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Narayanprosad Jhunjhunwalla and ors. Vs. the Indian Iron and Steel Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberSuit No. 4699 of 1952
Judge
Reported inAIR1953Cal695
ActsConstitution of India - Articles 14, 19(1), 31 and 31(2); ;Iron and Steel Companies Amalgamation Ordinance, 1952; ;Iron and Steel Companies Amalgamation Act, 1952; ;Companies Act, 1913 - Section 153A and 153B; ;Industrial Development and Regulation Act, 1951; ;Specific Relief Act, 1877 - Section 42
AppellantNarayanprosad Jhunjhunwalla and ors.
RespondentThe Indian Iron and Steel Co. Ltd.
Appellant AdvocateA.K. Sen and ;S. Roy, Advs.
Respondent AdvocateS. Chaudhury and ;B. Das, Advs.
DispositionSuit dismissed
Cases ReferredRamkissendas Dhanuka v. Satya Charan
Excerpt:
- bose, j. 1. this is a suit by the plaintiffs who are five share-holders of a company known as the indian iron & steel co. ltd., for selves and on behalf of the other share-holders of the said company against the said indian iron & steel co. ltd. and 8 other persons who are directors of the said company for a declaration that an ordinance known as the iron & steel companies amalgamation ordinance 1952 (8 of 1952) and an act replacing the said ordinance being act no. 79 of 1952 are void and inoperative and the scheme of amalgamation and merger contained therein is illegal and void and for an injunction restraining the defendants from giving effect to or acting upon the said scheme of amalgamation and merger, and for certain other reliefs (2) the case of the plaintiffs is that the defendant.....
Judgment:

Bose, J.

1. This is a suit by the plaintiffs who are five share-holders of a company known as the Indian Iron & Steel Co. Ltd., for selves and on behalf of the other share-holders of the said company against the said Indian Iron & Steel Co. Ltd. and 8 other persons who are directors of the said company for a declaration that an ordinance known as The Iron & Steel Companies Amalgamation Ordinance 1952 (8 of 1952) and an Act replacing the said Ordinance being Act No. 79 of 1952 are void and inoperative and the Scheme of Amalgamation and merger contained therein is illegal and void and for an injunction restraining the defendants from giving effect to or acting upon the said Scheme of amalgamation and merger, and for certain other reliefs (2) The case of the plaintiffs is that the defendant company being the Indian Iron & Steel Co. Ltd. was incorporated under the Indian Companies Act on or about 11-3-1948 and its business is, inter alia, the manufacture of iron and steel. The authorised capital of the company is Rs. 7,50,000,00/-divided into 50,000,00 Ordinary shares of Rs. 10/-each and 2,50,000 five per cent Preference shares of Rs. 100/- each. The issued and subscribed capital of the company is Rs. 4,05,25,960/-The total properties and assets of the company are valued at Rs. 14,08,15,203/- as at the end of 31-3-1952. The company holds among its investments 11,000,00 ordinary shares of the face value of Rs. 10/- each, valued at Rs. 1,10,00,000/- ss at the end of 31-3-1952, of the Steel Corporation of Bengal Ltd., a company incorporated under the Indian Companies Act having its registered office at No. 12, Mission Row, Calcutta. The Managing Agents of the defendant company and the said Steel Corporation of Bengal Ltd. have at all material times been Messrs. Martin & Burn Ltd., a company also incorporated under the Indian Companies Act and having its registered office at No. 10, Mission Row, Calcutta.

It is alleged that some time in 1952 defendants 2 to 9 who are the Directors of the defendant company, formulated a Scheme of amalgamation of the defendant company with the Steel Corporation of Bengal Ltd. without any reference to the shareholders of the defendant company and they approached the Union of India with a request to give effect to that Scheme of amalgamation by promulgating an Ordinance for the purpose. On or about 29-10-1952 the President of India promulgated an Ordinance being the Iron & Steel Companies Amalgamation Ordinance 1952 (8 of 1952). The Heading and Preamble of the said Ordinance were as follows:

'An Ordinance to make special provision, in the interests of the general public and the Union, for the amalgamation of certain companies closely connected with each other in the manufacture and production of iron and steel, and for matters connected therewith or incidental thereto.

WHEREAS for the purpose of securing, in the interests of the general public and the Union, the efficient and economical expansion and working of the iron and steel industry in India, it is essential that the Steel Corporation of Bengal Limited, and the Indian Iron and Steel Company, Limited, which are engaged in the manufacture and production of iron and steel, should be amalgamated;

AND WHEREAS to give effect to the scheme of the Central Government for the expansion of the iron and steel industry and to makeavailable further resources for such expansion, it is necessary that the said companies should be amalgamated with as little delay as possible;

AND WHEREAS the amalgamation of the said companies is also in pursuance of successive recommendations made by the Tariff Board and the Tariff Commission;

AND WHEREAS Parliament is not in session and the President is satisfied that circumstances exist which render it necessary for him to take immediate action;

NOW THEREFORE, in exercise of the powers conferred by clause (1) of Article 123 of the Constitution, the President is pleased to promulgate the following Ordinance:

...... ........ ........ ..' etc.

3. The said Ordinance provided inter alia (a) that the Steel Corporation of Bengal Ltd. would stand dissolved from 1-1-1.953 and from the said date undertaking of the dissolved company would be transferred to and would vest in the Iron & Steel Co., Ltd. and all the properties, profits and assets of the dissolved company would from that date be deemed the properties and profits and assets of the Iron and Steel Co., Ltd.

(b) As soon as might be after 1-1-1953 the Iron & Steel Co. would allot to every person registered as shareholder in the dissolved company (i) if he was a holder of Preference share as many Preference shares in the Iron & Steel Co. as are equivalent in number and value to the Preference shares held by him in the dissolved company immediately before 1-1-1953, (ii) if he was a holder of Ordinary shares, four Ordinary shares of Rs. 10/- each in the Iron and Steel Co. for every five Ordinary shares of Rs. 10/- each, held by him in, the dissolved company.

(c) Every officer or other servant of the dissolved company would from 1-1-1953 become an officer or other servant as the case might be of the Iron & Steel Co. & every Director of the dissolved company would become, from the said date, a Director of the Iron & Steel Company in addition to the other Directors of the Iron & Steel Company.

4. The said Ordinance did not make any provisions regarding the said 11,00,000 Ordinary shares, in the dissolved company held by the Iron & Steel Co. nor any Rules have been framed by the Central Government making any provision in this respect. The defendants 2 to 9, however, it is alleged, had deicide without any authority from the shareholders of the defendant company to sell the said 11,00,000 Ordinary shares in the dissolved company to one Messrs. Dalhousie Holdings Ltd. inter alia on the terms and conditions that the said Dalhousie Holdings Ltd. would sell from time to time the said shares according to the instructions from the Directors of the Company and the sale proceeds less the commission payable to the Dalhousie Holdings Ltd. would be credited to the company and would form part of the working capital of the company. It appears that there has been an actual transfer of these shares to the Dalhousie Holdings Ltd. on or about 6-12-1952. The validity of this transfer has been challenged in another suit being suit No. 4916 of 1952 of this Court.

5. The present suit was filed on 9-12-1952. During, the pendency of this suit the Iron & Steel Companies Amalgamation Act, 1952, (Act 79 of 1952) was passed by the Indian Parliament on 29-12-1952 but it came into force with retrospective effect from 29-10-1952. The Act contained substantially the same provisions that were in the Ordinance except that Section 15 of the Act contained a provision repealing the said Ordinance. At, the hearing of the suit the learned counsel appearing for the plaintiffs asked for leave to makecertain amendments in the plaint challenging the validity of the Act 79 of 1952 on the same grounds on which the vires of the Ordinance was challenged and I have granted such leave to amend the plaint. I have also granted leave to the defendants to amend the Written Statements. The contentions that have been raised on behalf of the plaintiffs may be summarised as follows:

(i) The substance of the Ordinance and the Act is acquisition of property belonging to the Steel Corporation of Bengal for the private use of the Indian Iron & Steel Company, which is not permissible under the Constitution -- for private property of one person cannot be acquired for the private use of another person and given to the latter. Acquisition can only be made for a public purpose and upon payment of compensation.

(ii) Assuming such an acquisition for private use is possible it is only within the competence of the Provincial Government to so acquire by appropriate legislation made by the Provincial Legislature for the purpose.

(iii) The shareholders of the Steel Corporation of Bengal and the Iron & Steel Company have been without their consent and compulsorily brought into a Scheme which may eventually result in total loss -- in which event there, will be no compensation available to the shareholders for the acquisition of their property. The Scheme imposes an unreasonable restriction on the rights to hold, acquire and dispose of property and thus violates Article 19(1)(f) of the Constitution. The legislation also infringes Article 19(1)(c) and 19(1)(g) of the Constitution.

(iv) The legislation is discriminatory and infringes Article 14 of the Constitution.

(v) The legislation in question is not covered by Entries 43, 44 or 52 of List I of the 7th Schedule. Under item 43 only such laws can be made as relate to the actual incorporation or winding up of trading corporations but it does not empower compulsory extinguishment of a company and transfer of its assets to another without the consent of either. Item 52 similarly connotes the power to exercise control over or to regulate an Industry. Under this item laws can be framed fixing the hours of work of the employees of an industrial establishment or about their wages and such like matters only.

6. The Issues raised in the suit are the following:

1) Is the suit maintainable?

2) Is Ordinance No. 8 of 1952 or the Act No. 79 of 1952 valid?

3) To what reliefs, if any, are the plaintiffs entitled?

7. I now propose to deal with the contentions raised by Mr. Sen attacking the validity of the Ordinance and the Act. The first point made is that the Ordinance and the Act in effect and substance purports to acquire property belonging to The Steel Corporation of Bengal for the private use of the Iron, and Steel Company and to give it to the Iron and Steel Company. An acquisition of private property for the private use of another person is, it is said, not permissible under the Constitution of India. It is submitted that the only mode of acquisition recognised by the Constitution is acquisition for public purpose toy the Union or the State upon payment of justcompensation. In other words, the Governmentcould have acquired the property of the SteelCorporation in the first instance and after it had become vested in the Government then the pro-perty have been transferred to the Iron & Steel Company. Reliance is placed upon, Article 31 and Item 33 of List I and Item 36 of List II of the Seventh Schedule of the Constitution, It appears to me that this argument of Mr. Sen is based on a misapprehension of the true scope and implications of Article 31 and the two items of the legislative lists referred to by him. By the impugned legislation the Steel Corporation of Bengal has been deprived if at all of its undertaking and assets which have been transferred to the Iron and Steel Company, and the dissolved company has been amalgamated with and has been merged in the Iron and Steel Company, by destroying the status and constitution of the Steel Corporation of Bengal. The Ordinance or the Act has not purported to acquire any property of Indian Iron & Steel Company or of its shareholders. The plaintiffs have not suffered any deprivation or dispossession by reason of the Ordinance or the Act. It is the Steel Corporation of Bengal and its shareholders who can complain of deprivation of property if at all by the Ordinance or Act in question but neither the dissolved Company nor any of its shareholders have come forward to challenge the validity of the Ordinance or the Act.

8. The argument based on the Entries 33 of List I and 36 of List II to the effect that apart from these Entries there is no power in the Union or the State to legislate with regard to deprivation, of property does not appear to be correct. In the! case of -- 'Chiranjitlal v. Union of India', : [1950]1SCR869 (A), the questions whether Article 31(1) and Article 31(2) should be read together or independently of each other and whether Clause (1) of Article 31 contemplates only confiscation or destruction of property in exercise of what are known as police powers in American law were left open. But in the case of -- 'Shamdasani v. Central Bank of India Ltd.', : [1952]1SCR391 (B), Patanjali Shastri C. J. who delivered the unanimous judgment of the Court observed:

'The argument based on the Entries in the List is fallacious. It is not correct to suggest that merely because there is no Entry in the lists of Schedule 7 relating to 'deprivation of property' as such, it is not within the competence of the legislatures in the Country to enact a law authorising deprivation of property. Such a law could be made, for instance, under Entry No. I of List I, Entry No. 1 of List 2 or Entry No. I of List III. Article 31(1) itself contemplates a law being passed authorising deprivation of the properties and it is futile to deny the existence of the requisite legislative power.' (page 60 paragraph (6)). (9) Again in the case of -- 'State of Bihar v. Kameshwar Singh', : [1952]1SCR889 (C), the Chief Justice of Supreme Court observed that: 'The Entries in the Lists of the Seventh Schedule are designed to define and delimit the respective areas of legislative competence of the Union and State legislatures and such context is hardly appropriate for the imposition of implied restrictions on the exercise of legislative powers which are ordinarily matters for positive enactment in the body of the Constitution' (page 60 paragraph (6)).

10. In para. 14 (Page 264) the learned Chief Justice further pointed out that:

'The police power of the State is only the general power to regulate and control the exercise of private rights and liberties in the interests of the community and does not represent any specific head of legislative power.'

11. Now the question that really arises for determination is whether the impugned legislation is one the subject-matter of which is 'Acquisition of property' as contemplated by Entry 33 in List I and Article 31(2) of the Constitution or is it a law covered by Entry 43 of List I read with Entry 52 of the same List? Mr. Sen has argued that amalgamation or merger of companies is not comprised in the connotation of words 'Incorporation or regulation of Corporations' as used in Entry 43 of List I and hence such matters are outside the legislative power or competence of the Union legislature. This argument appears to me to be without substance. It will be putting a very narrow construction on the words used in Entry 43 and Entry 44 of List I to deny to the Union Legislature the power to pass a legislation providing for amalgamation or merger of companies and of incidents and consequences resulting from such amalgamation or merger merely because the Constitution has not used the words 'amalgamation or merger of corporations' in the Constitution. It is a well-settled rule of interpretation that a Written Constitution should not be construed in a narrow or pedantic sense taut in a broad and liberal spirit to illustrate and illuminate the full import of the general words used in the Constitution and giving the powers conferred therein the widest amplitude permissible. (See -- 'James v. Commonwealth of Australia (No. 2)', (1936) AC 578 at p. 614 (D), -- 'British Coal Corporation v. King' (1935) AC 500 at p. 518 (E) and -- 'In Re Central Provinces & Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938', ).

12. Sections 153A and 153B, Companies Act, give very clear indication that amalgamation or merger of companies is a matter which relates to the incorporation or regulation of Companies or Corporations and can properly form the subject-matter of a law relating to Corporations. Section 153A provides for transfer of undertaking of one company to another, dissolution of transferor company, allotment of and appropriation of shares by the transferee company, and these are the very things which are sought to be effected by the impugned legislation in respect of the two companies in question. It is true that the Ordinance or the Act does not enact any general law with regard to all companies but it deals with amalgamation of only two individual companies. But I do not find any illegality in such a course being adopted. It is clear from the Industries (Development and Regulation) Act 1951 (Act 65 of 1951) that in exercise of the power conferred by Entry 52 of List I of the 7th Schedule of the Constitution of India, the Indian Parliament declared that it is expedient in the public interest that the Union should take under Its control the industries specified in the First Schedule; (Section 2 of Act 65 of 1951) and the Iron and Steel Industry (Item 5 in First Schedule of Act 65 of 1951) is one of the industries which was brought under the control of the Union inasmuch as the activities of such an Industry affect the country as a whole and the development of this industry is governed by economic factors of all India import.

13. Clause 14 of the Ordinance which corresponds to Section 14 of the Act shows that the Central Government has retained control over the amalgamated companies by reserving to itself the Rule-making power and its right of representation in the Board of Directors of the new company. (Sub-clause (d) of Clause 14).

14. The preamble of the Ordinance and the Act provide that it is for the purpose of securing, in the interests of the general public and the Union, the efficient and economical expansion and working of the iron and steel industry in India that itwas essential that the two companies should beamalgamated.

15. Thus the true nature and character of the legislation -- its pith and substance is that it is a legislation with regard to Entries 43 and 44 of List I read with Entry 52 of the same List. The meaning and effect of amalgamation has been brought out clearly in the cases of -- 'Wall v. London & N. Assets Corporation (No. 1)', (1898) .2 Ch 469 at 478-479) (G) and -- 'In re South African Supply and Cold Storage Co.', (1904) 2 Ch 268 at p. 287 (H).

16. In the case of -- 'Union Colliery Company of British Columbia v. Bryden', (1899) A C 580 (I), Lord Watson in delivering judgment of the Judicial Committee observed in construing Section 91, Sub-section (25), British North America Act, 1S67, that:

'The subject of 'Naturalisation' seems prima facie to include the power of enacting what shall be the consequences of naturalisation or in other words what shall be the rights and privileges pertaining to residents in Canada after they have been naturalised' (page 586).

17. The Amalgamation Ordinance has similarly dealt with Constitution of Corporations -- the consequences of this particular amalgamation and has defined the rights of the shareholders of the amalgamated companies. In the case of -- ' : [1950]1SCR869 (A)', the Governor General, finding that the mismanagement of the affairs of the Sholapur Spinning and Weaving Company Ltd. had prejudicially affected the production of an essential commodity and had caused unemployment amongst a section of the community, promulgated an Ordinance which had the effect of curtailing certain rights of the shareholders and placing the management in the hands of new directors appointed by the Government. The Ordinance was subsequently replaced by an Act. Upon the validity of the Act being challenged it was inter alia held by Mukherjee J. and Das J. that the legislation was valid as being covered by Item 43 of the Union List (page 915 -- last but one paragraph; and pages 918 and 924).

18. It has further pointed out in the case of-- ' : [1950]1SCR869 (A)', that

'Acquisition means and implies the acquiring ofthe entire title of the expropriated owner. Theentire bundle of rights which are vested in theoriginal holder would pass on acquisition to theacquirer leaving nothing in the former.'(page 54 -- Per Mukherjea J.)

The impugned legislation has merely the effectof combining the assets and undertaking of twocompanies and making them in substance andeffect co-owners in respect of the combined assetsthough technically the Steel Corporation as anartificial person, ceases to exist. The share-holdersof the two companies are also made participantsin the combined assets of the two companies.There is no deprivation of their 'entire' interestor ownership, which is implied in acquisition. Inplace of their exclusive interest or ownership theybecome, if I may use the expression 'co-sharers'.It is amalgamation as denned by Lindley J. andBuckley J. in -- '(1898) 2 Ch 469 at pp. 478-479(G)' and -- '(1904) 2 Ch 268 at p. 287 (H)', (casescited above) and not acquisition.

19. This disposes of the further argument of Mr. Sen that the legislation falls within Entry 35 of List II or that it is within the exclusive competence of the Provincial Legislature.

20. Assuming that the legislation relates to acquisition of property, the Union Government having assumed control by reason of declaration made by Parliament under Entry 52 List I, and the legislation being made for purposes of theUnion and in the interest of the general public, it falls within Item 33 of List I and the Act was, therefore, validly enacted by the Parliament of India. It also satisfies the requirements of Article 31(2) because the share-holders of the Steel Corporation are compensated by allotment of shares in the Iron and Steel Company and the Steel Corporation itself acquires interest in the undertaking and assets of the Iron and Steel Company in addition to its interest in its own undertaking and assets.

21-22. Mr. Sen relied on the case of --'Citizens Insurance Co. v. Parsons', (1882) 7 AC 96 (J). In that case an Ontario Act (39 Vict. Ch. 24) which dealt with policies of insurance entered into in the Province of Ontario for insuring property situated in the province against fire, and which prescribed certain conditions which were to form part of such contracts, was held to be a valid Act inasmuch as words 'regulation of trade and commerce' in Item No. 2 of Section 91 were interpreted to include political arrangements in regard to trade, regulation of trade in matters of inter-provincial concern and general regulation of trade affecting the whole Dominion but did not include regulation of the contracts of a particular business or trade such as fire insurance in a single province. The case turned on the construction of Item No. 2 of Section 91 and Item No. 13 of Section 92 and except as to the general principles of interpretation laid down therein, it is not of assistance in the determination of the questions arising in this case, before me.

23. In the next case cited by Mr. Sen and reported in -- 'In Re Dairy Industry Act1, (1949) CLR 1 at pp. 60-67 (K), it was held that Sub-section (a) of Section 5, Dairy Industry Act, which was enacted, by Parliament of Canada was a legislation in relation to 'Property and Civil Rights' and could not be supported under any head of Section 91 and so was ultra vires of Parliament, except as to the prohibition of importation which was valid, being a legislation in respect of foreign trade. At pages 60-63 Kellock J. has referred to certain observations of their Lordships of the Judicial Committee for the purpose of determining the validity of the Dairy Industry Act and for construing the expressions 'Peace, Order and Good Government of Canada' and 'Property & Civil Rights in. the Province'.

24. In the case of -- 'Attorney General of Canada v. Attorney General of Alberta', AIR 1916 PC 66 (L), also relied on by Mr. Sen the expressions 'Regulation of Trade and Commerce'. 'Peace, Order and Good Government of Canada' and 'Property and Civil Rights in the Province' were considered, and regulation of a particular trade by introducing a licensing system was held as not covered by item (2) of Section 91 nor by the general power to legislate for peace, order and good government of Canada and consequently Section 4 of the Insurance Act, 1910, enacted by the Parliament of Canada was held to be ultra vires the Parliament of Canada.

25. Similarly in the case of -- 'In re, Board of Commerce Act, 1919, AIR 1921 PC 205 (M), cited by Mr. Sen the Judicial Committee held that the Combines and Pair Prices Act 1919 which authorised the Board of Commerce to restrain and prohibit the formation and operation of trade combinations in the Provinces, which the Board might consider to be detrimental to the public interest and also the Board of Commerce Act 1919 (9 and 10 Geo. 5 Dom. C. 37) which created the Board of Commerce were ultra vires the Dominion Legislature as the statutes were not covered by Item 27 of Section 91 or Item 2 of Section 91, British North America Act, 1867 (30 and 31 Vie. Ch. 3) but they trenched upon the legislative power of the Province to legislate with regard to 'Property and Civil Rights in the Province'.

26. The case in -- 'Narasaraopeta Electric Corporation v. State of Madras', : AIR1951Mad979 (N), referred to by Mr. Sen held that the impugned legislation (Madras Electricity Supply Undertakings (Acquisition) Act (Act 43 of 1949)) was in pith and substance a legislation with regard to 'Electricity' an item appearing in the Concurrent List of the G. I. Act, 1935, and was therefore intra vires the Provincial legislature. The legislation did not fall within Entry 33 of List I which dealt with 'Corporation and its incorporation and regulation'. The observations made by the Madras High Court in para. 7 (concluding sub-paragraph of para. 7 of the judgment (page 982) and in para. 9 of the judgment which explains the Entry 33 of the Federal List) are of assistance to the defendants in the case before me and not to the plaintiffs.

27. The cases cited by Mr. Sen are, therefore, of no assistance to him.

28. It, has been further contended by Mr. Sen that inasmuch as the legislation affects and interferes with the fundamental rights of the plaintiffs share-holders as guaranteed by Article 19(1)(f) and 19(1)(g) and (c) of the Constitution it must be held to be invalid. This is an argument which I find difficult to follow. The amalgamation has not in any way interfered with the rights or interest which the plaintiff share-holders had in the Indian Iron and Steel Company before the amalgamation. Their holdings in the Company have been kept intact and have not been touched in any way. It was suggested that the effect of the legislation this been to deprive the plaintiffs of the opportunity to participate in the 11,00,000 (11 lakhs) ordinary shares which they otherwise would have. This is again an argument which it is difficult; to follow. The 11,00,000 shares are the property nf the Company as distinct from its share-holders viz., the plaintiffs. (See -- ' : [1950]1SCR869 (A)'. where the distinction between interest of share-holders and interest or property of the company is brought out). The share-holders cannot assert or claim any right in respect of these shares so long as the Company is a running concern and is not wound up.

29. The legislation in question, moreover, has not purported to deal with the 11,00,000 ordinary shares of the Steel Corporation in any way. The plaintiff share-holders can pledge or mortgage their own shares. They can sell them. They can do whatever they like. They can exercise all the rights and privileges which are available to them by reason of their holding the shares in the company. There is no fetter put on any of these rights by the legislation in question.

30. It is also difficult to follow how Clause (c) and (g) of Article 19 have been violated. The share-holders do not carry on any business or trade but it is the company, which is a separate legal entity, which carries on the business. So share-holders are not in any way a fleeted. Moreover, the business of the Iron and Steel Company has not been stopped or restricted by the legislation. The Iron and Steel Company goes on carrying on the business with augmented assets and extension of the undertaking.

31. The right to form associations is also not interfered with in any manner. It is true that some new share-holders and the undertaking and assets of the Steel Corporation are brought into the constitution of the Iron and Steel Companyagainst the wishes of the share-holders of the Iron and Steel Company, but as the Legislature has power to regulate the trading corporations, such amalgamation is justified. No restriction is put on the right to form associations by the impugned legislation. There is no obligation imposed on any unwilling shareholder to continue as member in the company after amalgamation. He can sell his shares and go out of the company if he so chooses. The association or the company of which the plaintiffs are members is continuing and has not been put an end to by the legislation. The option to continue or not to continue as member is untouched and the matter is left to the will of the shareholders. In fact there is no compulsion of any kind. (See --'Suryapalsingh v. U. P. Government', : AIR1951All674 (O), paragraphs 127-132 of the judgment).

32. Further, assuming that any of the rights under Article 19(1)(f) and (g) has been infringed, the question further arises whether the restrictions put are reasonable or not. If they are reasonable then Clauses (5) and (6) of Article 19 will protect the legislation from any attack on its validity.

33. Now it is clear from the materials placed before the Court that the two companies have all along been closely associated with each other. The Iron and Steel Company had Rs. 1,10,00,000 of its capital invested in 11,00,000 shares in the Steel Corporation and so was vitally interested in the undertaking and business of the latter company. The recommendations of the Tariff Commission and the Tariff Board were in favour of amalgamation. The amalgamation is made with the avowed object of efficient and economical expansion of iron and steel industry, and is necessary to give effect to the scheme of Government and in the interests of the general public. By the amalgamation the assets of the Iron and Steel Company are augmented and its undertaking is expanded. It is suggested that bringing in more shareholders will diminish the dividends of the existing shareholders. This is nothing more than a mere apprehension. It will be a rash conclusion to condemn as ultra vires a legislation upon such an uncertain factor. It may be that as a result of the augmentation of the assets and extension of the undertaking, there may be increase in the Iron and Steel Company's production and profits, and more dividends will be available to the shareholders. It is true that the existing shareholders are compelled to accept the new shareholders, and the Iron and Steel Company is being made to absorb the undertaking and assets of the Steel Corporation but individual interests must yield to the general good of the country. It need not be pointed out that iron and steel are commodities essential not only for the development, progress and defence of the country but for every day life. No materials have been placed before the Court to show that the legislation is not a bona fide one or that it is a colourable piece of legislation introduced only to benefit a private enterprise. The onus is entirely on the plaintiffs to show that the legislation is a colourable one.

34. Thus as there is reasonable basis for the legislation, it is not open to the challenge of its being ultra vires the Constitution.

35. Moreover it is this element of reasonablenesswhich protects the Ordinance or the Act from the challenge that the legislation violates Article 14 of the Constitution. As pointed out by Fazl Ali J. in -- ' : [1950]1SCR869 (A)', by quotation from ProfessorWillis's book:

'In determining the question of reasonableness the Courts must find some economic, political or other social interest to be secured and some relation of the classification to the objects sought to be accomplished............ The factthat only one person or one object or one business or one locality is affected is not' proof of denial of the equal protection of the laws.'

Again at page 877 the following passage fromProf. Willis is quoted:

'If any state of facts can reasonably be conceived to sustain a classification, the existence of that state of facts must be assumed.'

36. Following the reasonings of the learned Judges of the Supreme Court who delivered the majority judgment in -- 'Chiranjitlal's case (A)'. I hold that the classification is reasonable and the legislation in question is not open to attack on the ground of its violating Article 14 of the Constitution.

37. A point has also been raised on behalf of the defendants as to the maintainability of the suit. It was submitted that although the plaintiffs purport to sue for selves and on behalf of all other shareholders of the defendant company it is clear that that is not the correct state of affairs inasmuch as defendants 2 to 9 who are directors and shareholders have not consented to the suit being filed. There cannot be any doubt that defendants 2 to 9 who are also shareholders have not agreed to the suit being instituted as otherwise they would not have been impleaded as defendants at all. It is not pleaded in the plaint either, that the majority of the shareholders have agreed in any meeting, or otherwise to institute the present suit. The plaint seeks a declaration that the Ordinance and the Act are ultra vires or void. The declaration, asked for is not one that is contemplated by Section 42, Specific Relief Act. The plaintiffs do not seek any declaration of any legal character or right to property but ask for a declaration that the Ordinance or Act is void. This, it is pointed out, is not permissible. It appears to me that this contention is not without substance. Although there is conflict of authorities on the point whether Section 42, Specific Relief Act, is exhaustive of declaratory suits or not, the view of this Court has been that it is exhaustive. The cases referred to in, the judgment of Das J. in -- 'Snow White Food Products Co. v. Punjab Vanaspati Supply Co.', 49 Cal WN 172 at p. 177 (P), show that the Calcutta view is that Section 42 is exhaustive. It has also been held by a Special Bench of the Lahore High Court that a simple suit for a declaration that an Ordinance is ultra vires and for an injunction is not maintainable. -- 'Shingara Singh v. Callaghan', AIR 1945 Lah 247 at pp. 255-256 (whole) (Q).

38. Mr. Sen submitted that a suit by shareholders of a company for declaration that certain acts of the Directors of the Company are ultra vires and on that basis to ask for an injunction restraining them from giving effect to the ultra vires acts, is a very normal thing and such suit has been held to be maintainable. Mr. Sen refers to the case reported in -- 'Ramkissendas Dhanuka v. Satya Charan', 50 Cal WN 310 (R). In the present suit the point as to ultra vires nature of the Ordinance or the Act is not merely collaterally or incidentally in issue but it is directly and substantially in issue and without obtaining a determination from the Court to the effect that the legislation is void the plaintiffs cannot have the acts of the defendants declaredas ultra vires nor can they get an injunctionagainst the defendants. In my view the suit as framed is not maintainable. It may be noted, however, that under the English or American law such a suit for declaration that a particular legislation is void would be maintainable.

39. A point was also raised that without making the Steel Corporation a party to the suit, the suit is not maintainable, and a further point was raised that as the plaintiffs have not suffered any injury nor has there been any infraction of their rights by reason of the legislation, there is no cause of action for this suit and so it must fail. Reliance is placed on Chiranjitlal's case in support of the latter argument.

40. In view of my decisions on the other points it is not necessary to deal with these points for the purpose of disposal of this case and I express no opinion on such points.

41. In the result this suit fails and it must bedismissed. The plaintiffs must pay the costs ofthe suit on Scale No. 2 including reserved costsif any. Certified for two counsel.


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