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Rai Bahadur Hurdutroy Moti Laljute Mills Private Limited Vs. Union of India - Court Judgment

LegalCrystal Citation
CourtDelhi High Court
Decided On
Case NumberCivil Writ Appeal No. 1292 of 1972
Reported inILR1975Delhi382
ActsIndustrial (Development and Regulation) Act, 1951 - Sections 15
AppellantRai Bahadur Hurdutroy Moti Laljute Mills Private Limited
RespondentUnion of India
Advocates: A.K. Sen,; A.K. Nag,; S.S. Chadha and;
Cases ReferredM. A. Rasheed v. State of Kerala C. A.No.
.....complained that on the basis of public statementsof the hon'ble minister and the newspaper reports that the government had predetermined to take over the mill of the petitionersand order under section 15 of the act was a preliminary step. in this case as well as in rohtas industries, (3)the supreme court referred to two english decisions in ridge v. on the other hand- thefigures of production for the whole year of 1971 as well as for theprevious years, which show that the production had increased, hadbeen omitted from consideration by the government we wish toemphasise that the order of the government does not proceed on theclause (b) of section 15, nor on the ground that the production waslikely to fall, but it proceeds on the definite ground that the production had substantially..........order were non-existent.(2) the petitioners have further averred that in bihar, there are three jute mills. one is known as rameshwar jute mills limited, situated at muktapur, and the other two mills are at katihar; one is the petitioners mill known as rai bahadur herdutroy modlal jute millsprivate limited and the other is katihar jute mills private limited.according to the everments of the petitioners, katihar jute mill hadrun into troubles. even previously, it had been taken over by thegovernment for a period of five years and then released, but it raninto trouble and was not able to pay the wages and there was labourunrest, and the government had actually passed an order under section 15 of the act on 22/12/1971. the suggestion ofthe petitioners is that the government had in its.....

B.C. Misra, J.

(1) The first petitioner is a private limited company. which has its registered office in Calcutta and which owns a jute mill situated in Katihar, in the District of Purnea, State of Bihar. The second petitioner is one of its directors. This writ petition has beenfiled, challenging the order of the Central Government dated 22/12/1971, setting up a committee for investigation intothe affairs of the petitioners' undertaking under section 15 of theIndustries (Development & Regulation) Act 65 of 1951, (hereinafterreferred to as 'the Act'). The admitted case of the parties is that the order has been passed on the ground mentioned in sub-clause (i) ofclause (a) of section 15 of the Act, which reads as follows :'15 Whether the Central Government is of the opinion that

(A)in respect of any scheduled industry or industrial undertaking or undertakings :

(I)there has been, or likely to be, a substantial fall in thevolume of production in respect of any article or classof articles relatable to that industry or manufacturedor produced in the industrial undertaking or undertakings, as the case may be, for which, having regard to the economic conditions prevailing, there is no justification :

THECentral Government may make or cause to be made a fulland complete investigation into the circumstances of the case bysuch person or body of persons as it may appoint for the purpose.'

the petitioners have alleged in the petition that the mill had beenleased out to another company for the period from 1/04/1960to 5/01/1970, during which time that lessee accummulatedliabilities of provident fund, bonus, employees state insurance andothers, but on the resumption of the lease, the petitioner-companytook over the management of the mill and started working it andduring the course of its working, it has cleared the liabilities of thelessee to the extent of Rs. 11.50 lakhs. It also paid interim increaseof Rs. 30.00 per month on the basic wages of the workmen with effectfrom 1/08/1969, although legally it was not liable to make thesaid payment. The petitioners further state categorically that theproduction has increased very substantially and while in the year1969 it was 6424.28 tonnes, it increased in 1970 to 10,511 and in1971 to 11,391.54 and in 1972 to 11,520.00 tonnes. We will haveoccasion to refer to the figures of production in detail herein at alater stage. The petitioners have, however, contended that there wasno substantial fall in the production and the production had actuallyincreased considerably and the economic condition of the mill wasextremely satisfactory and sound and that the mill had been earningprotits and so the basic and jurisdiction facts justifying passing ofthe impunged order were non-existent.

(2) The petitioners have further averred that in Bihar, there are three jute mills. One is known as Rameshwar Jute mills Limited, situated at Muktapur, and the other two mills are at Katihar; one is the petitioners mill known as Rai Bahadur Herdutroy Modlal Jute MillsPrivate Limited and the other is Katihar Jute Mills Private Limited.According to the everments of the petitioners, Katihar Jute Mill hadrun into troubles. Even previously, it had been taken over by theGovernment for a period of five years and then released, but it raninto trouble and was not able to pay the wages and there was labourunrest, and the Government had actually passed an order under section 15 of the Act on 22/12/1971. The suggestion ofthe petitioners is that the Government had in its view the affairs ofthe Katihar Jute Mills and without applying their mind to thefacts and affairs of the petitioners mill, the Government passed theimpugned order illegally, without any justification and without anybona fides and the impugned order is based on collateral, extreneousand irrelevant considerations, and is illegal and unsustainable and theopinion of the Government is based on non-existent facts.

(3) In support of this averment, the petitioners have further alleged that the order passed under section 15 of the Act, which wascommonicated to the petitioners under cover of letter dated 2 8/12/1971 related to Katihar Jute Mills and that no orderrelating to the petitioners mill had been communicated to them. Ithas been further contended that the members of the investigationcommittee paid avisit to the office of the petitioners in February,1972, when the figures of production of the. mill were handed overto them. The committee, however, is said to have completed itsreport by 18/02/1972. The petitioners assert that theyhave never heard anything further from the committee or from theGovernment on the subject and the only communication they hadreceived was a telegram dated 17/11/1972, requiring the petitioners to discuss the matter with the State Minister (Industries)of Bihar, on 20/11/1972 at his office Chamber at Patna,but the telegram was wrongly addressed and was delivered to the petitioners only on 20/11/1972, when they wrote aregistered letter intimating that owing to late delivery of the telegram,they could not attend the discussion. Thereafter nothing has beenheard from the Government. But, a newspaper reported that theMinisters of the Government had decided to take over the petitionersmill along with the two other mills. Eventually the petitioners filedthis writ petition on 20/12/1972. This court issued anotice to the respondents to show cause against: the admission of thewrit petition and subsiquently admitted the same to a Division Benchand directed its early hearing. The court had on 12/01/1973 stayed the taking over of the petitioners mill which order wasextended until the decision of the writ petition.

(4) The counter-affidavit, the figures of production furnished by the petitioners have not been disputed. In fact, the figures for theyears 1970 and 1971 as stated are common. They have rightly notbeen disputed, since they are based on the reports of productionsubmitted to the Jute Commissioner from time to time and are supported by the clearances on payment of excise duties. In thecounter-affidavit three points have been raised. Firstly, the petitionis inordinately delayed, secondly the investigation committee hasalready finalised the report on 28/02/1972 and so the writpetition has become futile, and lastly the opinion of the Governmentwas subjective and has been formal bona fide on the availablematerial and is not reviewabie by the court. They have furthermade some averments about the potential capacity and inefficiencyof the mill, but these facts arc. in our opinion, not relevant for purposses of deciding the writ petition, since the notice has been issuedonly on the ground mentioned in sub-clause (i) of clause (a) ofsection 15 of the Act.

(5) With regard to the service of the impugned order, it has been stated in the counter affidavit that three orders were passed on thesame date and they were gazetted and copies of all the three musthave been sent to the petitioners. So the grievance that what had beensupplied to the petitioners related to Katihar Jute Mills and not tothem is contended to be baseless.

(6) The impugned notifications dated 22/12/1971 (a copy of which has been filed by the respondents as annexure R-l and acopy pertaining to Katihar Jute Mills has been filed by the petitionersas annexure E), are in identical terms, excepting the name of thecompany. They read as follows :

'S.O.Whereas the Central Government is of the opinion thatthere has been substantial fall in the volume of production in respect of jute products manufactured in theindustrial undertaking known as Rai Bahadur HurdutroyMutilal Kalihar Jute Mills, Katihar Jute Mills (P) Ltd..P. 0. Katihar, Mills. Distt. Purnca for which, havingregard to the economic conditions prevailing, there is nojustification.

Now, in exercise of the powers conferred by section 15 of the Industries (Development & Regulation)Act, 1951, (65 of 1951) the Central Government herebyappoints for the purposes of making full and completeinvestigation into the circumstances of the case, a bodyof persons consisting of :

xx xx xxxx xx xx

(7) The members of the committee have been imp leaded in the writpetition as respondents.

(8) At this stage, we will examine the material details of the figures of production, which have led to the passing of the impugned order :

Chart. Figures in tonnes.ABCDEFMonthsYears 196819691970 197119721.January95952292299310022.FebruaryS685398879759483.March 705633928102410764.April 76865298110099625.M

(9) These figures have been taken from the chart conveniently reproduced in the rejoinder affidavit, but they are the same as are givenin greater details in the chart, annexure G filed with the petition forthe said years, except 1972. The respondents in their counter-affidavit filed by . B. D. Kumar, Joint Secretary, have in paragraph16 reproduced the very same figures for the years 1970 and 1971,excepting that the entries in column for the months of November andDecember, 1971 are blank. As mentioned above, there is no disputebetween the parties with regard to the correctness of the figures ofproduction.

(10) A perusal of the chart shows that while the production of the mill for the years 1968 and 1969 (when the mill was in the management of the lessee) were 8531 and 6424, the production certainlyincreased considerably to 10511 in 1970 and to 11391 in 1971.Increase in production has also been maintained during the year 1972.Stand of the Government is that when they passed the impugnedorder in December, 1971, they did not have the figures of production for the months of November and December, 1971. But, e, evenif the average be taken only from January to October, there is nodoubt that the average figures for 1970 were 9321 and for the sameperiod of 1971 it was 9658. There is, thereforee, every reason tohold that the production had considerably increased and there wasno basis for holding that the volume of production had substantiallyfallen.

(11) Mr. Chadha has analysed the figures and has relied upon the averment on the counter-aflidavit to explain that the production inJuly, 1971 was 1011 and in the following month it came down to824. He was further explained that the average for seven monthsup to July, 1971 is about 1000 tonnes as against 824 tonnes in themonth of August, 1971 and that the volume of production furtherfell in September, 1971 to 750 tonnes and in October to 752 tonnes.From this. it has been contended that there was a falling trend of production. It is significant to notice that even in the has not been asserted that there was substantial fall in volume ofproduction, but it has only been stated that the trend of productionwas falling.

(12) In our opinion, the submission of the counsel for the respondent is fallacious. It has been explained in the rejoinder affidavit that the mill is situated in agricultural area and that the production of the mill will vary during the sowing and harvesting seasons. This Explanationn is supported by the fact that in the figures quoted in theabove noted chart, it would be found that there is a seasonal fall inthe production of the mill even in 1968, 1969 and 1970 round aboutthe months of August, September and October, e.g. in 1968, the production for August was 721, in September it was 677 and in October738. Similarly, for 1969 the figures for July were 725, for AugustB 490, for September 597, for October 781, and turn the year 1970 inJuly the production was 834, in August 809. in September 776 andin October 809. The figures for the year 1971 show that the production for the month of July was 1011. for August 824, for Sepicinber 750, for October 752. for November 956 and for December 1 113.The fall which has been relied upon by Mr. Chadha can in the cir-cumstances of the case be never reasonably called a substantial fall.The occasional tall of production in any particular month is not amatter of any consequence to bring it within the purview of substan-tial fall in the volume of production. There is another fallacy in llicsubmission of the respondents. They want to establish the tall ofproduction by changing the standards either from the previous monthsor for a few months in other years, but they have omitted from con-sideration the figures for several months in the year in which theproduction had definitely increased substantially. To examine lhcchart again, the production in 1971 for the month of January washigher than in 1970, so was the production for February, March, April,May, June, July, August, November and December. They have alsoomitted from consideration the material facts that while the prodution for the month of December 1970 was 950 (which was highestbut one than the previous figures). The production in 1971 hadconsiderably increased to 993 in January, 975 in February. 1014in March, 1009 in April, 992 in May and 1011 in July. Even theaverage from January to December or from January to October was(; higher. Any man of ordinary prudence would normally take theaverage for the whole year and sec if the production has considerablyincreased or substantially fallen as compared with other years. Rule4(i)(a) of the Investigation of Industrial Undertakings (Procedure)Rules, 1967, framed under sub-section (1) of section 30 of the Act,provides that for the purpose of investigation and making a comparative study, the figures for the preceding three years would be collected. This also supports the view that the formation of the opinionbased only on the fibres for one or two months and omitting fromconsideration the figures for the rest of the months is not a horn fUleexercise of power by a reasonable man. The statutory requirementis 'substantial' fall in production. According to the dictionarymeaning, the word 'substantial' means 'essential real,, considerable inamount'. This expression is used in contradiction, to the words'flimsy, imaginary, casual, occasional'. The slightest fall in produc-tion in any particular month, while there has been considerable increase in other months and in the average for the whole year. cannotpossibly be construed as substantial fall in volume of production, forwhich there would be no justification having regard to the economicconditions prevailing. The admitted figures of production leave noroom for doubt that the production of this mill has considerably increased and no reasonable man would bona fide come to the conclusion that the production had substantially fallen.

(13) Mr. Chadha has not placed before us the report of the investigation committee, which could throw light whether the material onwhich the Government had based its opinion about the substantialfall in production was, in fact, justified, we are. thereforee, left withthe admitted figures of production placed before as. On this basis,we are of the view that there was no relevant material on the basis ofwhich the Government could form its opinion. It may, however, benoticed that the order of the Government is not based on the opinionthat the production is likely to fall but it categorically recites that theproduction has substantially fallen, which we find is baseless.

(14) Some attempt has been made in the counter affidavit by the Government to show that the mill was not working efficiently- It is certainly not a ground on the basis of which the impugned order hasbeen passed and it is the common case of the parties that the presentorder is based on the ground mentioned in sub-clause (i) of clause(.a) and not clause (b) of section 15, nor is the order based on theground that the production is likely to fall. We are, thereforee, notprepared to consider the efficiency or otherwise of the working ofthe mill in this writ petition. It appears that there is some groundfor the submission of the petitioners that the authorities were reallythinking of the affairs of the Katihar Mills, which had been takenover by the authorised Controller of the Government for a period offive years and then released and there was fire in the mill and themill was functioning partially from 4/10/1971 and the Government had communicated to the petitioners only the copy of the order relating to the Katihar Mills. Mr. Chadha submitted that the orders had been published in the Gazette and that was sufficient noticeto the petitioners. But an order under section 15(1) of the Act doesnot require a publication in the Gazette as does an orderunder section 18A(b) and unless and until the law requiresan order to be published in the Gazette, its publication cannot be heldto be a sufficient notice to the persons concerned. In the counter affidavit, it has been categorically stated that the order communicatedto the petitioners related to them. But it has been asserted that all thethree orders were sent and so the order relating to the petitionersmust have been sent. This is rather vague. Why was order relating to other Mills sent to the petitioners This only shows that thefigures of production of the petitioners mill were not carefully scrutinised by the authorities before the passing of the impugned order.The petitioners have complained that on the basis of public statementsof the Hon'ble Minister and the newspaper reports that the Government had predetermined to take over the mill of the petitionersand order under section 15 of the Act was a preliminary step. It isnot necessary for us to investigate or comment on the said complaint.It is enough for us to hold that the admitted facts of the case do notconstitute the material on the basis of which an opinion could reasonably be formed by the Government that the production of the mill hadsubstantially fallen and in the impugned order the Government liasomitted from consideration the relevant material. The order is, thereforee, without jurisdiction and without justification.

(15) The counsel for the respondents has contended that this court will not review the formation of the opinion by the Government. We arein agreement with the submission that the court docs not sit in judgment over the formation of the opinion, but we are of the view thatthe facts and material on the basis of which the Government forms itsopinion are certainly subject to scrutiny of the court, and if it isfound, that the facts were non-existent or the material did reasonablynot lead to the inference drawn or the opinion is based on irrelevantor extraneous matters or material facts had been omitted from consideration, then the impugned order is certainly liable to be quashed.In the view we are taking, we are supported by three authorities ofthe Supreme Court, namely, Barium Chemicals Ltd v. Company LawBoard, : [1967]1SCR898 , (1) Rohtas industries Lid. v. S. D. Agarwal, : [1969]3SCR108 , (2) and RampurDistillary Co. Ltd. v. Company Law Board, : [1970]2SCR177 , (3).In Barium Chemicals, (1) the court observed in paragraph 27 of thereport that no jurisdiction outside the section which empowers theinitiation of investigation could be exercised and an action not basedon circumstances suggesting an inference would not be valid; no doubtthe formation of the opinion was subjective, but the existence of thecircumstances relevant to the inference as the sine qua non for actionmust be demonstrable and if the action is questioned on the groundthat no circumstances leading to the inference of the kind contemplated by the section exist, the action might be exposed to interferenceunless the existence of the circumstances was made out and it was notreasonable to say that the clause permitted the Government to saythat it had formed the opinion on circumstances which it thoughtexisted- In that case, the Supreme Court found that the existenceof circumstances was a condition fundamental to the making of anopinion, the existence of the circumstances, if questioned, had to beproved at least prima facie and it was not sufficient to assert that thecircumstances existed and gave no clue to what they were becausethe circumstances must be such as to lead to conclusions of certaindefiniteness. The court then examined the affidavit filed by the authorities and found that the same did not make out a case of an intentto defraud, a fraudulent or unlawful purpose, fraud or misconduct.So the impugned order was quashed.

(16) In Robtas Industries case, (2) the court quoted with approval the aforesaid observations made in Barium Chemicals and observed that if the existence of the prescribed conditions was challenged, the courts are entitled to examine whether those circumstances were existiagwhen the order was made. In other words, the existence of thecircumstances in question was open to judicial review, though theopinion formed by the Government was not amenable to review bythe courts. The court further observed that if it comes to the conclusion that no reasonable authority would have passed the impugnedorder on the material before it, then the same was liable to be struckdown. In that case, the Supreme Court felt convinced that the precipitated action taken by the Government was not called for, norcould be justified on the basis of the material before it and the opinionformed by the Government was wholly irrational and so the opinionhad not been formed in accordance with law. The impugned orderswere set aside.

(17) In Rampur Distillery Company's case, (3) the court observed that it did not agree that because the exercise of the power depended upon the satisfaction of the Government, its exercise could not be subject to judicial review and that the Government was final arbiter of theconditions in which the power may be exercised. The court observed that the High Court was not constituted a court of appeal overthe judgment of the Board, but it had to consider whether in arrivingat its decision the Board had restricted itself to the enquiry contemplated to be made and had taken into consideration all the relevantcircumstances and that its decision was not vitiated by any irrelevantor extraneous matter. In this case as well as in Rohtas Industries, (3)the Supreme Court referred to two English decisions in Ridge v.Baldwin, (1964) A.C 40 and padfield and others v. Ministerof Agriculture, (1968) 1 All E. R. 694. The rule of law laiddown in Rohtas Industries' case has been reaffirmed by the SupremeCourt in a recent judgment in M. A. Rasheed v. State of Kerala C. A.No. 2064/73 decided on 18/09/1974.(6).

(18) As a result, we hold that we are entitled to scrutinise the existence or non-existence and the relevance of the facts and circumstances on which the opinion of the Government is .based If we find that relevant circumstances exist and the Government honestly formed theopinion, the matter would be put outside the purview of judicial review. But, if the basic condition is not fulfillled and the facts andcircumstances considered do not exist or are irrelevant, the orderbased on such material is liable to be quashed by the court. In theinstant case we hold that from the material placed before the Government, as disclosed in the counter affidavit, there was no substantialfall in the production of the petitioners mill and there was no relevantmaterial before the Government from which it could reasonably inferthat the circumstances bona fide justified the action under sub-clause(i) of clause (a) of section 15 of the Act. On the other hand- thefigures of production for the whole year of 1971 as well as for theprevious years, which show that the production had increased, hadbeen omitted from consideration by the Government We wish toemphasise that the order of the Government does not proceed on theclause (b) of section 15, nor on the ground that the production waslikely to fall, but it proceeds on the definite ground that the production had substantially fallen, which we find was non-existent. It mustnot be forgotten that in business houses, an order under section 15(1) for investigation of the affairs makes a serious inroad and affectsthe credibility of the undertaking considerably and such power shouldnot be exercised lightly or as a routine and it can be exercised onlyin accordance with the provisions of the statute on the fulfillment ofprescribed conditions and existence of jurisdiction facts, and if notso exercised, the action is likely to be quashed.

(19) Mr. Chadha has contended that the petition is inordinately delayed. We are not impressed by this submission. The Government passed the impugned order in December, 1971 and did not communicate it. The members of the committee did pay a visit to the petitioners mill in February, 1972, but nothing was heard thereafter eitherfrom the Government or the committee until a telegram was receivedin November, 1972 for seeing the Minister, which did not reach the petitioners in time. The petition filed in December, 1972 followingthe newspaper reports about the proposed taking over of the millof the petitioners, thereforee, is in our opinion, not inordinately delayedand cannot be thrown out on this ground.

(20) The last contention of Mr. Chadha is that the investigation has been completed and the committee has submitted its report and the writ petition has become futile. This is not a relevant consideration in the circumstances of the present case. The order under section 15 of the Act and the report of the investigation committee only constituted preliminary steps for further action by the Government, ifnecessary, under section 16 or 18A of the Act. The proceedingsare, thereforee, not terminated by the submission of the report, whichhas, as mentioned above, not been placed before us. If the writpetition is allowed, the impugned order under section 15 and the consequent proceedings will have to be quashed. It will, however, beopen to the Government to take any further steps in the matter as itlikes.

(21) As a result, the writ petition succeeds. We thereforee, issue & writ of mandamus directing the respondents to treat the impugned order dated 22/12/1971 as quashed and forebear from taking anysteps in furtherance of the same in so far as the petitioners are concerned. It is made clear that it will be open to the Government totake any further or other action, it may consider advisable to be takenaccording to law in the circumstances of the case. The writ petitionis allowed and the petitioners will have costs of the petition from the Union of India, respondent No. 1.

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