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Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd., Mavoor and anr. Vs. Government of Kerala and anr. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtKerala High Court
Decided On
Case NumberO.P. No. 1530 of 1978
Judge
Reported inAIR1979Ker56
ActsConstitution of India - Articles 19(1), 31A, 31(2), 213, 213(1) and 246; Gwalior Rayons (Rayon Pulp Division) Taking over Management Ordinance, 1978 - Sections 1, 3 to 5 and 9; Industries (Development and Regulation) Act
AppellantGwalior Rayons Silk Mfg. (Wvg.) Co. Ltd., Mavoor and anr.
RespondentGovernment of Kerala and anr.
Appellant Advocate Siddartha Sankar Ray,; Menon and; Pai, Advs.
Respondent Advocate T.C.N. Menon, Addl. Adv. General
DispositionPetition allowed
Cases ReferredIndu Bhusan Bose v. Rama Sundari Debi
Excerpt:
constitution - ordinance - articles 19 (1), 31 a, 31 (2), 213, 213 (1) and 246 of constitution of india, sections 1, 3, 4, 5 and 9 of gwalior rayons (rayon pulp division) taking over management ordinance, 1978 and industries (development and regulation) act - validity of gwalior rayons (rayon pulp division) taking over management ordinance challenged - subject matter of ordinance falls under entry 52 of list 1 of viith schedule - state legislature had no legislative competence in regard to subject matter of ordinance - governor had no authority to promulgate ordinance - legislation on same subject matter required previous assent of president - ordinance not passed with previous instruction from president as required by proviso to article 213(1) - ordinance violates articles 19 (1) (f) and.....gopalan nambiyar, c.j.1. thegwalior rayons silk ., mavoor -- a private limited company -- and one of its shareholders, are the two petitioners in this writ petition. they challenge the recent gwalior rayons (rayon pulp division) taking over of management ordinance, 1978 (ordinance no. 14 of 1978) promulgated by the governor. the company is registered under the companies act with its registered office at nagda in madhya pradesh. besides its factories at nagda and gwalior in madhya pradesh, the company has two factories in kerala state at mavoor, near calicut, and also its factories in harihar (karnataka) and bhiwani (haryana). the factories at mavoor are engaged in the manufacture of rayon grade pulp from bamboo and various other hard and soft woods, and staple fibre from the dissolving.....
Judgment:

Gopalan Nambiyar, C.J.

1. TheGwalior Rayons Silk ., Mavoor -- a Private Limited Company -- and one of its shareholders, are the two petitioners in this writ petition. They challenge the recent Gwalior Rayons (Rayon Pulp Division) Taking over of Management Ordinance, 1978 (Ordinance no. 14 of 1978) promulgated by the Governor. The Company is registered under the Companies Act with its Registered Office at Nagda in Madhya Pradesh. Besides its factories at Nagda and Gwalior in Madhya Pradesh, the Company has two factories in Kerala State at Mavoor, near Calicut, and also its factories in Harihar (Karnataka) and Bhiwani (Haryana). The factories at Mavoor are engaged in the manufacture of rayon grade pulp from Bamboo and various other hard and soft woods, and staple fibre from the dissolving pulp. Apart from these two divisions, there is a paper division engaged in the manufacture of various types of paper. The Rayon Pulp Division went into production in 1963. The impugned Ordinance in effect provides for the taking over of the management and administration of the Company and entrusting the same to a Controller appointed by the Government. The Ordinance is styled an Ordinance 'to provide for the taking over of the management of the undertaking of the Rayon Pulp Division of the Gwalior Rayons and Silk Manufacturing and Weaving Company Limited for a limited period in order to secure the proper management thereof and for matters connected therewith or incidental thereto.' The Preamble recited that the Rayon Pulp Division of the Company had not been working from the 30th November, 1977, and the production of rayon grade pulp had stopped, resulting in the unemployment of twenty thousand workers, and the interest of the unemployed workers andpublic interest made it necessary to take over the management of the Rayon Pulp Division of the Company. Section 3 enables the Government by a notified order to appoint a person or body of persons as the Controller of the undertaking to take over the management thereof. The order is to remain in force for a period not exceeding two years; but is liable to be extended. Section 4 provides for the effect of a take over under Section 3; all persons in charge of the management of the undertaking are to vacate office and the Controller alone is entitled to be in management of the undertaking. Under Section 5, the Government can remove the Controller and appoint another person or body of persons. Section 6 enacts that no person who is obliged to vacate the office consequent on the take over shall be entitled to any compensation for the low of office. Section 8 empowers the Government to cancel a notification issued under Section 3. Under Section 9 all property of the Company is to be delivered to the Controller. Section 10 lays on the Company the obligation to furnish the necessary particulars to the Controller. Section 11 provides the penalty for furnishing false particulars. Section 14 provides immunity in respect of acts done in good faith against the Government or the Controller, under the Ordinance. Section 15 enacts that the provisions of the Ordinance shall have effect notwithstanding anything inconsistent therewith contained in any law other than the ordinance. Such, in substance, are the provisions of the Ordinance.

2. The Ordinance has been attacked on the following grounds. (1) That the subject-matter of the Ordinance is beyond the legislative competence of the State, and therefore of the Ordinance making powers of the Governor, and the Ordinance cannot be saved, as no Presidential assent has been obtained and no instructions obtained from the President before promulgating it. (2) Assuming the subject-matter of the Ordinance is within the legislative powers of the Legislature and therefore the Ordinance making powers of the Governor, it violates the fundamental rights under Articles 14, 19 and 31 and is not saved by Article 31A of the Constitution for want of previous consultation with, and assent of, the President. (3) That the provisions of the Ordinance are repugnant to the provisions of several laws made by Parliament and should for that reason also, be void and of no effect.

3. Article 213 of the Constitution provides for the power of the Governor to promulgate Ordinances during the recess of the Legislature. The same reads :

'213. Power of Governor to promulgate Ordinances, during recess of Legislature.-

(1) If at any time, except when the Legislative Assembly of a State is in session, or where there is a Legislative Council in a State, except when both Houses of the Legislature are in session, the Governor is satisfied that circumstances exist which render it necessary for him to take immediate action, he may promulgate such Ordinances as the circum-ttances appear to him to require:

Provided that the Governor shall not, without instructions from the President, promulgate any such Ordinance if-

(a) a Bill containing the same provisions would under this Constitution have required the previous sanction of the President for the introduction thereof into the Legislature; of

(b) he would have deemed it necessary to reserve a Bill containing the same provisions for the consideration of the President; or

(c) an Act of the Legislature o the State containing the same provisions would under this Constitution have been invalid unless, having been reserved for the consideration of the President, it had received the assent of the President.

(2) An Ordinance promulgated under this article shall have the same force and effect as an Act of the Legislature of the State assented to by the Governor but every such Ordinance-

(a) shall be laid before the Legislative Assembly of the State, or where there is a Legislative Council in the State, before both the Houses, and shall cease to operate at the expiration of six weeks from the reassemly of the Legislature, or if before the expiration of that period a resolution disapproving it is passed by the Legislative Assembly and agreed to by the Legislative Council, if any, upon the passing of the resolution or. as the case may be, on the resolution being agreed to by the Council; and

(b) may be withdrawn at any time by the Governor.

Explanation -- Where the Houses of the Legislature of a State having a Legislative Council are summoned to reassemble on different dates, the period of six weeks shall be reckoned from the later of those dates for the purposes of this clause.

(3) If and so far as an Ordinance under this article makes any provision which would not be valid if enacted in an Act of the Legislature of the State assented to by the Governor, it shall be void :

Provided that, for the purposes of the provisions of this Constitution relating to the effect of an Act of the Legislature of a State which is repugnant to an Act of Parliament or an existing law with respect to a matter enumerated in the Concurrent List, an Ordinance promulgated under this article in pursuance of instructions from the President shall be deemed to be an Act of the Legislature of the State which has been reserved for the consideration of the President and assented to by him.

(4) Notwithstanding anything in this Con-stitution, the satisfaction of the Governor mentioned in Clause (1) shall be final and conclusive and shall not be questioned in any court on any ground.'

Clause (3) of the above Article is clear that the Ordinance making power of the Governor is conterminous with the Legislative powers of the State, Sub-clause (c) of the proviso to Clause (1), read with Clause (3), in substance provides that where the State legislation requires the assent of the President it shall not be valid without such assent of the President, and without the President's previous instructions to the Governor, The proviso to Sub-clause (3) of the Article contains a further provision that an Ordinance promulgated in pursuance of the instructions of the President shall be deemed to be an Act of the Legislature of the State which has been reserved for consideration of the President and assented to by him for the purposes of the provisions of the Constitution providing for repugnancy as between an Act of Parliament and an existing law on a matter in the Concurrent List.

4. It is an accepted fact that the Ordinance has not been promulgated under instructions of the President; nor has it received the assent of the President The enquiry should therefore, in the first instance, be whether the subject-matter of the Ordinance was within the Legislative competence of the State, and therefore, of the Ordinance-making-power of the Governor. Next, it has to be seen whether the Ordinance offends the fundamental rights as claimed; and last, if it is repugnant to an Act of Parliament or to an existing law with respect to a matter in the Concurrent List.

5. As far as the Legislative comptence is concerned, the case was put thus ; The Paper and Rayon Pulp industries are covered by Entry 52 of List I of the VIIth Schedule to the Constitution and cannot fall either within Entry 24 of List II or within Entries 23 and 33 of List III as claimed for the State. For this reason, it was stated that there is total want of Legislative competence for the State Legislature to legislate on the subject of taking over the management of the Rayon Pulp Industry and for the Governor to promulgate an Ordinance relating thereto. We may extract the relevant entries of the Constitution, on which reliance has been placed.

'52. Industries, the control of which by the Union is declared by Parliament by law to be expedient in the public interest.

(List I of VIIth Schedule).

24. Industries subject to the provisions of Entries 7 and 52 of List I.

(List II of Schedule VII)

23. Social security and social insurance; employment and unemployment

(List III of Schedule VII)

33. Trade and commerce in, and the production, supply and distribution of,--

(a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products.

(b) foodstuffs, including edible oilseeds and oils;

(c) cattle fodder, including oilcakes and other concentrates;

(d) raw cotton, whether ginned or unginned, and cotton seed; and

(e) raw jute.'

(List III of Schedule VII)

We may next refer to the Industries (Development and Regulation) Act, 1951 (Act No. 65 of 1951), passed by Parliament under Entry 52 of List I of the Constitution. Section 2 declared that it was expedient in the public interest that the Union should take over under its control the Industries specified in the First Schedule. Item 24 of the First Schedule is the item with which we are here concerned. To appreciate the scope and the nature of the contentions raised, we may extract the relevant portion of the Schedule and the entry :

'THE FIRST SCHEDULE (See Sections 2 and 3(i))

Any industry engaged in the manufacture or production of any of the articles mentioned under each of the following headings of sub-headings, namely :

XXXXX

24. Paper and Pulp including Paper Pro-ducts :

(1) Paper -- writing, printing and wrapping.

(2) Newsprint

(3) Paper board and straw board.

(4) Paper for packaging (corrugated paper, kraft paper, paper bags, paper containers and the like).

(5) Pulp -- wood pulp, mechancial, chemical, including dissolving pulp.

XXXXX'

Regarding that scope of a Parliamentary declaration made in terms of Entry 52 of List I it is now well settled by at least three decisions of the Supreme Court that once Parliament has made a declaration in public interest in respect of any industry, so much of it is completely taken away from the jurisdiction of theState and allocated to the exclusive jurisdiction of the Parliament; so that, in respect of the area thus taken over, there is complete absence of Legislative jurisdiction for the State. The three Supreme Court decisions which are authorities for this propositions are: Hingir-Rampur Coal Co. Ltd. v. State of Orissa (AIR 1961 SC 459); State of Orissa v. M. A. Tulloch and Co. (AIR 1964 SC 1284); and Baijnath v. State of Bihar(AIR 1970 SC 1436). iN the first of these cases (Hingir-Rampur Coal Co.'s case), it was observed (at p. 469):

'23. The next question which arises is, even if the cess is a fee and as such may be relai-able to Entries 23 and 66 in List II its validity is still open to challenge because the legislative competence of the State Legislature under Entry 23 is subject to the provisions of List I with respect to regulation and development under the control of the Union; and that takes us to Entry 54 in List I. This Entry reads thus: 'Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest'. The effect of reading the two Entries together it clear. The jurisdiction of the State Legislature under Entry 23 is subject to the limitation imposed by the latter part of the said Entry. If Parliament by its law has declared that regulation and development of mines should in public interest be under the control of the Union, to the extent of such declaration the jurisdiction of the State Legislature is excluded. In other words, it a Central Act has been passed which contains a declaration by Parliament as required by Entry 54, and if the said declaration covers the field occupied by the impugned Act the impugned Act would be ultra vires, not because of any repugnance between the two statutes but because the State Legislature had no jurisdiction to pass the law. The limitation imposed by the latter part of Entry 23 is a limitation on the legislative competence of the State Legislature itself. This position is not in dispute.'

In Tulloch's case (AIR 1964 SC 1284) it was observed (at p. 1287):

'It does not need much argument to realise that to the extent to which the Union Government had taken under 'its control' 'the regulation and development of minerals' so much was withdrawn from the ambit of the power of the State Legislature under Entry 23 and legislation of the State which bad rested, on the existence of power under that entry would to the extent of that 'control' be superseded or be rendered ineffective, for here we have a case not of mere repugnancy between the provisions of the twoenactments but of a denudation or deprivation of State legislative power by the declaration which Parliament is empowered to make and has made.' (p. 1287).

In the last mentioned case, that is, Baijnath's case (AIR 1970 SC 1436), the principle of the two earlier decisions was affirmed as follows :

'17. These two cases bind us and apply here. Since the Bihar State Legislature amended the Land Reforms Act after the coming into force of Act 67 of 1957, the declaration in the latter Act would carve out a field to the extent provided in that Act and to that extent Entry 23 would stand cut down. To sustain the amendment the State must show that the matter is not covered by the Central Act The other side must, of course, show that the matter is already covered and there is no room for legislation.'

6. In the instant case, the Parliamentary declaration read with the Industries (Development and Regulation) Act -- Schedule I, Item 24-- covers the field of the Paper and Pulp Industry including paper products mentioned in sub-items (1) to (5) of Item 24 of Schedule I. There was some attempt to confine the scope of the Entry to paper and paper products and not to the manufacture of Rayon pulp. But this was rightly given up in view of the juxtaposition of Entry 24 and Its sub-headings as related to the opening words superscribed in the First Schedule before the enumeration of the entries themselves. As this aspect of the matter, although taken in the counter-affidavit, was not seriously pressed before us, we refrain from referring to the scientific treatises on the subject to which our attention was called by counsel for the petitioners to show that dissolving pulp is actually used in paper production. For instance, counsel for the petitioners referred to the Wealth of India -- Dictionary of Indian Raw Materials and Industrial Products (Part VII), published by the Council of Scientific and Industrial Research (page 166); the United Nations publication entitled 'Pre Investment Survey of Forest Resources (of) India--Pulp and paper studies by P. A. Shagaev; etc. Counsel for the petitioners cited the decision in Harakchand v. Union of India (AIR 1970 SC 1453), where, in relation to the Entries in the Fint Schedule of the Industries (Development and Regulation) Act, it was observed that the headings of the schedule did not follow any logical off scientific pattern, but are put in merely ai devices for convenient grouping of the Industries, It was again repeated :

'As we have already said that there is no scientific or logical scheme in the classification of first schedule of Act 65 of 1951 but it is a mere enumeration and grouping of variousitems. We are unable to accept the argument of petitioners that the heading metallurgical industries should be construed at having a controlling effect on the meaning of Item B (2) 'semi-manufactures or manufactures' (p. 1461) We have therefore no hesitation to fix the scope and content of Item 24 of the First Schedule of the Industries (Development and Regulation) Act in a wide and comprehensive tense so as to cover the main item and the sub-items.

7. Entries 52 of List I and 24 of List II specifically relate to Industries; and between them they completely exhaust the sphere of Industries, in the sense that what is covered by a Parliamentary declaration is within the sphere of parliament, and the rest are within the sphere of the State Legislature. In the face of these specific entries, we find little force or weight to trace the legislative power, as was sought to be done by the learned Additional Advocate-General, to Entry 23 or Entry 33 of List III already noticed, or to Entry 27 of List II, dealing with production, supply and distribution of goods subject to the provisions of Entry 33 of List III. The subfecl-matter of the Ordinance is the taking over of the Industry. That seems to directly fall within Entry 52 of List I and 24 of List II. The power of the State Legislature under the latter entry is completely excluded in view of the Parliamentary declaration under the former entry.

8. The learned Additional Advocate-General struggled to persuade us to hold that the entire sphere of Industry is not taken over or covered by the Parliamentary declaration under Item 24 of Schedule I of the Industries (Development and Regulation) Act, and that matters relating to production, supply and distribution of goods could still fall within the purview of the State Legislature under Entry 27 of List II. In support of this submission, he relied upon the exposition of the scape of the term 'Industry' given in Tika Ramji's case (AIR 1956 SC 676). where, with respect to Sugarcane Industry covered by a Parliamentary declaration under Entry 52 of List I. the State's legislation for production, supply and distribution of Sugar under the Essential Commodities Act was still sustained. This aspect of the matter does not arise for consideration in this case, as we are satisfied that the subject-matter of the Ordinance falfs completely within the sphere of the Parlia-mentary declaration under Entry 52 of List I. Even in pith and substance, it cannot be said to relate to production, supply and distribution of goods. There are no provisions regarding production, supply and distribution of Rayon Pulp. For the tame reason, the otherentries relied on and referred to earlier --Entries 23 and 33 of List in are unhelpful and unavailable. The Ordinance cannot, in pith and substance, he said to be under these entries.

9. The result of oar discussion discloses that the State Legislature would have no power to legislate on the subject of Industries in respect of which a Parliamentary declaration had been made under Entry 52 of List I, in relation to the matters covered by the declaration. Ex-hypothesi the Governor would have no power to promulgate an Ordinance in respect of such matters under the proviso to Article 213(1)(c) of the Constitution. The Ordinance could therefore not have been passed without instructions from the President, in view of the provisions in the proviso to Clause (1) of the said Article. On this ground we are clearly of the opinion that the Ordinance is invalid.

10. Next we shall deal with the question, whether assuming legislative competence for the State, and Ordinance making powers for the Governor, the provisions of the Ordinance violate the fundamental rights of the petitioners We are here confronted with the preliminary objection that the 1st petitioner, being a Company, is dot a citizen of India, and cannot have any fundamental rights under Art 19, and the 2nd petitioner, as only a shareholder, has no direct and individual interest to maintain the writ petition. The answer to these objections of the learned Additional Advocate-General is to be found in the decision of the Supreme Court in R. C. Cooper v. Union of India (AIR 1970 SC 564). There the Court observed (at p. 584-585) :--

'13. A company registered under the Companies Act is a legal person, separate and distinct from its individual members. Property of the Company is not the property of the shareholders. A shareholder has merely an interest in the Company arising under its Articles of Association, measured by a sum of money for the purpose of liability, and by a share in the profit. Again a director of a Company is merely its agent for the purpose of management. The holder of a deposit account in a Company is its creditor : he is not the owner of any specific fund lying with the Company. A shareholder, a depositor or a director may not therefore be entitled to move a petition for infringement of the rights of the Company, unless by the action impugned by him, his rights are also infringed.

14. By a petition praying for a writ against infringement of fundamental rights, except in a case where the petition is for a writ of habeas corpus and probably for infringement of the guarantees under Articles 17, 23 and 24, the petitioner may seek relief in respect ofhis own rights and not of others. The shareholder of a Company, it is true, is not the owner of its assets; he has merely a right to participate in the profits of the Company subject to the contract contained in the Articles of Association. But on that account the petitions will not fail. A measure executive or legislative may impair the rights of the Company alone, and not of its shareholders; it may impair the rights of the shareholders and not of the Company : it may impair the tights of the shareholders as well as of the Company. Jurisdiction of the Court to grant relief cannot be denied, when by State action the righti of the individual shareholder are impaired, if that action impairs the rights of the Company as well. The test in determining whether the shareholder's right is impaired is not formal; it is essentially qualitative; if the State action impairs the right of the shareholders as well as of the Company, the Court will not, concentrating merely upon the technical operation of the action, deny itself, jurisdiction to grant relief.'

The Court referred to Dwarkadas's case (AIR 1954 SC 119), and distinguished the decision in the State Trading Corporation of India's case (AIR 1963 SC 1811). It was held that The petition under Article 32 was competent. We overrule the objection of the Additional Advocate-General.

11. We shall then pass on to consider whether the ordinance violates the fundamental rights of the petitioners. Violation of Articles 14, 19(1)(f) and (g) and 31 was alleged. The Additional Advocate-General threw up the protective mantle of Article 31A and claimed immunity from attack against these Articles. Article 31A, in so far as it is material, reads:

'31-A. Saving of laws providing for acquisition of estates, etc.-- (1) Notwithstanding anything contained in Article 13, no law providing for -

xxxxx

(b) the taking over of the management of any property by the State for a limited period either in the public interest or in order to secure the proper management of the property, or

XXXXX

shall be deemed to be void on the ground that it is inconsistent with, or takes away of abridges any of the rights conferred by Articles 14, 19 or Article 31 :

Provided that where such law is a law made by the Legislature of a State, the provisions of this article shall not apply thereto unless such law, having been reserved for the consideration of the President, hat received his assent.

xxxxx

It is plain from the above Article that if there has been a taking over of the management of any property by the State, the protection of Article 31A would be available only if the pro-viso is complied with. Under the laid pro-viso. Presidential assent is a necessary requisite. To escape from the devastating effect of the proviso, the learned additional Advocate-General had per force to take up the position that the impugned Ordinance does not provide for the taking over of the management 'by the State', but only by a Controller, and therefore neither Article 31A nor the proviso would be attracted. It ii a little curious to see the State disclaim the protective mantle of Article 31A in this fashion. All the same, we are satisfied that the argument that there was no taking over by the State must fail. The expression 'State' is defined in Article 12 of the Constitution which is a limited definition for the purpose of Part III of the Constitution, the Part relating to fundamental rights. That definition reads:

'12. Definition.-- In this Part, unless the context otherwise requires, 'the State' includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India.'

In K. S. Ramamurthy v. Chief Commr., Pondi-cherry (AIR 1963 SC 1464) the Supreme Court observed (at p. 1468):

'Article 12 gives an inclusive definition of the words 'the State' and within these words of that Article are included, (i) the Government and Parliament of India, (ii) the Government and the legislature of each of the States, and (in) all local or other authorities. These are the only authorities which are included in the words 'the State' in Article 12 for the purpose of Part III. Then follow the words which qualify the words 'all local or other authorities'. These local or other authorities which are included within the words 'the State' of Article 12 are of two kinds, namely, (i) those within the territory of India, and (ii) those under the control of the Government of India. There are thus two qualifying clauses to 'all local or other authorities'. Those clauses are, (i) within the territory of India and (ii) under the control of the Government of India. It would in our opinion be grammatically wrong to read the words 'under the control of the Government of India' as qualifying the word 'territory'. From the scheme of Article 12 it is clear that three classes of authorities are meant to be included in the words 'the Slate', there; and the third class is of two kinds and the qualifying words which follow 'all local or other authorities' definethe two types of such local or other authentics as already indicated above. Further all local or other authorities within the territory of India included all authorities within the territory of India whether under the control of the Government of India or the Governments of various States and even autonomous authorities which may not be under the control of the Government at all. In contradistinction to this the second qualifying clause refers only to such authorities as are under the control of the Government of India and so the second qualifying clause must govern the word 'authorities'. Therefore, the interpretation put forward on behalf of the respondents seems to us to be correct both grammatically and otherwise. 'All local or other authorities' would thus be of two kinds, namely (i) those within the territory of India and (ii) those under the control of the Government of India, In the latter case there is no qualification that they should be within the territory of India, It is enough if they are under the control of the Government of India wherever they may be. We are therefore of opinion that no writ could issue to the Appellate Authority at the time when the order under challenge was passed' unless it could be called 'other authority under the control of the Government of India'. Further, there can be no doubt that if no writ could issue to the Appellate Authority at the time the order was passed, no writ could issue now after Pondicherry has become part of the territory of India, for that would be giving retrospective operation to the Constitution for this purpose which obviously cannot be done: (See Jangardan Reddy v. State, 1950 SCR 940 : (AIR 1951 SC 124).' (para 11). In Rajasthan State Electricity Board v. Mohan Lal (AIR 1967 SC 1857) the Supreme Court considered the question whether the terra 'other authority' in Article 12 must be understood on the principle of ejusdem generis as an authority exercising sovereign functions. It was held that there was no room for applying the said principle as no distinct genus or category was indicated in the enumeration of the bodies indicated in Article 12. It was ruled:

'(5) The meaning of the word 'authority' given in Webster's Third New International Dictionary, which can be applicable is 'a public administrative agency or corporation having quasi-governmental powers and authorised to administer a revenue-producing public enterprise. This dictionary meaning of the word 'authority' is clearly wide enough to include all bodies created by a statute on which powers are conferred to carry out governmental or quasi-governmental functions. The expression 'other authorities' is wide enough to include within it every authority created by a statute and functioning within the territory of India,or under the control of the Government of India; and we do not see any reason to narrow down this meaning in the context in which the words 'other authorities' are used in Article 12 of the Constitution.

(6) In Smt. Ujjam Bai v. State of Uttar Pradesh, (1963) 1 SCR 778 : (AIR 1962 SC 1621), Ayyangar, J., interpreting the words 'other authorities' in Article 12. held :

'Again, Article 12 winds up the list of authorities falling within the definition by referring to 'other authorities' within the territory of India which cannot obviously be read as ejusdem generis with either the Government and the Legislatures or local authorities. The words are of wide amplitude and capable of comprehending every authority created under a statute and functioning within the territory of India or under the control of the Government of India. There- is no characterisation of the nature of the 'authority' in this residuary clause and consequently it must include every type of authority set up under a statute for the purpose of administering laws enacted by the Parliament or by the State including those vested with the duty to make decisions in order to implement those laws'. In K. S. Ramamurthy Reddiar v. Chief Commr., Pondi-chery, 1964-1 SCR 656 : (AIR 1963 SC 1464), this Court, dealing with Article 12, held:

'Further, all local or other authorities within the territory of India include all authorities within the territory of India whether under the control of the Government of India or the Governments of various States and even autonomous authorities which may not be under the control of the Government at all.'

These decisions of the Court support our view that the expression 'other authorities' in Article 12 will include all constitutional or statutory authorities on whom powers are conferred by law. .....'

In the light of this exposition of the Supreme Court, the Controller created by the Ordinance to assume management of the Company seems to satisfy the definition of the State, In Dwarkadas's case (AIR 1954 SC 119) where the management of the Sholapur Spinning and Weaving Company had been taken over, one of the arguments advanced was that the State had not acquired title and only the Controller had. This was rejected by the Supreme Court after an elaborate examination. Again, in the Kerala University Act case, that is, State of Kerala v. Very and Rev. Mother Provincial (AIR 1970 SC 2079), the Court observed :

'18. The remaining provisions of this section lay down an elaborate procedure for management in which even the governing body or the managing council have no say. Sub-section 63 (1) involves the transfer of right to possession of the properties to the University. The High Court rightly pointed out that this section provides for compulsory requisition of the properties within Article 31(2) and (2A). To be effective the section required the assent of the President under Clause (3) and it was not obtained. Therefore the saving in Article 31A(1)(b) is not available.'

12. There is also another aspect of the matter. The Controller appointed by the State s subject to removal by the State and to the control of the State. The taking over of the management of the Company is, in the circumstances, only a taking over by the State through the medium of the Controller. On the state of the authorities, we are unable to accept the contention of the learned Additional Advocate-General that the taking over of management was not by the State but by the Controller, and that therefore the first proviso to Article 31A would not be attracted. We hold that the said proviso is attracted and that as there is no assent of the President, the protection under Article 31A against any attack based on Articles 14, 19 and 31 would not be available.

13. Does the Ordinance, then, violate Articles 14, 19 and 31 of the Constitution We are not much impressed by the arguments based on Article 14. The argument was thatthere are many other Companies where strikes, irregularities and mismanagement has been rampant, which have been left untouched, without the Government assuming control or management; and that the action taken against the petitioner-Company alone was discriminatory. We do not think, these facts, even if true, would amount to discrimination. The fact that in the case of many other Companies the Government chose to take no curative or preventive action for mismanagement or for irregularities disclosed, is no ground to strike down the action taken against the petitioner-Company.

14. Article 19(1)(f) guarantees the right to acquire, hold and dispose of property; and Clause (5) permits reasonable restrictions in the interests of general public or for the protection of the interests of any Scheduled Tribe. Article 19(1)(g) guarantees the right to practise a profession or to carry on a trade or business. The provisions of the Ordinance have been sketched. They are so drastic that they clearly constitute a violation of the rights to hold and dispose of property and to carry on the Company's business. We are unable to see any public interest which justifies the restriction on these rights. The attack based on Article 19(1)(f) and (g) seems to be well founded.

15. Article 31 of the Constitution, in so far as it is relevant, reads :

'31. Compulsory acquisition of property.-

(1) No person shall be deprived of his property save by authority of law.

(2) No property shall be compulsorily acquired or requisitioned save for a public purpose and save by authority of a law which provides for acquisition or requisitioning of the property for an amount which may be fixed by such law or which may be determined in accordance with such principles and given in such manner as may be specified in such law; and no such law shall be called in question in any court on the ground that the amount so fixed or determined is not adequate or that the whole or any part of such amount is to be given otherwise than in cash :

(proviso omitted)

(2A) Where a law does not provide for the transfer of the ownership or right to possession of any property to the State or to a corporation owned or controlled by the State, it shall not be deemed to provide for the compulsory acquisition or requisitioning of property, notwithstanding that it deprives any person of his property.

(2-B) Nothing in Sub-clause (f) of Clause (1) of Article 19 shall affect any such law as is referred to in Clause (2).

(3) No such law as is referred to' in Clause (2) made by the Legislature of a State shall have effect unless such law, having been reserved for the consideration of the President, has received his assent.' (clauses (4), (5) & (6) omitted)Clause (1) deals with deprivation of property; clause (2) with compulsory acquisition and requisition. Clause (2A) negatively provides that a law which does not provide for transfer of ownership or right to possession to the State or to a Corporation, shall not be deemed to provide for the compulsory acquisition or requisition of property. By implication, the positive inference may perhaps be made that if it does so provide it is a law relating to compulsory acquisition or requisition. The principle in Dwarkadas's case (AIR 1954 SC 119) and the Kerala University Act case in State of Kerala v. Very Rev. Mother Provincial (AIR 1970 SC 2079). supports the conclusion as to compulsory acquisition and requisition. Under Clause (3), no such law as is referred to in Clause (2) shall be made by the Slate Legislature except with the assent of the President. The argument on behalf of the State has been that there has only been a temporary taking over for a limited purpose and this cannot amount to acquisition and requisition by the State. A similar argument in rather different circumstances was considered exhaustively and rejected by the Supreme Court inDwarkadas v. Sholapur Spinning & Weaving Co. (AIR 1954 SC 119 -- see paras. 8, 9, 12 and 14). In answer to the decisions cited, little has been shown to us to hold that there h;.s been no taking over of management by the State.

16. Assuming again, that the Ordinance it within the Governor's powers, and that it does not violate the fundamental rights under Articles 19 and 31 of the Constitution, (we have found that it does not violate Article 14), how does it stand in the matter of its inconsistency with, or repugnance to, the laws enacted by Parliament? That takes us to the arguments on repugnancy. Counsel for the petitioners argued that the provisions of the Ordinance are in violation of many of the provisions of the Companies' Act and other statutes passed by Parliament. Counsel drew our attention to Article 254 of the Constitution, which reads:

'254. Inconsistency between laws made by Parliament and laws made by the Legislatures of States.-- (1) If any provision of a law made by the Legislature of a State is repugnant to any provision of a law made by Parliament which Parliament is competent to enact, or to any provision of an existing law with respect to one of the matters enumerated in the Concurrent List. then, subject to the provisions of Clause (2). the law made by Parliament, whether passed before or after the law made by the Legislature of such State, or, as the case may be. the existing law, shall prevail and the law made by the Legislature of the State shall, to the extent of the repugnancy, be void

(2) Where a law made by the Legislature of a State with respect to one of the matten enumerated in the Concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State:

Provided that nothing in this clause shall prevent Parliament from enacting at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by the Legislature of the State.'

Counsel for the petitioners and the learned Additional Advocate-General placed reliance, for their respective points of view, on Tika Ramji v. State of U. P. (AIR 1956 SC 676). On an analysis of the facts and the circumstances disclosed in that case, it would be seen that the Supreme Court only recognised that it was possible to give effect to the State Legislature's power under Entry 27 of List IT, and, at the same lime to confine the Parliamentary legislation by giving free scope to Entry 56 of List I. It was pointed out that production, supply and distribution of essential articles which the impugned State legislation attempted to regulate, could well fall within the State's legislative competence under Entry 27 of List II, and that despite the Industry having been declared a controlled Industry by Parliament under Entry 52 of List I, it was still possible for the State legislation to have free-play. Our difficulty in applying the said principle is that the declaration of the Industry and its taking over by Parliament undes Entry 52 of List I, removes it altogether from the jurisdiction of the State Legislature. It might have been possible to confine the scope of the term 'Industries' in Entry 52, so as to give effect to 'production, supply and distribution', or 'trade and commerce' or 'employment and unemployment' which are within the State's field as already noticed. But the Ordinance, in its pith and substance, deals with the control and regulation of the Industry, and not with any of the aspects within the State's jurisdiction. That the correct test to see the nature and character of the legislation is to examine its pith and substance, has been settled in numerous decisions. In the well-known Bengal Money-lenders Act case, (Prafulla Kumar v. Bank of Commerce, Khulna, AIR 1947 PC 60), the Privy Council observed:

'38. (3) Thirdly, the extent of the invasion by the Provinces into subjects enumerated in the Federal List has to be considered. No doubt it is an important matter, not, as their Lordships think, because the validity of an Act can be determined by discriminating between degrees of invasion, but for the purpose of determining what is the pith and substance of the impugned Act. Its provisions may advance so far into Federal territory as to show that its true nature is not concerned with. Provincial matters, but the question is not, has it trespassed more or less, but is the tres-pass, whatever it be, such as to show that the pith and substance of the impugned Act is not money-lending but promissory notes or banking? Once that question is determined the Act falls on one or the other side of the line and can be seen as valid or invalid according to its true content.'

Examining the pith and substance of the legislation, we are unable to hold that it deals either with the production, supply and distribution of the products of any Industry. oF other matters. For this reason, we see no room or scope for applying the principle of the decision in the Calcutta Gas Company's case (AIR 1962 SC 1044) on which strong reliance was placed by the learned Additional Advocate-General For the same reasonagain, we are unabte to derive advantage from the recent decision of the Full Bench of the Calcutta High Court in Pushraj Puran Mull v. N. Roy (AIR 1978 Cal 215) where the State legislation in respect of a controlled Industry under Entry 52 of List T was sustained on the basis of Entry 23 in List III. That was because from the objects and reasons of the State enactment and from its provisions, the impugned Legislation was found in pith and substance to be under the Entry in the State List. The same was the principle of the decision of the Gujarat High Court referred to therein, in D. S. Patel & Co. v. Gujarat State Textile Corporation Ltd. ((1971) 41 Com Cas 1098).

17. in order to show the repugnance of the provisions of the Ordinance with those of the Companies Act, counsel for the petitioners invited our attention to Section 20 of the Industries (Development and Regulation) Act which enacts that after the commencement of the Act it shall not be competent for the State Government or a local authority to take over the management or control of any industrial undertaking under any law for the time being in force that authorises such Government or local authority to do so. It was stated that the provisions of the Ordinance fly in the face of the section. We have been shown little to hold otherwise. Attention was called to Sections 15 to 18F of the Industries (Development and Regulation) Act, to show that it constitutes a complete and self-contained code for the regulation, control and management of the Industry, and that the provisions of the Ordinance are inconsistent with and opposed to these provisions of the Act. Our attention was drawn to the following provisions of the Companies Act; Section 291, which provides that the management shall vest in the Directors : Sections 166, 171 and 173 providing for Annual General Meeting and for the conduct and management of Companies; Section 284. providing for the removal of Directors by shareholders; Section 210 providing for annual accounts of the Company; Section 159 providing for annual returns; Section 161 providing for the Directors vouching the annual returns; Section 162, providing for prosecution for failure to file the returns; Section 224. providing for auditing of accounts; Section 484 providing for voluntary winding up. etc. In the face of the provisions of the Ordinance providing for the vacating of office of all persons in charge of the management of the undertaking (Section 4) etc. and the various other provisions to which we have called attention, counsel for the petitioners contended that the provisions of Section 16 of the Ordinance could only be unreal and ineffective. Section 16 of the Ordinance enacts:

'16. Application of Companies Act, 1956.--For the removal of doubts it is hereby clarified that the Companies Act, 1956. (Central Act 1 of 1956), shall continue to apply to the Rayon Pulp Division in the same manner as it applied thereto before the date of the notified order under Sub-section (1) of Section 3.'

HOW, in the face of the provisions of Section 4 of the Ordinance and the various other Stations to which we have already drawn attention, the provisions of Section 36 are to he given effect to, was not satisfactorily explained. We see force in the contention of counsel for the petitioners that the provisions of the Ordinance are inconsistent with the provisions of the Companies Act. But the learned Additional Advocate-General cited K. S. E. Board v. Indian Aluminium Co. Ltd. (AIR 1976 SC 1031) (para. 11) in support of his contention that repugnancy can arise, as provided in Article 254, only if the subject-matter of the two legislations is in the Concurrent Lists and not where the conflict arises between the Union List and State List. Counsel for the petitioners would place reliance on Indu Bhusan Bose v. Rama Sundari Debi (AIR 1970 SC 228 at p. 235) to establish the supremacy of Parlia-mentary legislation under List I over State legislation even under List II; and on para 5 of AIR 1976 SC 1031, noticed (supra). We refrain from expressing our views on the question, as the Ordinance has to fail on other grounds.

18. Counsel for the petitioners drew our attention to Ext. P3 licence issued to the petitioner-Company under the Industries (Development and Regulation) Act, 1951, and R. 7 of the Registration and Licensing of Industrial Undertakings Rules. 1952. The licence has been superscribed as 'Licence No. L/24/(5)/ N. 1/58'. The petitioners' counsel explained the numerals as signifying Entry 24, sub-item (5) of the I Schedule of the Industries (Development and Regulation) Act. He referred to Clause 9 of the Licence to the effect that the Government of India do not take any responsibility for the financial soundness of the undertaking or for the correctness of any of the statements made or opinions expressed in regard to it. Attention was called to Ext. P4. the application for a substantial expansion of business made by the Company; to the exemption granted by order dated 20-7-1966 (seen at page 768 of Berarwalla's Book 'Industrial Licensing, Monopolies and Restrictive Trade Practices'); to the 'carry-on business' licence dated 28-11-1972 -- C. D. B. licence, as it is called -- issued under Section 29B(2) of the Industries (Development and Regulation) Act; to the cancellation of the exemption order in Feb. 1970 (vide page 768 of Berarwalla); to the order dated 18-7-1970 seen at page 803 ofBerarwalla's book; to the letter dated 9-2-1971 of the Government of India to follow the press-note issued by the Ministry of the Government of India; to the letter of the Government of India dated 31-3-1972 rejecting the Company's application for expansion (Ext P18 (2)); to the expansion licence dated 21-1-1977 for the Kumarapatanam plant (Ext. P20); to the Government of India's letter dated 22-1-1977 (Ext. P13); and many other materials to show the functioning of the Industry under the guidance and control of the Government of India. These were relied on to show that the Industry was one which had been completely taken over by the Parliamentary declaration and by item 24 of Schedule I of the Industries (Development and Regulation ) Act. We have been impressed by these facts marshalled by counsel for the petitioners. We think that these sufficiently establish that the suject-matter of the Ordinance was outside the legislative competence of the State Legislature.

19. Throughout our discussion we have proceeded on the basis that Ordinance is 'law'. The definition of 'law' in Article 13 as specifi-cally including an Ordinance is limited for the purpose of that Article. But we have Article 366 where the term 'existing law' is defined to include an Ordinance. Quite apart from these definitions, we think, on general jurispru-dential grounds an Ordinance will pass as law.

20. As a result of the above discussion we summarise our conclusions as follows: We are of the opinion, that the subject-matter of the Ordinance falls fairly and squarely within Entry 52 of List 1 of the VIIth Schedule to the Constitution and not either within Entry, 24 or 27 of List II of the said Schedule or within Entry 23 or 33 of List III of the said Schedule of the Constitution. Being so, We are clearly of the opinion, that the State Legislature had no legislative competence in regard to the subject-matter of the Ordinance, and ex-hypothesi, the Governor had no authority to promulgate the Ordinance. Legislation on the same subject-matter as the Ordinance would have required the previous assent of the President as envisaged by Article 213(1)(c); and the Ordinance could therefore not have been passed without previous instruction from the President as required by the proviso to Article 213(1) of the Constitution. Assuming that there was legislative competence to promulgate the Ordinance, we are of the opinion that it violates Article 19(1)(f) and Article 31(2) of the Constitution arid is not saved by Article 31A thereof. We express no opinion, whether the Ordinance should fail by reason of its being inconsistent with, and repugnant to the pro-visions of the Companies Act, and therefore void under Article 254(1) read with Article 254(2) of the Constitution. For the reasons stated, we allow this writ petition and declare the Ordinance void. There will be no order as to costs.

We record our appreciation of the able and learned arguments of counsel for the petitioners and the learned Additional Advocate-General.


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