the volume of production of any scheduled industry, it may, by notified order, declare that:--

(a) all or any of the enactments specified in the Third Schedule shall not apply or shall apply with such adaptations, whether by way of modification, addition or omission (which does not, however, affect the policy of the said enactments) to such industrial undertaking, as may be specified in such notified order, or

(b) the operation of all or any of the contracts, assurances of property agreements, settlement awards standing orders or other instruments in force (to which such industrial undertaking is a party or which may be applicable to such industrial undertaking or company) immediately before the date of issue of such notified order shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified in the notified order.

(2) The notified order made under Sub-section (1) shall remain in force, in the first instance, for a period of one year, but the duration of such notified order may be extended from time to time bya further notified order by a period notexceeding one year at a time;

Provided that no such notified order shall, in any case, remain in force -

(a) after the expiry of the period for which the management of the industrial undertaking was taken over under Section 18A. Section 18AA or Section 18FA, or

(b) for more than five years in the aggregate from the date of issue of the first notified order, whichever is earlier.

(3) Any notified order made under Sub-section (1) shall have effect notwithstanding anything to the contrary contained in any other law, agreement, or instrument or any decree or order of a court, tribunal, officer or other authority or of any submission, settlement or standing order.

(4) Any remedy for the enforcement of any right, privilege, obligation or liability referred to in Clause (b) of Sub-section (1) and suspended or modified by a notified order made under sub-section shall, in accordance with the terms of the notified order, remain suspended or modified, and all proceedings relating thereto pending before any court, tribunal, officer or other authority shall accordingly remain stayed or be continued subject to such adaptations, so, however, that on the notified order ceasing to have effect -

(a) any right, privilege, obligation or liability so remaining suspended or modified shall become revived and enforceable as if the notified order had never been made;

(b) any proceedings so remaining stayed shall be proceeded with, subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings become stayed.

(5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability referred to in Clause (b) of Sub-section (1), the period during which it or the remedy for the enforcement thereof remained suspended shall be excluded.'

The Amending Act No. 72 of 1971 also inserted Section 29D in Chapter IV bearing the title 'Miscellaneous'. Section 29D is as follows:

'29D. Debts incurred by the authorised persons to have priority. Every debt arising out of any loan obtained by the authorised person for carrying on the management of, or exercising functions of control in relation to an industrial undertaking or part thereof, the management of which has been taken over under Section 18A or Section 18AA or Section 18FA, --

(a) shall have priority over all other debts, whether secured or unsecured, incurred before the management of such industrial undertaking was taken over:

(b) shall be a preferential debt within the meaning of Section 530 of the Companies Act, 1956 (1 of 1956); and such debts shall rank equally among themselves and be paid in full out of the assets of the industrial undertaking unless such assets are insufficient to meet them, in which case they shall abate in equal proportions.'

4. By the Constitution (39th Amendment) Act. 1975, which came into force on 10th August, 1975, Items 87 to 124 were added in the Ninth Schedule to the Constitution. This amendment inserted the entire Industries (Development and Regulation) Act, 1961, at Item No. 88. Then by Section 2 of Ordinance No. 6 of 1978 which took effect from 30th December, 1978, the words 'eight years' were substituted in place of 'five years' in Section 18FB(2)(b) of the Act. The Ordinance was repealed and replaced by Act No. 17 of 1979.

5. Learned counsel for the petitioners first contends that Sections 18FB and 29D of the Act, which were introduced in the Act by Amending Act No. 72 of 1971 are ultra vires and void as they take away the petitioners' fundamental rights under Articles 14, 19(1)(f), 19(1)(g) and 31 of the Constitution. The inclusion of the Act at Item 88 in the Ninth Schedule by the Constitution (39th Amendment) Act, 1975, shuts out this argument and so the petitioners' learned counsel further contends that the inclusion of the Act at Item 88 by the said! Constitution Amendment Act is beyond the constituent power, for it damages the basic structure or framework of the Constitution, as thereby the right to challenge the said Act as infringing Articles 14, 19 and 31 becomes barred.

6. In the celebrated case of Kesavananda Bharti v. State of Kerala, AIR 1973 SC 1461, the Supreme Court by a majority of seven against six held that the constituent power conferred by Article 368 did not enable Parliament to alter the basic structure or framework of the Constitution. The ruling in Kesavadanda Bharti's case has to be understood and applied in the light of the recent decisions of the Supreme Court pronounced on 9th May, 1980 in Waman Rao v. Union of India, W. P. Nos. 656-660 of 1977: (reported in AIR 1981 SC 271) and Minerva Mills Ltd. v. Union of India, W. P. Nos. 356-361 of 1977: (reported in AIR 1980 SC 1789). The decision in Waman Rao's case upheld the validity of Article 31A introduced by the Constitution (1st Amendment) Act, 1951, and amended by the Constitution (Fourth Amendment) Act, 1950, with retrospective effect on the ground that it does not damage any of the basic or essential features of the Constitution or its basic structure. It was also held that Article 31B and all amendments to the Constitution which were made before 24th April, 1973 (the dale on which Kesavananda Bharti's case was decided) by which the Ninth Schedule to the Constitution was amended from time to time by the inclusion of various Acts and Regulations therein are valid and constitutional. It was further held that amendments to the Constitution made on or after 24th April, 1973 by which the Ninth Schedule to the Constitution was amended from time to time by the inclusion of the various Acts and Regulations therein are open to challenge on the ground that they or any one or more of them are beyond the constituent power of Parliament since they damage the basic or essential features of the Constitution or its basic structure. The Supreme Court also upheld the validity of Article 31C to the extent it was held to be valid in Kesavananda Bharti's case as it stood before the Constitution (42nd Amendment) Act, 1976, on the ground that it does not damage any of the basic or essential features of the Constitution. The Supreme Court did not pronounce upon the validity of subsequent constitutional amendments introducing further items in the Ninth Schedule, but the Court observed that if any Act or Regulation included in the Ninth Schedule by a constitutional amendment made after 24th April, 1973, is saved by Article 31C as it stood prior to its amendment by the Constitution (42nd Amendment) Act, the challenge to the validity of the relevant constitutional amendment by which that Act or Regulation is put in the Ninth Schedule on the ground that the amendment damages or destroys the basic or essential features of the constitution or its basic structure, as reflected in Article 14, 19 or 31 will become otiose. In Minerva Mills' case the Constitution (42nd Amendment) Act in so far as it amended Articles 31C and 368 was struck down on the ground that it damages the basic or essential features of the Constitution and destroys its basic structure. The majority judgment held that Articles 14, 19 and 21 of the Constitution and the limitations of the constituent power to amend the Constitution formed part of the basic or essential features or the basic structure of the Constitution.

7. Articles 19(1)(f) and 31 which deal with rights to property, were delated from Part III of the Constitution lay the Constitution (44th Amendment) Act, winch came into force on 20th June, 1979. The validity of the Constitution (44th Amendment) Act has not been challenged before us. The deletion of Articles 19(1)(f) and 31 from Part III, though prospective, is on the hypothesis that rights to property as guaranteed therein did not form part of the basic or essential features or the basic structure of the Constitution. Khanna, J., in Kesavananda Bharti's case had categorically held that rights to property did not form part of the basic structure of the Constitution. Although there is a strong extra judicial writing supporting a contrary view (see Several, Constitutional Law of India, Vol. III (second edition) p. 1729), there is no judicial authority which may have taken a view different from that taken by Khanna, J., Indeed in Golak Nath v. State of Punjab, AIR 1967 SC 1643 at p. 1710, Hidayatullah, J., as he then was, observed that it was an error to place the Rights to Property in the chapter of fundamental rights and that of all the fundamental rights, they were the weakest. We, therefore, hold that Articles 19(1)(1) and 31 dealing with rights to property did not pertain to the basic or essential features or the basic structure of the Constitution and that the exercise of the constituent power under Article 368 cannot be tested on the touch stone of these articles. It is true that at the time when the Constitution (39th Amendment) Act, 1975, was enacted, Articles 19 (1) (f) and 31 were in Part III of the Constitution and a law could be declared void if it violated these articles, but a Constitution Amendment Act passed in exercise of the constituent power is not a law under Article 13 and it can only he declared invalid if it damages the basic or essential features or the basic structures of the Constitution. As Articles 19(1)(f) and 31 even when they remained in Part III of the Constitution, did not pertain to the basic structure of the Constitution, the Constitution (39th Amendment) Act, 1975, cannot be assailed on the ground of infringing these articles.

8. We have already noticed that in Waman Rao's case, AIR 1981 SC 271 the Supreme Court observed that if any Act or Regulation included in the Ninth Schedule by a constitutional amendment made after 24th April, 1973 is saved by Article 31C as it stood prior to its amendment by the Constitution (42nd Amendment) Act, the challenge to the validity of the relevant constitutional amendment by which that Act or Regulation is put in the Ninth Schedule on the ground that the amendment damages or destroys the basic or essential features of the Constitution or its basic structure as reflected in Article 14, 19 or 31 will become otiose. On a parity of reasoning, if an Act or Regulation introduced in the Ninth Schedule is protected by Article 31A of the Constitution as amended by the Constitution (Fourth Amendment) Act, 1955, (upheld in Waman Rao's case) the validity of the constitution amendment by which such an Act is introduced in the Ninth Schedule would not be open to question on the ground that it damages or destroys the basic or essential features or the basic structure of the Constitution as reflected in Article 14, 19 or 13.

9. It is in the light of the above principles and decisions of the Supreme Court in the cases of Kesavananda Bharti, AIR 1973 SC 1461, Waman Rao, AIR 1981 SC 271 and Minerva Mills Ltd, AIR 1960 SC 1789 that the contention as to the validity of the Constitution (39th Amendment) Act introducing the Industries (Development and Regulation) Act at Item 88 in the Ninth Schedule with particular reference to Sections 18FB and 29D of the Act has to be examined. The Act seeks to bring under central control the development and regulation of a number of important industries called scheduled industries, the activities of which affect the country as a whole and the development of which is governed by economic factors of all India import. As declared by Section 2, the scheduled industries are those the control of which by the Union is in public interest.

As already seen Section 18A occurring in Chapter III-A of the Act empowers the Central Government to assume management of an industrial undertaking when it has failed to comply with the directions issued under Section 16 for its proper management or when it is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest in cases where an investigation had been ordered under Section 15A. Section 18AA which was added in Chapter III by Act No. 72 of 1971 empowers the Central Government to take over management of an industrial undertaking without ordering investigation under Section 15A when immediate action is necessary to prevent a situation affecting the production of articles manufactured in the industrial undertaking. The Central Government can also take over management under this section when the industrial undertaking has been closed for a period of three months or more and the restarting of the undertaking is necessary in the interests of the general public. Similarly, Section 18FA which is the only section in Chapter III-AA introduced by Act No. 72 of 1971 empowers the Central Government to take over the management of an industrial undertaking in liquidation with the permission of the Court when it is necessary that such an industry should be run for maintaining or increasing the production, supply or distribution of a class of articles needed by the general public. All these three sections which empower the Central Government to take over the management of industrial undertakings relatable to scheduled industries and can be described to be laws providing for 'the taking over the management of any property by the State for a limited period either in the public interest or in order to secure management of the property' within the meaning of Article 31A(1)(b) of the Constitution. The validity of these provisions cannot be assailed on the ground that they infringe Articles 14 and 19 of the Constitution. Now Article 31A(1) of the Constitution as inter preted by the Supreme Court, does not merely protect the laws which directly cover the matters enumerated in Clauses (a) to (e) but also provisions made in such laws by ancillary, incidental and consequential matters (See Raghubir Singh v. State of Ajmer; AIR 1959 SC 475 at pp. 477-478).

The question then is whether Sections 18FB & 29D of the Act introduced by Act No. 72 of 1971 are ancillary provisions for carrying out the object envisaged by Sections 18A, 18AA and 18FA. The power under Section 18FB(1)(b) of suspending the operation of existing contracts etc., can be exercised only in respect of an industrial undertaking the management or control of which has been taken over under Section 18A or under Section 18AA or Section 18FA. Further, this power can only be exercised when it is necessary so to do in the interests of the general public with a view to preventing fall in the volume of production. Now, the object of the power of taking over management under the aforesaid three sections of the Act is to provide proper management...... with a view to maintain the production in industrial undertakings dealing with scheduled industries which are closed or which are not properly functioning because of mismanagement or financial stringency or causes of like nature. In many cases, however, it may not be possible to achieve this object merely by taking over the management unless the Central Government has power to suspend the existing contracts. For example, if the undertaking is in financial difficulties and if all its creditors are allowed to sue and recover their debts, the undertaking may have to be closed even after its management is taken over by the Central Government.

Section 18FB(1)(b) which empowers the Central Govt. to suspend the existing contracts etc., when it is satisfied that it is necessary so to do in the interests of the general public with a view to preventing fall in the volume of production of any scheduled industry is an ancillary provision to promote the object of taking over of management of an undertaking dealing in a scheduled industry under Sections 18A, 18AA and 18FA. Similar is the power contained in the same provision to permit enforceability of existing contracts etc., with such adaptations as the Central Government may specify. Sub-section (2) of Section 18FB deals with the duration of the operation of the order of suspension and other sub-sections viz., Sub-sections (3) to (5), deal with similar other consequential matters. In our opinion, therefore, Section 18FB being ancillary to Sections 18A, 18AA and 18FA, comes within the protective umbrella of Article 31A(1)(b) of the Constitution. We will, however, like to make it clear that we have not considered the validity of Section 18FB(1)(a) with which we are not concerned here.

It has now to be seen whether Section 29D which was also inserted by Act No. 72 of 1971 in the Act is an ancillary or incidental provision for bringing out the object underlying the taking over of management under Sections 18A, 18AA or Section 18FA. Section 29D gives priority to every debt arising out of any loan obtained by the authorised person for carrying on the management of or exercising functions of control in relation to an industrial undertaking or part thereof the management of which has been taken over under Section 18A or Section 18AA or Section 18FA. The effect is that the debts incurred after the taking over of management have priority over all other debts whether secured or unsecured which were incurred before the management was taken over. Further, the debts incurred after the taking over of management are regarded as preferential debts within the meaning of Section 530 of the Companies Act.

The effect of Section 29D is to create a classification between debts incurred prior to the taking over of management and debts incurred after the taking over of management. The latter type of debts are given a favoured treatment by Section 29D. The operation of Section 29D in creating such a discrimination is automatic. The operation of Section 29D does not depend even upon the passing of any order of the Central Government that such a favoured treatment to the post-take over debts is necessary for continuing the production of the scheduled industry or in the interest of the general public. Further Section 29D, is not even conterminous with the order of the Central Government, if any, suspending the debts under Section 18FB(1)(b). Even if a pre-take over debt is not suspended or its period of suspension is over it cannot rank equally with a post-take over debt. Such a blanket provision as made by Section 29D in our opinion, cannot be regarded as an ancillary or incidental provision for carrying out the object of taking over management of an undertaking dealing in a scheduled industry under Section 18A, 18AA or 18FA. Section 29D cannot, therefore, claim the protection of Article 31A(1)(b).

It has also to be noticed that the discrimination brought about between the debts incurred prior to the taking over management and debts incurred after the taking over of management bears no reasonable relation to the object of taking over management, viz., the maintenance of production of a scheduled industry. In this connection, reference may be made to Section 18C, which deals with contracts or agreements entered into in bad faith and detrimental to the interest of the industrial undertaking. Such contracts or agreements can be cancelled or varied on an application made to the Court after the management is taken over. Section 29D does not place at a disadvantage merely debts of this category but applies to all debts incurred prior to the taking over of management howsoever honest or beneficial to the industrial undertaking they may have been. The classification made by Section 29D, in our opinion, is clearly wholly arbitrary and has no nexus with the object to be achieved by the taking over management.

In re Special Courts Bill, 1978, AIR 1979 SC 478 at p. 509, the Supreme Court laid down that for a classification to be valid two conditions must be fulfilled, namely: (1) that the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from others; and (2) that differentia must have a rational relation to the object sought to be achieved. It was further observed that 'the differentia which is the basis of the classification and the object of the Act are distinct things and what is necessary is that there must be a nexus between them'. (Ibid). Tested on these principles, the classification made by Section 29P cannot be sustained and the favoured treatment given to the debts incurred after the taking over of management has to be held to be violative of Article 14 of the Constitution. The Constitution (39th Amendment) Act in so far as it gives protection to Section 29D by inserting the Industries (Development and Regulation) Act at Item 88 in the Ninth Schedule offends Article 14 and thus damages one of the basic or essential features or the basic structure of the Constitution and is beyond the constituent power and invalid to that extent-Section 29D in our opinion, for this reason cannot claim the protection of Article 31B. It is also not protected by Article 31A(1)(b) and must be held to be invalid being violative of Article 14 of the Constitution. However, as earlier shown, Section 18FB is valid and constitutional being protected by Article 31A(1)(b) and the Constitution (39th Amendment) Act in so far as it has the effect of inserting this section in the Ninth Schedule cannot be held to be invalid.

10. The learned counsel for the petitioners next contends that Section 3 of Ordinance No. 6 of 1978 and Section 2 of Act. No. 17 of 1979, in so far as they amended Section 18FB(2) by providing that the aggregate period of extension can extend to eight years, cannot claim the protection of the Constitution (39th Amendment) Act and are invalid and void being violative of Articles 14, 19 and 31 of the Constitution. It is true that the Constitution (39th Amendment) Act cannot protect these provisions because they were enacted later. It is now well settled that protection of Article 31B to an Act inserted in the Ninth Schedule is not available to the amendments subsequently made in the Act : (See Ramanlal v. State of Gujarat, AIR 1969 SC 168 and Godavari Sugar Mills v. S. B. Kamble, AIR 1975 SC 1193. The amendments made by Ordinance No. 6 of 1978 and Act No. 17 of 1979 in the Industries (Development and Regulation) Act cannot be taken to have been inserted in the Ninth Schedule as they were enacted subsequent to the insertion of the Act in the Ninth Schedule by the Constitution (39th Amendment) Act. Even so, in our opinion, the amendment made in Section 18FB(2)(b) by the Ordinance and the Act cannot be held to be unconstitutional. We have already seen that Section 18FB is protected under Article 31A(1)(b). The only change made in Section 18FB(2) by the Ordinance and the Act is that the Central Government can now extend the period of suspension of contracts for an aggregate period of eight years in place of five years. By amending Section 18FB(2) by the aforesaid Ordinance and the Act, Parliament thought that the period of five years was not adequate and that the Central Government should be given power to suspend the contracts for an aggregate period of eight years to enable full revival of the industrial undertaking the management of which is taken over. The question whether the Central Government should have power to suspend the contracts for an aggregate period of five years or eight years is a matter of policy to be decided by Parliament. If the power to suspend contracts for a period of five years as initially enacted was protected by Article 31A(1)(b), by the same reasoning the power to suspend the contracts for the aggregate period of eight years would also be protected. The amendment introduced in Section 18FB(2) by Ordinance No. 6 of 1978 and Act No. 17 of 1979 cannot, therefore, be held to be invalid.

11. The learned counsel for the petitioners lastly contends that the two orders suspending the contracts passed on 29th January, 1974, and their subsequent extensions are violative of petitioner's fundamental rights under Articles 14, 19(1) (f) and (g) and 31 and are entirely arbitrary. The learned counsel rightly argues that protection to these orders cannot be available simply because of inclusion of Industries (Development and Regulation) Act in the Ninth Schedule, for it is now settled that orders passed under an Act which is inserted in the Ninth Schedule do not get the protection of Article 31B: (See Prag Ice & Oil Mills v. Union of India, AIR 1978 SC 1296 at Pp. 1310, 1311). Section 18FB under which the impugned orders were made is. however, not only protected by Article 31B but also by Article 31A. The impugned orders and Section 18FB along with Sections 18A 18AA and 18FA form part of a scheme of the taking over of the management of the industrial undertaking of the respondent company and would be protected from attack under Article 31A. On a similar reasoning, the Supreme Court in Latafat Ali Khan v. State of U. P.; AIR 1973 SC 2070, upheld the validity of R. 4 (4) made under the U. P. Imposition of Ceiling on Land Holdings Act, 1961, which was protected both by Articles 31A and 31B. In Latafat All Khan's case it was held that if a statutory rule is within the powers conferred by a section of a statute protected by Article 31B. It is difficult to say that the rule must further be scrutinised under Articles 14, 19 etc. It was further held that Section 6 (xvii) of the U. P. Act and Rule 4 (4) are part of a scheme of land reform in U. P. and would be protected from attack under Article 31A of the Constitution. In Prag Ice Mills' case (supra) the Supreme Court overruled the view taken in Latafat All Khan's case relating to the scope of Article 31B but it did not disturb the view taken in that case relating to Article 31A. Following the reasoning in Latafat Ali Khan's case as to the scope of Article 31A which is binding on us, we reject the contention that the impugned orders are invalid being violative of Articles 14, 19 and 31 of the Constitution. It has next to be examined whether the impugned orders are invalid being arbitrary or unreasonable. In this context the petitioners in sub-para (xvi) of para 30 of their petition alleged that the Central Government in issuing the orders had not applied its mind to the petitioner company's outstanding debts and that the orders were wholly arbitrary and unreasonable. In answer to these allegations it is averred in the return filed by the Union of India that the orders were not illegal, arbitrary or unreasonable. The orders issued on 29th January, 1974, under Section 18FB(1)(b) which were extended from time to time recite the fact that the Central Government was satisfied that it was necessary to pass the orders of suspension in the interests of the general public with a view to preventing fall in the volume of production of the scheduled industry, namely, bicycles and bicycle chain industry. It is the existence of this satisfaction which gave jurisdiction to the Central Government to pass the orders under Section 18FB(1)(b). As the fact of existence of satisfaction is recorded in the orders, the presumption arises that the Central Government was really satisfied and the burden is on the petitioners to show that there was no such satisfaction (See Swadeshi Cotton Mills Co. Ltd. v. State Industrial Tribunal, AIR 1961 SC 1381 at pp. 1386, 1387.) The petitioners do not even allege that the Central Government had not the required satisfaction at the time of passing of the orders. The said allegation in the petition that orders were arbitrary and unreasonable, without any definite allegation, regarding material facts, takes us nowhere and the Union of India cannot be blamed for merely denying the allegation that the orders were arbitrary and unreasonable. Had the petitioners pleaded that there was no satisfaction as required under Section 18FB(1)(b) or that there was no material for such satisfaction, the Union of India would have been required to plead more specifically the existence of the satisfaction and may have been also required to disclose the material on which the satisfaction was based. The orders can be struck down as arbitrary or unreasonable It they were really in excess of authority conferred by Section 18FB(1)(b) or; in other words, if they were made without the satisfaction required under that section. But as earlier stated by us, the petitioners have failed to make out such a case and hence the orders cannot be held to be invalid.

12. The petition is partly allowed. We declare that Section 29D of the Industries (Development and Regulation) Act, 1951, inserted by Act No. 72 of 1971, is unconstitutional and void. In all other respects the petition fails and is dismissed. There shall be no order as to costs. The security amount be refunded to the petitioners,


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //