# CHIRANJIT LAL CHOWDHURI v. THE UNION OF INDIA AND OTHERS

- **Citation:** [1950] 1 S.C.R. 869
- **Court:** Supreme Court of India
- **Decided:** 1950
- **Bench:** Shri Harilal Kania, Saiyid Fazl Ali, Patanjali Sastri, MuKHERJEA, Das
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/chiranjit-lal-chowdhuri-v-the-union-of-india-and-others-160
- **Pages:** 72

## Headnote

Sholapllr Spinning and Weaving Company (Emergency Pro·
<isions) Act (XXVIII of 1950)-Act dismissing managing agents of
a company, removing its
directors,
a~ahorising Government
to
appoint new dir<ctors, and «irtuiling !"lghts of shareholders in the
matter of voting, etc.-Validity-Wliether infringes fundamental
rights-Right not to be
de~rived of property save by attthority of
law-Right to acqiiire, hold and dispose of property-Right to equal
protection of law-Constit,.tion of India, Arts. 14, 19 (1) (!), 19(5),
31, 32-" Deprivation of properly",
11 Property"," acqiiisitio1z",
''taking possession",
11 eqital protection'', meanings of-Right to
apply under Art. 32-Corporntwn's right to apply-Shareholders'
··ight.
The Governor-General of India, finding that on account of
mismanagement and neglect a situation had arirsen in the affairs
of the Sholapur Spinning and Weaving Company Ltd., which had
prejudicially affected the production of an essential commodity
and bad caused serious unemployment amongst a certain section of
the community, and that au emergency had thereby a.risen which
rendered it necessary to make special provision for the proper
management and adminietration of the said company, promulgated an Ordinance, which was subsequently re-enacted in the form
of an Act of the Legislature called the Sholapur Spinning and
Weaving Company (Emergency Provisions) Act, 1950, the net
result of which was that the Managing .~gents of the said company were dismissed, the directors holding office at the time
automatically vacated their office, the Government was authorised
to appoint new directors, the'.rights of the shareholders of the com·
pany were curtailed in the matters of voting, appointment of
directors, passing of resolutions and applying for winding up, anJ
power was also given to the Government to further modify the
Indian Companies Act in its application to the company; and in
accordance with the provisions of the Ordinance new directors
were appointed by the Government. A shareholder of the company made an application under Art. 32 of the Constitution for
a declaratior. that the Act was void and for enforcement of his
fundamental rights by a writ of mandamus against the Central
Government, the Government of Bombay and the directors res·
training them from exercising any powers under the Act and
from interfering with the management of the company, on the
ground that the Act was not within the Legislative competence
1950
Deo. 4.
1950
ChiranjitlaZ
Chowdhuri
v.
The Union of
India and
Other a.
870
SUPREME COURT REPORTS
[1950)
of the Parliament and infringed his fundamental rights goaran·
teed by Arts. 19 (1) \f), 31 and 14 of the Constitution and was
consequently void under Art. 13.
The company was mado a
respondent and opposed the petition.
Held per KANIA C.J., FAZL ALI, MUKHERJEA and DAS JJ.-
(i) that the impugned Act did not infringe any fundamental right
of the petitioner under Art. 31 (1), as it did nGt deprive the com.
pany or the petitioner of any property save under authority of
law;
(ii) that the impu~ned Act did not infringe any fundamental
right guaranteed by Art. 31 (2) inasmuch as it did not authorise
the ''acquisition" of any property of the company or of the shareholders or '' the taking possession " of the property of the petitioner, namely, the shares which he held in the company, though
he wag disabled from exercising some of the rights which &n
ordinary shareholder in a. company could exercise in respect of
his shares, such as the right to vote, to appoint directors, and to
apply for winding up; and, if the Act had anthorised the "taking
possession" of the proper~y of the company, the petitioner was
not entitled to any relief on that score under Art. 32;
(iii) that, as the Act did not impose any restrictions on the
petitioner's right "to acquire, hold and dispose of'' his shares,
there was no infringement of Art. 19 (1) (f); and assuming that
the restrictions imposed on the right of voting etc. were restricti

## Text

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-
S.C.R.
SUPREME COURT REPORTS
CHIRANJIT LAL CHOWDHURI
v.
THE UNION OF INDIA AND OTHERS.
869
[SHRI HARILAL KANIA, C.J., SAIYID FAZL ALI,
PATANJALI SASTRI, MuKHERJEA and DAS JJ.]
Sholapllr Spinning and Weaving Company (Emergency Pro·
<isions) Act (XXVIII of 1950)-Act dismissing managing agents of
a company, removing its
directors,
a~ahorising Government
to
appoint new dir<ctors, and «irtuiling !"lghts of shareholders in the
matter of voting, etc.-Validity-Wliether infringes fundamental
rights-Right not to be
de~rived of property save by attthority of
law-Right to acqiiire, hold and dispose of property-Right to equal
protection of law-Constit,.tion of India, Arts. 14, 19 (1) (!), 19(5),
31, 32-" Deprivation of properly",
11 Property"," acqiiisitio1z",
''taking possession",
11 eqital protection'', meanings of-Right to
apply under Art. 32-Corporntwn's right to apply-Shareholders'
··ight.
The Governor-General of India, finding that on account of
mismanagement and neglect a situation had arirsen in the affairs
of the Sholapur Spinning and Weaving Company Ltd., which had
prejudicially affected the production of an essential commodity
and bad caused serious unemployment amongst a certain section of
the community, and that au emergency had thereby a.risen which
rendered it necessary to make special provision for the proper
management and adminietration of the said company, promulgated an Ordinance, which was subsequently re-enacted in the form
of an Act of the Legislature called the Sholapur Spinning and
Weaving Company (Emergency Provisions) Act, 1950, the net
result of which was that the Managing .~gents of the said company were dismissed, the directors holding office at the time
automatically vacated their office, the Government was authorised
to appoint new directors, the'.rights of the shareholders of the com·
pany were curtailed in the matters of voting, appointment of
directors, passing of resolutions and applying for winding up, anJ
power was also given to the Government to further modify the
Indian Companies Act in its application to the company; and in
accordance with the provisions of the Ordinance new directors
were appointed by the Government. A shareholder of the company made an application under Art. 32 of the Constitution for
a declaratior. that the Act was void and for enforcement of his
fundamental rights by a writ of mandamus against the Central
Government, the Government of Bombay and the directors res·
training them from exercising any powers under the Act and
from interfering with the management of the company, on the
ground that the Act was not within the Legislative competence
1950
Deo. 4.
1950
ChiranjitlaZ
Chowdhuri
v.
The Union of
India and
Other a.
870
SUPREME COURT REPORTS
[1950)
of the Parliament and infringed his fundamental rights goaran·
teed by Arts. 19 (1) \f), 31 and 14 of the Constitution and was
consequently void under Art. 13.
The company was mado a
respondent and opposed the petition.
Held per KANIA C.J., FAZL ALI, MUKHERJEA and DAS JJ.-
(i) that the impugned Act did not infringe any fundamental right
of the petitioner under Art. 31 (1), as it did nGt deprive the com.
pany or the petitioner of any property save under authority of
law;
(ii) that the impu~ned Act did not infringe any fundamental
right guaranteed by Art. 31 (2) inasmuch as it did not authorise
the ''acquisition" of any property of the company or of the shareholders or '' the taking possession " of the property of the petitioner, namely, the shares which he held in the company, though
he wag disabled from exercising some of the rights which &n
ordinary shareholder in a. company could exercise in respect of
his shares, such as the right to vote, to appoint directors, and to
apply for winding up; and, if the Act had anthorised the "taking
possession" of the proper~y of the company, the petitioner was
not entitled to any relief on that score under Art. 32;
(iii) that, as the Act did not impose any restrictions on the
petitioner's right "to acquire, hold and dispose of'' his shares,
there was no infringement of Art. 19 (1) (f); and assuming that
the restrictions imposed on the right of voting etc. were restrictions on the right to acquire, hold or dispose of property within
Art. 19 (1) (f), such restrictions were reasonable restrictions imposed in the interests of the public, namely, to secure the supply
of a. commodity essential to the community and to prevent serious
unemployment amongst a section of the people, a.nd were therefore completely protected by cl. (5) of Art. 19.
Held .also per KANIA C.J., FAZL ALI, and MUKI!ERJEA JJ.
(PATANJALI SASTRI AND DAS JJ. dissenting).-that though the
Legislature ha.a proceeded against one ccmpany only and its
shareholders, inasmuch as even one corporation or a. group of persons can be taken to be a class by itself for the purposes of legislation, provided there is sufficient basis or reason for it and there
is a. strong presumption in favour of the constitutionality of an
enactment, the burden was on the petitioner to prove that there
were also other companies similarly situated a.nd this company
alone had been discriminated against, and as he had failed to
discharge this burden the impugned Act cannot be held to have
donied to the petitioner the right to equal protection of the laws
referred to in Art. 14 and the petitioner was not therefore entitled
to any relief under Art. 32.
Per PATANJALI SASTRIJ.-As the impugned Act plainly denied
to the shareholders of this particular company the protections of
the law relating to incorporated Joint Stock Companies as embodied in the Indian Comp•nies Act, it wu.s prima facie within
S.C.R.
SUPREME COURT REPORTS
871
the inhibition of Art. 14 ; and, even though when ~ law is made
applicable to a class of persons or things and the classification ie
based on differentia having a rational relation to the object
sought to be attained, it can be no objection to its constitutio1Jal
validity that its aJiplication is found to affect only one person 01·
thing, since the impugned Act selected a particular company and
imposed upon it and its shareholders burdens and disabilities on
the ground of mis1nanagement and neglect of duty on the part of
those charged with the conduct of its undertaking no question of
reasonable classification arose and the Act was plainly discriminatory in character and within the constitutional inhibition of
Art. 14. Whilst all reasonable presumptions must undoubtedly
be made in favour of the constitutional validity of a law ruade by
a competent legislature, no such presumption could be raised in
this case as on the face of it the Act was discriminatory and the
petitioner could not be called upon to prove that similar mismanagement existed in other companies. The issue was not whether
the impugned Act was ill-ad vised or not justified by the facts
on which it was based but whether it tramgressed the explicit
constitutional restriction on legislative power imposed by Art. 14.
Per DAS J.-The impugned Act, ex facie, is nothing but an
arbitrary selection of a particular company and its shareholders
for discriminating and hostile treatment, and, read by iteelf, is
palpably an infringement of Art. 14 of the Constitution.
Assuming that mismanagement and neglect in conducting the affairs of
a company can be a basis of classification and that such a
classification would bear a reasonable relation to the conduct of
a.11 delinquent companies and shareholders and may therefore
crea.te no inequality, a distinction cannot be made between the
delinquent companies inter se or between shareholders of equally
delinquent companies, and one set cannot be punished for its
delinquency while another set is permitted to continue, or become,
in like manner, delinquent without any punishment unless there
be some other apparent difference in their respective obligations
and unless there be some cogent reason why prevention of mis·
management is more irnperative in one instance than in the other.
The argument that the presumption being in favour of the Legislature, the onus is on the petitioner to show that there are other
individuals or companies equally guilty of mismanagement pre·
judicially affecting the production of an essential commodity and
causing serious unemployment amongst a certain section of the
community does not, in such circumstances, arise, for the simple
reason that here there has been no classification at all and, in
any case, the basis of classification by its very nature is muob
wider and cannot, in its application, be limited only to this company and its shareholders; and that being so, there is no reason
to throw on the petitioner the almost impossible burden of proving that there are other compa.nies which are in fact precisely and
in ~JI particulars similarly situated. In any event, the petitioner,
1950
Chiranjitfal
Chawdhurt
v.
The Union of
Ind<ia and
Other a,
1950
Chiranjitlal
Chowdhiu·~
v.
The Union of
Ind-ia and
Others.
872
SUPREME COURT REPORTS
(1950]
may well claim to have. discharged the onus of showing that this
company and its shareholders bn.ve been singled out for discriminating treatment by showing that the Act, on the face of it, ha•
adopted a basis of clai::sification which. by its very nature, cannot
be exclusively applicable to this company and its shareholders
but which may be equally applicable to other companies and their
shareholders ttncl has r>enalised this particular con1pany and its
shareholders, leaving out other companies and their shareholders
who may be equally guilty of the alleged vice of mismanagement
and neglect of the type referred to in the preamble in the Ordinance.
Per PATANJALI SASTRI, MUKHERJEA and DAS JJ. (KANIA, C.J.,
d1tbitante).-In so far as the petitioner's rights as a shareholder
were curtailed be was entitled to apply for relief under Art. 32 in
bis own right on the ground that the Act denied to him the equal
protection of the laws and therefore contravened Art. 14 even
tboush the other shareholders did not join him in the application.
Per MUKRERJEA J .-The fundamental rights guamnteed by
the Constitution are available not merely to individual citizens
but to corpol'ate bo:lies as well except where tho language of the
provision or the nature of the right compels the inference that
they are applicable only to natural persons.
An incorporated
company, therefore, can come up to the Supreme Court for enforcement ol its fundamental rights and so may the individual
shareholders to enforce their own; but as the company and its
shareholilers are in law separate entities, it \Yould not b9 open to
an individual shareholder to complain of a law which affects the
fundamental right of the company except to the extent that it
constitutes an infraction of his own rights as well. Io order to
redress a wrong to the company the action should prima facie be
brought by the company itself.
Article 32 of the Constitution is not directly concerned with
the determination of the constitutional validity of particular
enactments, what it aims at is the enforcement of funda~en~al
rights guaranteed by the Constitution and to make out a case
under the Article it is incumbent on the petitioner to establish
not merely that the law complained of is beyond the competence
of the Legislature but that it affects or invades his fundamental
rights guaranteed by the Constitution, o( which he could seek enforcement by a.n appropriate writ or order.
Under Art. 32 the Su1Jreme Court has a. very wlde discretion
in the matter of framing \Vrits to suit the exigencies of particular
cases and an application under the article cannot be thrown out
simply on the grnund that the proper writ or direction has not
been prayed for.
In the context in which th9 word
11 a.cquisitio:i '' is used in
Art. 31 .2) it means and implies the acquiring o( the entire title
of the expropriated owner whatever the nature or extent of that
right might be.
S.C.R.
SUPREME COURT REPORTS
873
The guarantee against the denial of equal protection or the
laws does not mean that identically the same rules of law should
be made applicable to all persons within the territory of India in
spite of differences of circumstances and conditions. It means
only that there should be no rliscrimination between one person
and another if as regards the subject-matter of the legislation
their position is the same.
Quaere: Whether the word" property" in Art. 31 means the
totality of the rights which the ownership of the property connotes, and whether clause (1) of Art. 31 contemplates only codiscation or destruction of property in exercise of what are known
as police powers in American law for which no compensation is
necessary.
DAS J.-Tbe question whether an Act has deprived a person
of his "property" must depend on whether it has taken away the
substantial bulk of the rights constituting his property. Where
the most important rights possessed by the shareholders of a company are still preserved hy a:i Act even though corhin pridleges
incidental to the ownership of the shares have been put in abeyance, the sba,reholders cannot be said to have been deprived of
their "property'' in the sense in which tl..ia.t word is used in
Art. 19(1) (f) and Art. 31.
If on the face of the Jaw there is no classification at all, or at
any rate, none on the basis of any nppnrent difference specially
peculiar to the individual or class affected by the law, it is only
an instance of an arbitrary selection of an individual or class for
rliscrirninating and hostile legislation and, therefore, no presumption can, in such circumstances, arise at all.
Assuming, however,
that even in such a case the onus is thrown on the complainant,
there can be nothing to prevent him from proving, if he can, from
the text of the law itself, that it is actually and palpably unreasonable and arbitrary and thereby discharging the initial onus.
The right to vote, to elect directors, to pass resolutions and
to present an application for winding up, are privileges incidental
to the ownership of a share, but they are not by themselves, apart
from the share, " property" within the meaning of Art. 19 \1) (f)
and Art. 31; and even assuming that they are "property" such rights
cannot be said to have been acquired or taken posBession of by
the Government in this case within Art. 31 (2).
The language of
clause (1) of Art. 31 is wider than that of clause (2), for d<privation of proporty may well be brought about otherwise than by
acquiring or taking possession of it and in such a case no question
of payment of compensation arises.
FAZL ALI, MOKHERJEA and DAS JJ.-Except in the matter
of writs in the nature of h'beas corpils no one but those whose
rights are directly affected by a law can raise the question of the
constitutionality of • law and claim relief under Art. 32.
A car·
poration being • different
entity from
tbe shareholders,. I.
ll~
1950
Chiranj1tlal
OhowdhuTi
v.
'1.'he Union Of
India and
Other&.
1%0
Chiranjitlal
Chowdhuri
v.
The Union of
India and
Others.
874
SUPREME COURT REPORTS
(1950]
share-bolder cannot complain on the ground that the rights of the
company under Arts. 19 (1) (f) or 31 are infringed.
FAZL ALI J.-A classification which is arbitrary and which
is made without any basis is no clas::;i:fication and a proper classi~
£.cation must al\vays rest upon some difference and must bear a
reasonable and just relation to the things in re8pect of which it is
proposed. But the presumption is always in favour of the consti•
tutionality of an enactn1ent and the burden is upon bim who
attacks it to show that there has been a clear tra.nsgressfon of
constitutional principles. Though Art. 14 lays down an important fundamental 'right, which should be closely and vigilantly
guarded, a doctrinaire approach which might choke all beneficial
legislation should not be ail.opted, in construing it. i
A. K. Gopalan, v. The State ([1950] S.C.R. 87), Minist'T of State
for the Army v. Dalziel (68 C.L.R. 26 l), Yick Wo v. Hopkins ( 118
U.S. 356), Southern Railway Co. v. Greene I 216 U.S. 400), Gulf
C. it S. F. Co. v. Ellis (165 U.S. 150), Middleton v. Texa• Power
and Light it Co. (249 U.S. 152), Ranice v. N'w York (%4 U.S. 294),
Pennsylvania Coal Co. v. Mahon (260 U.S. 393), McCnb' v. Atchi·
son (235 U.S. 151), Jeffrey Maniifict<tring Co. v. Blcing (235 U.S.
571), Newark Natural Gas and p,,,z Co. V· Oity of Nework (242
U.S. 403), Trnax V· Baich 1239 U.S. 33), B1tchanan V· Wnrley
(245 U.S. 60), Darnell v. The State of Iwliana (226 u.s. 388),
Lindely v. Natural Carbonic Gas Co. (220 u.s. 618', and Barbier
v. Connolly (113 U .s. 27) referre'1 to.
ORIGINAL JURISDICTION: Petition No. 72 of 1950.
Petition under article 32 of the Constitution of
India for a writ of mandamus.
V. K. T. Chari, ]. S. Dawdo, Alladi Kuppuswami,
and C. R. Pattabhi Raman, for the petitioner.
M. C. Setalvad, Attorney.General for India (G. N.
Joshi with him) for opposite party Nos. 1 and 2.
G.N. Joshi, for opposite party Nos. 3 to 5 and 7 to 10.
1950. December 4.
The Court delivered Judgment
as follows.
Kania a. J.
KANIA C.J .-This is an application by the holder of
one ordinary share of the Sholapur Spinning and
Weaving Company Ltd. for a writ of mandamus and
certain other reliefs under article 32 of the Constitution
of India. The authorized capital of the company is
Rs. 48 lakhs and the paid-up capital is Rs. 32 lakhs
half of which is made up of fully paid ordinary share~
of Rs. 1,000 each.
S.C.R.
SUPREME COURT REPORTS
875
I have read the judgment prepared by Mr. Justice
Mukherjea. In respect of the arguments advanced to
challenge the validity of the impugned Act under
articles 31 and 19 of the Constitution of India, I agree
with his line of reasoning and conclusion and have
nothing more to add.
On the question whether the impugned Act infringes
article 14, two points have to be considered. The first
is whether one individual shareholder can, under the
circumstances of the case and particularly when one of
the respondents is the company which opposes the
petition, challenge the validity of the Act on the
ground that it is a piece of discriminatory legislation,
creates inequality before the law and violates the principie of equal protection of the laws under article 14
of the Constitution of India. The second is whether in
fact the petitioner has shown that the Act runs contrary
to article 14 of the Constitution. In this case having
regard to my conclu.sion on the second point, I do not
think it is necessary to pronounce a definite opinion on
the first point. I agree with the line of reasoning and
the conclusion of Mr. Justice Mukherjea as regards the
second point relating to the invalidity of the Act on
the ground that it infringes article 14 of the Constitution and have nothing more to add.
In my opinion therefore this petition fails and is
dismissed with costs.
FAZL Au J.-I am strongly of the opinion that this
petition should be dismissed with costs.
The facts urged in the petition and the points raised
on behalf of the petitioner before us are fully set forth
in the judgments of my brethren, Sastri, Mukherjea
and Das JJ., and I do not wish to repeat them here.
It is sufficient to say that the main grounds on which
the Sholapur Spinning and
'Neaving
Company
(Emergency Provisions) Act, 1950 (Act No. XX VIII of
1950), which will hereinafter be referred to as "the
Act", has been assailed, is that it infringes three fundamental rights, these being:-
1950
Ohiranjttlal
Ohowdhuri
v.
The union of
India and
Other&.
Kania 0. J.
Fael Ali J,
!IMO
Chiranjitlal
Chowdhur$
..
'J?he: Union of
India a11d
Qthef'JJ.
Fa~I Ali J.
876
SUPREME COURT REPORTS
[1950]
(1) the right to property secured by article 31 of
the Constitution ;
(2) the right to acquire, hold and ·dispose of pro.
perty, guaranteed to every citizen by article 19 (l} (f);
and
(3) the right to equal protection of the laws,
guaranteed by article 14.
It has been held in a number of cases in the United
States of America that no one except those whose
rights are directly affected by a law can raise the
question of the constitutionality of that law. This
principle has been very clearly stated by Hughes J.
in McCabe v. Atchison('), in these words :-"It is an
elementary principle that in order to justify the granting of this extraordinary relief, the complainant's need
of it and the absence of an adequate remedy at law
must clearly appear. The complainant cannot succeed
because someone else may be hurt. Nor does it make
any difference that other persons who may be injured
are persons of the same race or occupation. It is the
fact, clearly established, of injury to the complainant
-not to others-which justifies judicial interference."
On this statement of the law, with which I entirely
agree, the scope of the discussion on this petition is
greatly restricted at least in regard to the first two
fundamental rights. The company and the shareholders
are in law separate entities, and if the allegation is
made that any property belonging to the company has
been taken possession of without compensation or the
right enjoyed by the company under article 19 (1) (f)
has been infringed, it would be for the company to
come forward to assert or vindicate its own rights and
not for any individual shareholder to do so. In this
view, the only question which has to be answered is
whether the petitioner has succeeded in showing that
there has been an infringement of his rights as a share·
holder under articles 31 and 19 (1) (f) of the Constitution. This question has been so elaborately dealt with
by Mukherjea J., that I do not wish to add anything
to what he has said in his judgment, and all that is
necessary for me to say is that I adopt his conclusions,
11) 235 U.S. 151.
-- .
S.C.R.
SUPREME COURT REPORTS
877
without committing myself to the acceptance of all his
reasonings.
The only serious point, which in my opinion, arises
in the case is whether article 14 of the Constitution is
in any way infringed by the impugned Act. This
article corresponds to the equal protection clause of the
Fourteenth Amendment of the Constitution of the
United States of America, which declares that "no
State shall deny to any person within its jurisdiction
the equal protection of the laws". Professor Willis
dealing with this clause sums up the law as prevailing
in the United States in regard to it in these words:-
"Meaning and effect of the guaranty-The guaranty
of the equal protection of the laws means the protection of equal laws. It forbids class legislation, but
does not forbid classification which rests upon reasonable grounds of distinction. It does not prohibit
legislation, which is limited either in the objects to
which it is directed or by the territory within which
it is to operate. 'It merely requires that all persons
subjected to such legislation shall be treated alike
under like circumstances and conditions both in the
privileges conferred and in the liabilities imposed.'
'The inhibition of the amendment . . . . was designed
to prevent any person or class of persons from being
singled out as a special subject for discriminating and
hostile legislation'. It does not take from the states the
power to classify either in the adoption of police laws,
or tax laws, or eminent domain laws, but permits to
them the exercise of a wide scope of discretion, and
nullifies what they do only when it is without any
reasonable basis. Mathematical nicety and perfect
equality are not required. Similarity, not identity of
treatment, is enough. If any state of facts can reasonably be conceived to sustain a classification, the existence of that state of facts must be assumed. One who
assails a classification must carry the burden of showing
that it does not rest upon any reasonable basis."(')
Having summed up the law in this way, the same
learned author adds :-"Many different classifications
(I) Conslilutlon•I Law bJ Pm!. Willis, (lat Edition), p. 679,
1960
Chiranjitlal
Ohowdhurt
••
The UnWn of
India and
Otheri.
Fail AH J.
1950
Chirarijitlal
Chowdhuri
v.
"The Union of
India ancl
Others.
Fa1Z AH J.
878
. SUPREME COURT REPORTS
[1950)
of persons have been upheld as constitutional. A law
applying to one person or one class of persons is
constitutional if there is sufficient basis or reason
for it." There can be no doubt that article 14
provides one of the most valuable and important
guarantees in the Constitution which should not be
allowed to be whittled down, and, while accepting the
statement of Professor \Villis as a correct exposition
of the principles underlying this guarantee, I wish to
lay particular emphasis on the principle enunciated by
him that any classification which is arbitrary and
which is made without any basis is no classification
and a proper classification must always rest upon
some difference and must bear a reasonable and just
relation to the things in respect of which it is proposed.
The petitioner's case is that the shareholders of the
Sholapur company have been subjected to discrimination vis a vis the shareholders of other companies, inasmuch as section 13 of the Act subjects them to the
following disabilities which the shareholders of other
companies governed by the Indian Companies Act are
not subject to : -
" (a) It shall not be lawful for the shareholders
of the company or any other person to nominate or
appoint any person to be a director of the company.
(b) No resolution passed at any meeting of the
shareholders of the company shall be given effect to
unless approved by the Central Government.
(c) No proceeding for the winding up of the company or for the appointment of a receiver in respect
thereof shall lie in any court unless by or with the
sanction of the Central Government."
Prima f acie, the argument appears to be a plausible
one, but it requires a careful examination, and, while
examining it, two principles have to be borne in
mind :--(1) that a law may be constitutional even
though it relates to a single individual, in those cases
where on account of some special circumstances or
reasons applicable to him and not applicable to others,
~---~
•
-
S.C.R.
SUPREME COURT REPORTS
879
that single individual may be treated as a class by
himself ; (2) that it is the accepted doctrine of the
American courts, which I consider to be well-founded
on principle, that the presumption is always in favour
of the constitutionality of an enactment, and the burden
is upon him who attacks it to show that there has
been a clear transgression of the constitutional
principles. A clear enunciation of this latter doctrine
is to be found in Middleton v. Texas Power and Light
Company('), in which the relevant passage runs as
follows:-
"It must be presumed that a legislature understands and correctly appreciates the need of its own
people, that its laws are directed to problems made
manifest by experience and that its discriminations are
based upon adequate grounds."
The onus is therefore on the petitioner to show that
the legislation which is impugned is arbitrary and
unreasonable and there are other companies in the
country which should have been subjected to the
same disabilities, because the reasons which led the
Legislature to impose State control upon the Sholapur
company are equally applicable to them. So far as
article 14 is concerned, the case of the shareholders is
dependent upon the case of the company and if if
could be held that the company has been legitimately
subjected to such control as the Act provides without
violation of the article, that would be a complete
answer to the petitioner's complaint.
Now, the petitioner has made no attempt to discharge the burden of proof to which I have referred,
and we are merely asked to presume that there must
necessarily be other companies also which would be
open to the charge of mismanagement and negligence.
The question cannot in my opinion be treated so
lightly. On the other hand, how important the doctrine
of burden of proof is and how much harm can be
caused by ignoring it or tinkering with it, will be fully
illustrated, by referring to the proceedings in the
Parliament in connection with the enactment of the
111 2iB u.a. ia2, 1s7.
1950
Chiranjitlal
Chowdhuri
India and
Other a.
IJ'ai! Ali J.
1950
Chiranjitlai
Chawdhuri
v.
The Union of
India an.cl
Other a.
Fazl Ali J.
880
SUPREME COURT REPORTS
[1950]
Act, where the circumstances which necessitated it are
clearly set out. I am aware that legislative proceedings cannot be referred to for the purpose of construing
an Act or any of its provisions, but I believe that they
are relevant
for the proper understanding of the
circumstances under which it was passed and the
reasons which necessitated it.
A reference to the Parliamentary proceedings shows
that some time ago, a representation was made on
behalf of a section of the shareholders of the Sholapur
company to the Registrar of Joint Stock Companies
in Bombay, against
the conduct of the managing
agents, and the Government of Bombay was moved
to order a special inquiry into the affairs of the company. For the purpose of this inquiry, two special
inspectors were appointed by the Bombay Government
and their report revealed "certain astounding facts"
and showed that the mill had been grossly mismanaged by the Board of Directors and the managing agents.
It also revealed that the persons who were responsible
for the mismanagement were guilty of certain acts and
omissions which brought them under the purview of
the law.
The Bombay Government accepted the
report of the inspectors and instructed the Advocate-
'General of Bombay to take legal proceedings against
certain persons connected with the management of the
company. Thereafter, the Government of India was
approached by the Provincial Government and requested to take special action in order to secure the early
opening of the mill.
The Government of India found
that they had no power to take over the management
of a particular mill, unless its working could be ensured
through the existing management acting under the
direction of a Controller appointed under the Essential
Supplies Act, but they also found that a peculiar situation had been created in this case by the managing
agents themselves being unable or unwilling to conduct the affairs of the company in a satisfactory and
efficient manner. The Government of India, as a
matter of precaution and lest it should be said that
they were going to interfere unnecessarily in the affairs
S.C.R.
SUPREME COURT REPORTS
881
of the company and were not allowing the existing
provisions of the law to take their own course, consulted other interests and placed the matter before the
Standing Committee of the Industrial Advisory Council
where a large number of leading industrialists of the
country were present, and ultimately it was realized
that this was a case where the Government could
rightly and properly intervene and there would be no
occasion for any criticism coming from any quarter.
It appears fro!ll the discussion on the floor of the
House that the total number of weaving and spinning
mills which were closed down for one reason or other
was about 35 in number. Some of them are said to
have closed for want of cotton, some due to overstocks,
some for want of capital and some on account of mismanagement. The Minister for Industry, who sponsored the Bill, in explaining what distingnished the
case of the Sholapur mill from the other mills against
whom there might be charges of mismanagement, made
it clear iu the course of the debate that "certain conditions had to be fulfilled before the Government can
and should intervene", and he set out these conditions
as follows :-
" (1) The undertaking must relate to an industry
which is of national importance. Not each and every
undertaking which may have to close down can be
taken charge of temporarily by Government.
(2) The undertaking must be an economic unit. If
it appears that it is completely uneconomic and cannot
be managed at all, there i> no sense in Government
taking charge of it. If anything, it will mean the
Government will have to waste money which belongs
to the taxpayer on an uneconomic unit.
(3) There must be a technical report as regards the
condition of the plants, machinery, etc. which either
as they stand, or after necessary repairs and reconditioning can be properly utilised.
(4) Lastly ,-and this is of considerable importancethere must be a proper enquiry held before Government take any action. The enquiry should show that
\lS
1960
Chiranjitlal
Chowdhi•ri
v.
The Unio11 of
India and
Oth~rs.
Fa1:l Ali J.
1950
Chiranjitlal
Chowdhuri
v.
Th~ Un.ion of
India and
Ot/~er!.
882
SUPREME COURT REPORTS
[1950)
managing agents have so misbehaved that they are no
longer fit and proper persons to remain in charge of
such an important undertaking."(')
It appears from the same proceedings that the
Sholapur mill is one of the largest mills in Asia and
employs 13,000 workers.
Per shift, it is capable of
producing 25 to 30 thousand pounds of yarn, and also
one lakh yards of cloth. It was working two shifts
when it was closed down on the 29th August, 1949.
The closure of the mill meant a loss of 25 lakhs yards
of cloth and one and a half lakhs pounds of yarn per
month. Prior to 1947, the highest dividend paid
by the company was l~s. 525 per share and the lowest
Rs. 100, and, in 1948, when the management was
taken over by the managing agents who have been
removed by the impugned Act, the accounts showed a
loss of Rs. 30 lakhs, while other textile companies
had been able to show very _substantial profits during
the same period.
Another fact which is brought out in the proceedings is that the managing agents had acquired control
over the majority of the shares of the company and a
large number of shareholders who were dissatisfied with
the management had been rendered powerless and they
could not make their voice heard. By reason of the
preponderance of their strength, the managing agents
made it impossible for a controller under the Essential
Supplies Act to function and they also made it difficult for the company to run smoothly under the
normal law.
It was against. this background that the Act was
passed, and it is evident that the facts which were
placed before the Legislature with regard to. the Sholapur mill were of an extraordinary character, and fully
justified the company being treated as a class by itself.
There were undoubtedly other mills which were open to
the charge of mismanagement, but the criteria adopted
by the Government which, in my opinion, cann;it be
said to be arbitrary or unreasonable, is not applicable
(l) Parlia.ments.ry DebateA,
Volume III, Nn.
14~ 31st March lO:SO,
pp, 2894.5.
·~
·-
S.C.R.
SUPREME COURT REPORTS
883
to any of them. As we have seen, one of the criteria was
that a mere allegation of mismanagement should not
be enough and no drastic step such as is envisaged in
the Act should be taken without there being a complete
enquiry.
In the case of the Sholapur mill, a complete
enquiry had been made and the revelations which were
made as a result of such enquiry were startling.
\Ve are familiar with the expression "police power"
which is in vogue in the United States of America.
This expression simply denotes that in special cases
the State can step in where its intervention seems·
necessary and impose special burdens for general benefit. As one of the judges has pointed out, " the regulations may press with more or less weight upon one
than upon another, but they are designed not to
impose unequal or unnecessary restrictions upon anyone, but to promote, with as little individual inconvenience as possible, the general good."(') It need
not be emphasized that the princi pies underlying what
is known as police power in the United States of
America arc not peculiar to that country, but are
recognized in every modern civilized State.
Professor
Willis dealing with the question of classification in
exercise of police power makes the following observations:
"There is no rule for determining when classification for the police power is reasonable. It is a matter
for judicial determination, but 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. In doing this the Courts
may consider matters of common knowledge, matters
of common report, the history of the times, and to
sustain it they will assume every state of facts which
can be conceived of as existing at the time of legislation. The fact that 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. For such
(I) Per Field J, in Barbier v. Connolly. 118 US. 27,
19CO
Chiranjit1al
Chowdhurt
v.
The Union of
India and
Other a.
Fa•l .Iii J.
1950
Chirn.njitlai
Chowdhurt
v,
Ths Uoiion. of
India and
Othsra,
FIUl Ali J.
884
SUPREME COURT REPORTS
[1950)
proof it must be shown that there is no reasonable basis
for the classification."(')
In this particular case, the Government initially
took control of the Sholapur Company by means of an
Ordinance (Ordinance No. II of 1950), of which the
preamble runs as follows:-
".Whereas on account of mismanagement and neglect
a situation has arisen in the affairs of the Sholapur
Spinning and Weaving Company, Limited, which has
prejudicially affected the production of an essential
· commocjity and has caused serious unemployment
amongst a certain section of the community;
And whereas an emergency has arisen which renders
it necessary to ·make special provision for the proper
management and administration of the aforesaid Company;
Now, therefore, ........................ "
In the course of the Parliamentary debate, reference
was made to the fact that the country was facing an
acute cloth shortage, and one of the reasons which
apparently influenced the promulgation of the Ordinance and the passing of the Act was that the
mismanagement of the company had gravely affected
the production of an essential commodity. The facts
relating to the mismanagement of this mill were carefully collected and the mischief caused by the sudden
closing of the mill to the shareholders as well as to the
general public were fully taken into consideration.
Therefore, it seems to me that to say that one particular mill has been arbitrarily and unreasonably
selected and subjected to discriminatory treatment,
would be an entirely wrong proposition.
Article 14 of the Constitution, as already stated, lays
down an important fundamental right, which should
be closely and vigilantly guarded, but, in construing
it, we should not adopt a doctrinaire approach which
might choke all beneficial legislation.
The facts to which I have referred are to be found in
a public document, and, though some of them may
(1) Constitutional La.w by Prof. Willis (1st Edition) p. 580.
S.C.R.
SUPREME COURT REPORTS
885
require further investigation forming as they do part
of a OJ:ie-sided version, yet they furnish good prima
facie grounds for the exercise of the utmost caution in
deciding this case and for not departing from the
ordinary rule as to the burden of proof. In the last
resort, this petition can be disposed of on the simple
ground that the petitioner has not discharged the onus
which lies upon him, and I am quite prepared to rest
my judgment on this ground alone.
I think that the petitioner has faiied to make out
any case for granting the writs or directions asked for,
and the petition should therefore be dismissed with
costs.
PATANJALI SASTRI J.-This is an application under
article 32 of the Constitution seeking relief against
alleged infringement of certain fundamental rights of
the petitioner.
The petitioner is a shareholder of the Sholapur
Spinning and Weaving Company, Limited, Sholapur,
in the State of Bombay, (hereinafter referred to as
"the Company").