# KAMLA PRASAD KHET AN v. THE UNION OF INDIA

- **Citation:** [1957] 1 S.C.R. 1052
- **Court:** Supreme Court of India
- **Decided:** 1955-11-08
- **Bench:** S. R. DAS c. J, Jafer Imam, s. K. DAS, GoVINDA MENON, A. K. Sarkar J
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/kamla-prasad-khet-an-v-the-union-of-india-1298
- **Pages:** 29

## Headnote

[1957)
Industrial undertaking, control of-Central Government taking
over management by notified order-Atnendment of such order by
another-Validity-'Like conditions', Meaning of-Appointment of
Controller-Bona fides-The Industries (Development and Regulation)
Act (LXV of 1951), as amenqed by Amrnding Act, 26 of 1953, ss.
18A, 15, 16-Gcneral Clauses Act (X of 1879), s. 21.
By a notified order dated November 8, 1955, the Government
of India took over the managen1ent of certain Sugar Mills under
s. 18A(l) (b) of the Industries (Development and Regulation) Act,
1951, for one year and vested it in a Controller.
This was
preceded by an investigation under s. 15 of the Act and the Central
Government had materials before it to be of the opinion that the
management was being conducted in a manner highly detrimental
to the undertaking and to public interest.
On November 7, 1956,
this order was amended extending the Controller's management for
a further period of two years.
It was contended on behalf of the
petitioners that the requirement of s.
18A(l)(b) of the Act not
having been satisfied before the amending order was made, the
amendment was invalid and that, in any event. the appointment
of the same person as the authorised Controller was not bona fide.
Held, per S. R. Das C. J., Jafer Imam, S. K. Das and Govinda
Menon J J.-that s.
18A of the
Industries
(Development and
Regulation) Act, 1951, read with ss. 15 and 16 of the Act and
properly
construed,
leaves no
doubt
that
the two conditions
mentioned in cl. (b} of sub-s. (I) of s. 18A, relating to investigation
and
mismanagement,
must
relate to a period when the
management of the undertaking was legally vested in its owne{
and once they are found to exist and the management is taken
over by the Governme'nt, the conditions continue to exist by their
very nature till the management goes back to the owner ; therefore, the amending order also fulfilled the same conditions subject
to which the original order was made.
When a notified
order
under
the
section is sought to be
amended by the application of s. 21 of the General Clauses Act,
'like conditions' mentioned in the latter section, to which such
Order of
amendment
must be
subject,
are
the two conditions
relating
to
investigation
and
mismanagement
mentioned
in
s. 18A(I} (b) of the Industries (Development and Regulation} Act,
S.C.R. ·
SUPREME COURT REPORTS
1053
Strawboard Manufacturing Co. v. Gutta Mill Workers' Union,
( 1953) S.C.R. 439, held inapplicable.
The appointment of a suitable person as the Controller rests
entirely with the Central Government and unless an appointment
can be show!). ·to have been made for any ulterior purpose contrary
to what the Statute has in view, its bona fides is not open to
question.
Consequently, in the instant case, both the original notification and· its amendment were valid in law.
Per Sarkar J.-'Like conditions' mentioned in s. 21 ot the
General Clauses Act, when applied to s. 18A of the Industries
(Development and Regulation) Act, cannot mean the two conditions mentioned in cl. (b) of sub-s. (I) of that section on the fulfilment of which the Central Government has the right to issue a
notification, but must mean the condition mentioned in sub-s. (2)
of that section, subject to which afone the right to issue a notification can be exercised, namely, that a notified order cannot have
effect for more than five years and, consequently, the amending
order in
questi!?n which
satisfied
that condition must be valid
in law.
ORIGINAL
JuRrSDICTION : Petition No. 54 of 1955.
Petition under Article 32 of the Constitution of India
for the enforcement of fundamental rights.
Purshottam Tricumdas, S. N. Andley, Rameshwar
Nath, f. B. Dadachanji and P. L. Vohra, for the
petitioner.
C. K. Daphtary, Solicitor-General of India, Porus
A. Mehta and R.H. Dhebar, for the respondent.
M. L. Misra, Advocate-General, U. P., and C. P. Lal,
for the Intervener.
1957. May 1. The Judgment of S. R. Das C.- J. Jafar
Imam, S. K. ·Das and

## Text

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1957
May I,
1052
SUPREME COURT REPORTS
KAMLA PRASAD KHET AN
v.
THE UNION OF INDIA
(and connected petitions)
(S. R. DAS c. J., JAFER IMAM, s. K. DAS,
GoVINDA MENON and A. K. SARKAR J J.)
[1957)
Industrial undertaking, control of-Central Government taking
over management by notified order-Atnendment of such order by
another-Validity-'Like conditions', Meaning of-Appointment of
Controller-Bona fides-The Industries (Development and Regulation)
Act (LXV of 1951), as amenqed by Amrnding Act, 26 of 1953, ss.
18A, 15, 16-Gcneral Clauses Act (X of 1879), s. 21.
By a notified order dated November 8, 1955, the Government
of India took over the managen1ent of certain Sugar Mills under
s. 18A(l) (b) of the Industries (Development and Regulation) Act,
1951, for one year and vested it in a Controller.
This was
preceded by an investigation under s. 15 of the Act and the Central
Government had materials before it to be of the opinion that the
management was being conducted in a manner highly detrimental
to the undertaking and to public interest.
On November 7, 1956,
this order was amended extending the Controller's management for
a further period of two years.
It was contended on behalf of the
petitioners that the requirement of s.
18A(l)(b) of the Act not
having been satisfied before the amending order was made, the
amendment was invalid and that, in any event. the appointment
of the same person as the authorised Controller was not bona fide.
Held, per S. R. Das C. J., Jafer Imam, S. K. Das and Govinda
Menon J J.-that s.
18A of the
Industries
(Development and
Regulation) Act, 1951, read with ss. 15 and 16 of the Act and
properly
construed,
leaves no
doubt
that
the two conditions
mentioned in cl. (b} of sub-s. (I) of s. 18A, relating to investigation
and
mismanagement,
must
relate to a period when the
management of the undertaking was legally vested in its owne{
and once they are found to exist and the management is taken
over by the Governme'nt, the conditions continue to exist by their
very nature till the management goes back to the owner ; therefore, the amending order also fulfilled the same conditions subject
to which the original order was made.
When a notified
order
under
the
section is sought to be
amended by the application of s. 21 of the General Clauses Act,
'like conditions' mentioned in the latter section, to which such
Order of
amendment
must be
subject,
are
the two conditions
relating
to
investigation
and
mismanagement
mentioned
in
s. 18A(I} (b) of the Industries (Development and Regulation} Act,
S.C.R. ·
SUPREME COURT REPORTS
1053
Strawboard Manufacturing Co. v. Gutta Mill Workers' Union,
( 1953) S.C.R. 439, held inapplicable.
The appointment of a suitable person as the Controller rests
entirely with the Central Government and unless an appointment
can be show!). ·to have been made for any ulterior purpose contrary
to what the Statute has in view, its bona fides is not open to
question.
Consequently, in the instant case, both the original notification and· its amendment were valid in law.
Per Sarkar J.-'Like conditions' mentioned in s. 21 ot the
General Clauses Act, when applied to s. 18A of the Industries
(Development and Regulation) Act, cannot mean the two conditions mentioned in cl. (b) of sub-s. (I) of that section on the fulfilment of which the Central Government has the right to issue a
notification, but must mean the condition mentioned in sub-s. (2)
of that section, subject to which afone the right to issue a notification can be exercised, namely, that a notified order cannot have
effect for more than five years and, consequently, the amending
order in
questi!?n which
satisfied
that condition must be valid
in law.
ORIGINAL
JuRrSDICTION : Petition No. 54 of 1955.
Petition under Article 32 of the Constitution of India
for the enforcement of fundamental rights.
Purshottam Tricumdas, S. N. Andley, Rameshwar
Nath, f. B. Dadachanji and P. L. Vohra, for the
petitioner.
C. K. Daphtary, Solicitor-General of India, Porus
A. Mehta and R.H. Dhebar, for the respondent.
M. L. Misra, Advocate-General, U. P., and C. P. Lal,
for the Intervener.
1957. May 1. The Judgment of S. R. Das C.- J. Jafar
Imam, S. K. ·Das and Govinda Menon JJ. was delivered
by S. K. Das J. Sarkar J. delivered a separate judgment.
19!i7.
Kamla PrtJJad
Khetan
v.
The Union.ef India
S. K. DAs J.-On November 8, 1955, the Ministry
s. K· Da.s J.
of Commerce
and
Industry, Government of India,
published a notified order, in exercise of the powers
conferred on that Government by section ISA of the
Industries
(Development and Regulation)
Act, 1951,
hereinafter referred to
as
the Act,
authorising one
Shri
Kedar
Nath
Khetan of
Padrauna, called the
1957
Kt11r.fo Prasad
KMtan
v.
Tltt Union of India
S IC Dai .1·
1054
SUPREME COURT REPORTS
[1957]
authorised Controller, to take over the management
of the Ishwari Khetan Sugar Mills Ltd., Lakshrniganj,
Deoria, subject to certain conditions. The order as
originally passed and published was to have effect for
a period of one year only, commencing on the date of
its publication in the official gazette. On November
7, 1956, there was an amendment of that order. The
amendment was published in notification No. 338-A of
even date and stated in effect that in stead and place
of the words 'one year' occurring in the order, the
words 'two years' shall be substituted.
Petitioner No. l before us is one Kamlaprasad
Khetan,
who states that
he is a Director and shareholder of the second petitioner, which is the Ishwari
Khetan Sugar Mills Ltd.
The Union of India was
and is the only respondent. By an order dated October 1, 1956, this Court permitted the said authorised
Controller to intervene, with the result that both the
Union of India and the authorised Controller have
been heard in opposition to the petition. The substantial case of the petitioners is that the order referred
to above dated November 8, 1955, and the amending
order dated November 7, 1956, are invalid in law and
bad on certain other grounds to be stated presently,
and it is not open to the Central Government to
interfere with the fundamental right of the petitioners
to hold and manage their property on the strength
of the said invalid orders ; the petitioners therefore
pray for the issue of appropriate writs or directions co
quash those orders.
Short and simple as the case of the petitioners
appears to be at first sight, it is necessary to refer to
a background of certain antecedent facts for a proper
understanding and appreciation of the issues involved
in the
present
dispute
between the parties.
The
Ishwari Khetan Sugar Mills Ltd., is a public limited
Company, in which four branches of a family known
as the Khetan familv held a large number of shares
and only about one-fourth of the shares wae held by
outsiders.
The Company was managed by a firm of
Managing
Agents,
subject
to
supervision
by
the
Directors.
Four
members
of
the
Khetan
family
S.C.R.
SUPREME COURT REPORTS
1055
constituted the Managing Agency firm, of which Kedar
Nath
Khetan
(later
appointed
as
the
authorised
Controller)
was one
and
Onkarmal Khetan (now
deceased), father of petitioner Karola Prasad Khetan,
was another.
The Managing
Agents
managed
two
Mills, known as the Ishwari Kheian Sugar Mills Ltd.,
Lakshmiganj, and the Maheshwari Khetan Sugar Mills
T
· l., Ramkola, District Deoria.
We are concerned in.
the present case with the Ishwari Khetan Sugar Mills
Ltd. The Managing Agents were also partners in the
firms of managing agents of certain other· companies,
namely, Morarji Gokul Das Spinning and Weaving
Mills,
Bombay,
and
Laxmidevi Sugar Mills Ltd.,
Deoria. In the affidavit in opposition filed on behalf of
the authorised Controller, it is stated that the Khetan
famiily was in the beginning a mere
trading
family,
but
"due
to the
initiative,
business
acumen
and
imagination of
Rai
Bahadur
Kedar
Nath
Khetan,
various
manufacturing
concerns
including
several
sugar factories grew up" ; and it was under his direction
that the
other members
of the
family,
including
Onkarmal Khetan, were put in charge of the day-t<>-
day routine administration of one business· or the other.
There was a provision in . the Managing Agency agreement under which every member of the firm of
Managing Agents was authorised to exercise all the
powers of the Managing Agents.
According to the
case of the authorised Controller, trouble arose between the members of the different branches of the
family of Managing Agents sometime in 1950-51 when
it came to light that Onkarmal Khetan had surreptitiously withdrawn large sums of money from· the
accounts of the various businesses in . which the members of the Khetan family were interested as Managing
Agents, and this led to certain ·· suits being instituted
against · Onkarmal Khetan.
The latter, · in his turn,
retaliated by bringing suits for the appointment of a
Receiver, or for restraining the holding of a general
meeting of one of . the mills, and instituting certain
other preceedings stated to be of an obstructive nature
and calculated to create an impasse in the working
of the mills.
1957
Kamla Prasad
K!rtlan
v •.
S. K. Das].
1957
Kam/a Pra.wlli
Khttan
v,
1"he Union of India
S. tr. DaJ J.
1056
SUPREME COURT REPORTS
[1957]
The petitioners on the contrary alleged that when
the balance sheet of the lshwari Khetan Sugar Mills
Ltd., for the financial year 1950-51 was published in
June 1952, it \Vas discovered that some of the Directors
including the. authorised Controller had utilised the
funds of the Company for their personal gain and
had committed breaches of certain provisions
of the
Indian Companies Act.
This led to Suit No. 4 of 1952
brought by ·the petitioners against some of the Directors, including the authorised· Controller, for an order
of permanent injunction restraining the said Directors
from exercising any. powers .as Directors of petitioner
No. 2 and also for a. declaration that a notice calling
the . twenty-fourth ordiriary general meeting of the
· Company to be held on July 9, 1952, was illegal and
invalid.
In that suit, an ex parte order of injunction
was made against the Directors concerned on July 8,
1952. That order was, however, subsequently vacated
as being without jurisdiction and a fresh order was
made on June 3, 1953. In the affidavit filed on behalf
of the authorised Controller, it has been stated that
on legal advice obtained by the defendants of that
suit to the effect that the ex parte order of injunction
dated
July
8,
1952,
w~s without
jurisdiction,
the
twenty-fourth . ordinary general meeting of the Company was held on July 9, 1952, and the shareholders
unanimously
passed
a
resolution
in
that meeting
approving and adopting the Directors' report and the
audited balance sheet of the Company as on October
9, 1951. The fresh
temporary order of
injunction
which was passed by the Civil Judge, Deoria, on June
3, 1953, was confirmed by the High Court of Allahabad
by its order dated September 14, 1953.
Feeling that
the order of stay would completely dislocate the affairs
of the Company, the shareholders themselves called an
extraordinary
general
meeting
which was held on
November 9, 1953, and at that meeting the authorised
Controller and certain other persons were re-elected as
Directors of the Company, subject to the condition
that if the Court decided in Suit No. 4 of 1952 that the
said Directors had not ceased to be
Directors, the
resolution would be ineffectual to that extent. There
S.C.R.
SUPREME COURT REPORTS
1057
were several proceedings in the High Court of Allahabad
in connection with Suit No. 4 of 1952, and in one of
them the High Court was moved for an expeditious
hearing of the suit, and such a direction was made by
the High Court.
Unfortunately, however, for reasons
which need not be stated here, Suit No. 4 of 1952 is
still awaiting trial and on July 31,
1956, petitioner
No. 1 obtained an ex parte order from the said High
Court adjourning the hearing of the suit. The case of
the
authorised
Controller
is that petitioner No. 1
having
realised
that
he
is
not supported by
the
majority of shareholders and cannot, therefore, legally
represent the Company, is delaying the hearing of Suit
No. 4 of 1952 on one ground or another.
While all this legal tussle, with allegations and
counter allegations made by the parties, was going on
in the arena of the Courts of law, certain other events
happened to which a reference must now be made. The
petitioners allege that the authorised Controller, finding
that the majority of the shareholders and Directors
were not in favour of his managing the Ishwari Khetan
Sugar Mills Ltd. moved the Ministry of Food, through
his grandson Durga Prasad Khetan and another gentleman related to him, for passing orders under ss. 15 and
17 of the Act. On November 8, 1952, a communication
was received from the Ministry of Food and Agriculture,
Government of India, wherein was stated :-
"The Government of
India consider that if on
account of the failure of the parties concerned to
compose their differences and inability to take timely
and proper steps to arrange for normal working of the
mills, the mills are not able to start work in time during
the 1952-53 season, or are unable to work at all, it will
result in a substantial fall in the production of sugar
without due justification.
Such a result will lead to
the conclusion that the mills are being managed in a
manner likely to damage the interests of a substantial
body of consumers besides cane
growers and mill
workers."
The communication contluded with the statement that,
in the circumstances stated above, the Government of
India would be constrained to order an investigation
1957
Kamla PrOJDl/
Khr:a.
v.
The U11io11 of India
S. K. Das].
1957
Kamlo Prasad
KMon
v.
. The Union of India
S. K. Das J.
1058
SUPREME COURT REPORTS
[1957]
into the matter and, if necessary, to undertake the
management of the said mills.
It may be stated here
that the communication was in respect of both the
Ishwari Khetan Sugar Mills Ltd. and the Maheshwari
Khetan Sugar Mills Ltd ..
On December 18, 1952, the Central Government did
actually pass an order under sub-s. ( 4) of s. 3 of the
Essential Supplies (Temporary Powers) Act, 1946, under
which the
authorised Controller was empowered to
exercise certain functions of control in respect of the
Ishwari Khetan Sugar Mills Ltd., the functions of
control being stated in detail in notification No. S.R.O.
2073 of even date.
On December 23, 1952, Onkarmal
filed a writ petition to this Court against the aforesaid
order of the Central Government and asked for an
interim direction staying the operation of the order.
This Court gave a direction expediting the hearing of
the petition, and further directed that the accounts of
the petitioner Company be audited periodically by a
Government or private auditor at the instance of
Onkarmal.
The writ petition itself could not, however,
be heard in time and was late-r dismissed on May 14,
1954, as having become infructuous in . the meantime.
On July 30, 1953, the ,Central Government passed an
order under s. 15 of the Act in respect of several mills,
including the Ishwari Khetan Sugar Mills Ltd.
Under
that order the Central Government appointed three
independent persons for . making a full and complete
investigation into the circumstances of each of the
industrial undertakings referred to therein. Then, on
November 14, 1953, the Central Government made an
order under s. 18A of the Act, by which the authorised
Controller was. appointed to take · over the management
of the Ishwari Khetan Sugar Mills Ltd.
It may be
stated here that the Act was amended in 1953 by Act
26 of 1953. · By that amendment, s. 17 was omitted
and a new chapter, viz., Chapter IIIA, was inserted.
This new chapter contained s. 18A under which the
Central Government passed its. order dated November
14, 1953. The order stated that it shall have effect for
a period of one year.
In December 1953 came the
· decision of this Court in . Dwarkadas Shrinit1as of .
S.C.R.
SUPREME COURT REPORTS
1059
Bombay v. The Sholapur Spinning & Weaving Co. Ltd. (1).
That decision pronounced on Art. 31 (2) of the Constitution . with . reference to the validity of the Sholapur
Spinnifi)fS':tnd.; Weaving .· Company (Emergency Provisions) Ordinance II of 1950 and ActXXVIII of 1950. As
a result, presumably, of that decision, on May 21, 1954,
the Central Government
cancelled
all appointments
of authorised Controllers under the provisions of the
Act, and on such cancellation the management of the
industrial undertaking vested again in the owner of
the undertaking.
The case of the petitioners is that
in spite of the cancellation the authorised Controller
continued to remain in possession of the undertaking
in question.
On July 16, 1954, the Central Government
again passed an order under sub-s. ( 4) of s. 3 of the
Essential
Supplies
(Temporary
Powers)
Act,
1946,
thereby again giving the authorised Controller Certain
functions of control in respect of the Ishwari Khetan
Sugar Mills -Ltd.
On September 19, 1954, there was
another investigation under s. 15 of the Act by a panel
of officers and it is stated that they recommended that
the Central Government should · take over the management. of the Mills for a period of three years.
On
January 31, 1955, the present
pedtioners filed a writ
petition iii this Court in respect of the order passed by
the Central Government on July 16, 1954. This is the
writ petition which, after necessary amendments, is now
under consideration before us, the amendments having
been
necessitated
by
reason
of certain subsequent
notifications made by the Central Government. These
Nubsequent notifications are-( 1) the notifications made
on November 8, 1955, by which the earlier order made
on July 16, 1954, was cancelled and a fresh order made
under s. 18A of the Act ; and (2) the amending order
dated November 7, 1956-to both of which a reference
has been made in the first paragraph of this judgment.
· By reason of these subsequent notifications, the order
dated July 16, 1954, no longer exists, and the writ
petition which was originally directed against that
order stands in need of amendment.
(1)[1954] S.C.R. 674.
1967
Komla PrtJJati
Khetan
v.
Tll4 U11ion of India
S. K. DtJJ J.
1957
K amla Prasad
Khttan
v.
Tire Union of India
S. K. Da, ].
1060
SUPREME COURT REPORTS
[1957]
The petitioners have prayed for an amendment of
the original writ petition and also for permission to
urge fresh grounds to challenge the validity of the two
notified orders, one dated November 8, 1955, and the
other dated November 7, 1956.
By
an order of
the
Judge-in-Chambers
dated
February
18,
1957,
the
petition for
amendment and
for
urging additional
grounds was directed to be heard along with the main
petition under Art. 32. But before that date, i.e., on
November 5, 1956,
when the stay application of the
petitioners was heard, the following direction was given
by this Court-
"The hearing of the main petition under Art. 32
to be expedited ....................... .It will be open
to the petitioners to challenge that the appointment
of R, B. Kedar Nath Khetan, if again made, is also
bad."
In view of the aforesaid directions, we have treated
the main petition under Art. 32 as a petition against
the
latest order passed by the
Central
Government
appointing the authorised Controller to take over the
management of the undertaking, and we have also
permitted the petitioners to urge fresh grounds in
support of their petition.
Having indicated in the preceding paragraphs the
necessary
background
against
which
the
dispute
between the parties has to be considered, we proceed
now to a consideration of the grounds on which the
petitioners challenge the validity of the orders dated
November 8,
1955, and November 7,
1956.
It is
necessary to clear the ground by stating at the very
outset that learned counsel for the petitioners has not
challenged the validity of s. 18A of the Act under which
the impugned orders were made.
We have already
stated that Chapter !!IA of the Act was inserted by
the Amending Act 26 of 1953.
Article 31B of the
Constitution was
enacted by the Constitution (First
Amendment Act,
1951, which states, inter alia, that
none of the Acts and Regulations specified in the Ninth
Schedule nor any of the provisions thereof shall be
deemed to be void, or ever to have become void, on
the ground that such Act, Regulation or provision is
S.C.R.
SUPREME COURT REPORTS
1061
inconsistent with, or takes away or abridges any of
the rights conferred by, any provisions of this Part
(meaning Part III) of the Constitution. ·The Ninth
Schedule was added to by the Constitution
(Fourth
Amendment) Act, 1955.
Item No. 19 of the Ninth
Schedule is now Chapter IIIA of the Act as inserted by
the Industries (Development and Regulation) Amendment Act, 1953. Learned Counsel for the petitioners
has frankly conceded that in view of these amending
provisions, he is not now in a position to challenge the
validity of s. 18A of the Act.
Therefore, the principal question for our consideration is the validity of the impugned orders made under
that section.
Learned counsel for the petitioners has
attacked the two orders on the following grounds :
(1) the order of November 8, 1955, is not a lawful
order, as it does not fulfil one of the essential requirements of s. 18A of the Act under which it purports to
have been made ;
(2) even assuming that the order was a good order
when it was made, s. 18A of the Act does not authorise
an extension of the peri0d during which the . order is to
remain in force, in the manner in which the extension
was made on November 7, 1956, and such extension
did not compiy with one of the essential requirements
of s. 21 · of the General Clauses Act, (No. X of 1897) ;
and
·
(3) in any event, the order is not a bona fide order
in that the Central Government appointed the very
person who was mismanaging the undertaking, who
was one of the parties to a pending dispute, and against
whom .an order of injunction had been passed by a ·
Court of competent jurisdiction.
These three grounds we now propose to examine in
the order in which we have set them out.
(1) We must first read s. 18A of the Act so far as
it is relevant for our purpose. The section states-
"If the Central Government is of opinion that-
( a) ............. .
(b) an industrial undertaking in respect of which
an investigation
has
been made under section
15
(whether or not any directions have been issued to the
1957
K amla Prasad
Khetan
v.
The Union of India
S. K. Das].
19~7
Kamla Prmad
Kht14n
v.
T/r• Union of lrulia
S. K. Dos:f.
1062
SUPREME COURT REPORTS
[1957]
undertaking in pursuance of section
16,
is being
managed
in a manner highly detrimental to the
scheduled industry concerned or to public interest,
the
Central
Government
may,
by notified order,
authorise any person or body of persons to take over
the management· of the whole or any part of the
undertaking or to exercise in respect of the whole or
any part of the undertaking such functions of conrtol
as may be specified in the order.
(2) Any notified order issued under sub-section (1)
shall have effect for such period not exceeding five
years as may be specified in the order :
Provided that the Central Government, if it is of
opinion that it is expedient in public interest so to do,
may direct that any such notified order shall continue
to have effect after the expiry of the period of five
years aforesaid for such further period as may be
specified in the direction and where any such direction
is issued; a copy thereof shall be laid, as soon as may
be, before both Houses of Parliament."
The argument before us is that for the application of
cl. (b) of sub-s. (I) of s. IBA, the two e~sential requirements are-(i) an investigation under s. 15 of the
Act and (ii) the opinion of the Central Government that
the industrial undertaking is being managed in a
manner highly detrimental to the scheduled industry
concerned or to public interest. Learned counsel for
the petitioners has conceded that before the order
dated November 8, 1955, was made, there was an
investigation under s. 15 of the Act in respect of the
industrial
undertaking
in
question, and
the
first
requirement
was thus fulfilled.
Learned counsel has,
however, very strongly
submitted
that
the
second
requirement was not fulfilled
in the present case,
because the authorised Controller himself was in charge
of the
undertaking
from
December 18, 1952, till
November 8, 1955 (when the impugned order was
made) with a small break of less than two months only
between
the two dates,
May
21,
1954, when all
appointments under the Act were cancelled and July
16, 1954,
when a fresh
order
under
the
Essential
Supplies (Temporary Powers) Act, 1946 was made, and
S.C.R.
SUPREME COURT REPORTS
1063
even during this short period the case of the petitioners
is that the authorised Controller continued in posses~
sion.
Founding himself on these circumstances, learned
counsel
for
the
petitioners
contends that it was
rationally
and
logically impossible for
the
Central
Government to be of opinion that the industrial undertaking
was
being
managed in a manner
highly
detrimental to the public interest, before the impugned
order was made.
We are unable to accept this argument as correct.
We have already referred to the legal tussle which was
going on between the parties with regard to the
management of the industrial undertaking in question.
The Central Go\'l:rnment very
rightly pointed
out in
their kttcr dated November 8, 1952, that the result of
tk differences b::tween the partie:;
wa~ Ekc!y to be a
stoppage of the mill and a fall in the production of
sugar with consequential detriment to the interests of
the industry concerned and the interests of a substantial
body of consumers, cane growers and mill workers.
In
view of the litigatio!l which was pending between the
partie,:, the
likelihooLl
of
the dangers at which the
Centra I
Govermcnt
hinted
in
1952
must
have
continued
to
exist~ as long as the management was not
fully
and completely taken over by the authorised
Controller.
In Dt'.cember 1952, the order passed under
the Essential Supplies (Temporary Powers) Act, 1946
merely gave some functions. of control to the authorised
Controller ; it did not vest
the management in him.
This distinction between exercising certain functions
of control, however, drastic the functions may be, on
an order made under sub-s. ( 4) of s. 3 of the Essential
Supplies (Temporary Powers) Act and the taking over
of the management of the whole of an undertaking. on
an order under s. ISA of the Act is a real distinction
which must be bOrne in mind, as it has a bearing on
the argument advanced before us.
Sub-section ( 4) of
s. 3 of the Essential Supplies (Temporary Powers) Act,
1946; authorises the Controller to exercise, with respect
to the whole or any part of the undertaking, such
functions of control as may be provided by the order ;
s. ISA of the Act is in wider terms and empowers the
8-61 S. C. India.'59
1957
Kam/a Prasad
Khetan
v.
The Union of India
S.K.Das J.
1957
Kam/a Prasad
Khetan
..
7 he !Jn ion of India
S. K. Da>].
1064"
SUPREME COURT REPORTS
[1957)
Central Government to authorise any person or body
of persons to take over the management of the whole
or any part of the undertaking or to exercise in respect
of the whole or any part of the undertaking such functions of control as may be specified in the order.
Section
!SB of the Act states the effect of a notified
order under s. ISA; in sub-s. (!),els. (a) to (e), is stated
the effect of taking over the management, and in subs. (3)
is stated the effect of merely giving functions of
control-a distinction
which is clear! y drawn
in the
section itself.
It Is not difficult to conceive that in a
particular industrial undertaking the mere giving of
some functions of control may not be enough to meet
the situation which has arisen and it may be necessary
for the Central Government to pass an order taking
over the management of the whole of the undertaking.
In the case under our
consideration,
in
December,
1952, certain functions of control were vested in the
authorised Gmtroller, but the management of the whole
undertaking was not taken over.
This continued till
an investigation
was
ordered
under s.
15 of the
Act on July 30, 1953. Then, on November 14, !953,
the authorised Controller was directed to take over
the
management
of
the
whole ·of the
industrial
undertaking. This order was
however cancelled on
May 21, 1954, and under s. !SF of the Act, the effect of
the cancellation was to vest the management of the
undertaking again in its owner the expression 'owner'
meaning,. under s. 3 (f) elf the Act, the person who, or
the authority which, has the ultimate contrd over the
affairs of the undertaking and, where the said affairs
are entrusted
to a manager, managing director or
managing agent, such manager, managing director or
managing agent.
Therefore, the legal effect of the
cancellation on May 21, 1954, was to vest the management of the Ishwari Khetan Sugar Mills Ltd., in the
Directors and Managing Agents who were quarrelling
amongst themselves.
On behalf of the petitioners, it
has been pointed ou't that Kedar Nath Khetan, the
erstwhile authorised Controller, continued to remain
in possession in spite of the cancellation order. In an
affidavit filed on behalf of the Central Government, it
S.C.R.
SUPREME COURT REPORTS
1065
is stated that after the cancellation order, Kedar Nath
Khetan, the erstwhile authorised Controller, informed
the Government of India that he was continuing in
management in a capacity other than that of autho-
. rised
Controller. The affidavit
filed
on behalf
of
the
authorised
Controller
states,
however,
that
between the time the Central Government directed him
to hand over possession to the Directors and the time
when he was again appointed on July 16, 1954, the
management of the Company ·remained in the hands
of the Directors who were in possession of the undertaking.
It is not necessary for us to pronounce on
these disputed facts.
It is abundantly clear from the
affidavits filed
that
peace
amongst the Directors or
in the family of the Managing Agents had not been
restored bv the time the cancellation order was made
on May Zl, 1954.
Suit No. 4 of 1952 was still pending, and the tussle between the parties was going on.
This was the position when another order was made
um\er the Essential Supplies (Temporary Powers) Act,
1946, on July 16, 1954.
This was followed by a second
in\'estigation under s. 15 of the Act in September, 1954.
Petitioner No. 1 was still pursuing what he conceived
to be his legal remedy by
filing a writ application
in respect of the order elated July 16, 1954, in this
Court and also in other proceedings arising out of Suit
No. 4 of 1952, in the High Court of Allahabad. In
these
circumstances,
the
Central
Government made
the impugned order dated November 8, 1955. Having
regard to the circumstances just stated, it is, we think,
idle to contend that the Central Government had no
materials before it for . arriving at the opinion that the
industrial undertaking was being managed in a manner
highly
detrimental to
public
interest.
The Central
Government might reasonably have felt that the order
elated July 16, 1954, which vested certain functions of
control only, was not enough to meet the situation
and a more drastic step was necessary. It is
worthy
of note that in the affidavit filed on behalf of
the
Centr'll Government it is stated that the affairs of · the
industrial • undertaking
were
investigated
a
second
137
1957
Kam/a Prasad
Khetan
v •
The Union of I~dia
S. K. Dns J.
1957
Kamla PraJad
Khetan
v.
The Union of India
S. K. Das J.
1066
SUPREME COURT REPORTS
[1957]
time under s. 15 of the Act in September I954, and
the
panel
of
officers
who held
that investigation
recommended that Government should take over the
management of the industrial undertaking for a period
of three years.
It is on that recommendation that the
Central Government
passed
the impugned order on
November
B,
1955.
We are unable to accept the
argument of learned
counsel
for. the. petitioners that
one of the essential requirements of cl. (b) of sub-s. ( 1)
of s. IBA of the Act was not fulfilled before the order
dated November B, 1955, was made.
Learned counsel for the petitioners has drawn our
attention to those statements in the affidavit filed on
behalf of the Central Government which referred to
the
improvement in management, after the undertaking was taken over by the authorised Controller.
In that affidavit, it is stated :
· "I say that by virtue of the order issued by the
Government of
India under s. 3( 4) of the Essential
Supplies (Temporary Powers) Act, 1946, the Government of India had taken over only the supervisory
control and the said Kedar Nath Khetan had only
powers to issue directions to the management.
The
management was with the old management and the
Government of India or the authorised Controller had
no effective
functioning in the management as the
authorised
Controller
could not manage the undertaking. I say that in view of the continued litigation
referred to in detail in the affidavit of the intervener
dated 25th October, 1956, it was apparent that the
mill was. being managed in a manner highly detri-.
mental ro the interests of the undertaking and that
it was necessary to pass the order under s. IBA of the
Industries
(Development and Regulation)
Act, 1951.
I say that after the management was taken over by
Shri Kedar Nath Khetan, the Government has reason
to believe that the management has improved and
has saved further deterioration."
In another parr of the same affidavit, it is stated
that the mill earned a profit during 1953-54 and in
1954-55 also the mill was likely to make a net profit of
S.C.R.
SUPREME COURT REPORTS
1067
Rs. 84,321.
We see nothing in these statements from
which it can be inferred that the recorded opinion of
the Central Government in the order dated November
8, 1955, that the industrial undertaking . was
being
managed in a manner highly detrimental to public
interest
contained a palpably
false
statement.
The
crux of the matter was the dispute inter se amongst
the Directors and the Managing Agents, leading to
protracted and harassing
litigation',
some of which
was. still pending ; that was the real cause of the
trouble, and we think that the Central Government
had enough materials for its opinion that the industrial
undertaking
in question was being managed in a
manner highly .detrimental to public interest .
. (2) w c now
turn to the amending order of
November 7, 1956.
The amending order is in these
terms:
"In the said order in sub-clause (ii) of clause 1
and clause 2 for the words 'one year', the words
·'two years' shall be substituted."
Section 21 of the General Clauses Act states :
"Where, by
any
Central
Act ·or Regulation, a
power to issue notifications, orders, rules, or bye-laws
is
conferred,
then
that power
includes a pov.:er,
exercisable in the like manner and subject to the like
sanction and conditions (if any), to add to, amend,
vary
or
rescind
any . notific_ations,
orders,
rules or
bye-laws so issued."
The argument of learned counsel for the petitioners
is that neither s. 18A of the Act nor s. 21 of the
General Clauses
Act save
the ·. amending order of
November 7, ··· 1956.
There has been some argument
before us with regard to the proviso .to sub-s. (2) of .
s. 1'8/\ of the Act, which we have quoted in extenso in
an . earlier part of this . judgment.
That proviso, it is
contended by learned counsel for the petitioners, refers
only to an . order which is initially made for a period
of five years, or, alternatively, which comes to an end
on the expiry of a perioo of five years.
According to
him,
the proviso ·empowers the Central Government
to continue the order after the expiry of a period of
1957
Kam/a Prasad
Khelan
v.
The Union of lndia
S. K. Das].
1957
Kanda Pra;ad
Khdan
v.
Tke Union of India
ii. K. Das].
1068
SUPREME COURT REPORTS
[1957]
five years for such further period as may be specified
in the direction given by
the Central Government,
and the only safeguard is that a copy of the direction
is to be laid before both Houses of Parliament. The
argument of learned counsel for the petitioners proceeds to state that the proviso has no application in the
present case where the original order was made for a
period of one year only and the amending order
merely continued it for another year.
In the view
which we. have . taken of the substantive provisions of
sub-s. (I) of s. 18A of the Act and s. 21 of the General
Clauses Act, we do not think it necessary to make any
pronouncement with regard to the true scope and
effect of the aforesaid proviso. In our opinion, the
amending order is protected under s. 21 of the General
Clauses Act read with sub-sec. (I) of s. ISA of the
Act.
Section 21 of the General Clauses Act says, inter alia,
that the power to issue an order under any Central
. Act includes a power to amend· the order ; but this
power is subject to a very important qualification and
the qualification is contained in the words 'exercisable
in the · like manner and subject to the like sanction
and conditions (-if any)'.
There is no dispute before
us that the amending order was made in the same
manner as the original order, that is, by means of a
notified order.
As no sanction is
necessary for an
order under s. 18A, the
only question before us is
whether the amending order complied with the like
conditions under which the original order was made.
We have already stated what are the two essential
requirements of an order under cl. (b) of sub-s. ( 1) of
s. !SA of the Act. The argument of learned counsel
for the petitioners is that those two essential conditions
must be fulfilled
again before any amendment
of the order can be made ; this, he urges, is the true
scope and effect of the expression 'subject to the like
condiiions (if any)' occurring in s. 21 of the General
Clauses Act.
We agree with learned counsel for
the petitioners
that the power to amend, which is included in the power
S.C.R.
SUPREME COURT REPORTS
1069
to. make the order, is exercisable in the like manner and
suh:cer to the like sanction and conditions (if any) as
govern the lnaking of the original order ; this is stated
by the section
itself. It becomes
necessary, however,
to understand clearly . the true nature of the conditions
which have to be fulfifled before an order under cl. (b)
of ;,ub-!;. (1) of s. 18A of the Act can be made. Once
the true ·nature of those conditions is appreciated, there
is in our opinion little difficutl:y left in the application
of s. 21 of the General Clausl'.s Act. Now, · the first
condition in cl. (b) of sub-s. ( 1) of s. 18A of the Act is
that the industrial undertaking must he one in respect
of which an investigation has been ma<le under s.
15
of the Act. Section 15 is in these terms :
.
.
.
"Where the Central Government is of the ·opinion
that-
·
(a) ii1 respect of any sche<lulc<l industry or indus-
.