# SHRI AMBALAL M. SHAH AND ANOTHER v. HATRISINGH MANUFACTURING CO., LTD

- **Citation:** [1962] 3 S.C.R. 171
- **Court:** Supreme Court of India
- **Decided:** 1960-12-06
- **Bench:** K. N. Wanchoo, K. c. DAS GUPTA, J.C. Shah, Raghubar Dayal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/shri-ambalal-m-shah-and-another-v-hatrisingh-manufacturing-co-ltd-2318
- **Pages:** 16

## Headnote

Industrial Untkrtaking-lnvestigation into its affairs by
Central Government-Takinq over of manoqement by officer appoin·
ted by Government on the basis of report--Legality-lndust1·ies
(Development and Regulation) Act. 1961 (66 of 1961), ss. 16,
18 A(I)(b).
Being of the opinion that 1lhere had been a• substantial
fall in the volume of production in respect of cotton textiles
manufactured in the respondent company, an industrial undertaking, for which having regard to the economic CQnditions
•
prevailing there was no justification; the Central Government
,\ made an order under s.15 of the Industries (Development
and Regulation)
Act, 195 l,
appointing a committee of
three persons
for
the
purpose of making
a
full
and
complete investigation into the circumstances of the case.
After the committee madeits report, the Central Government
being of the opinion thereupon
that
the
company was
being managed in a manner highly detrimental to public
interest, made an order under s.
18 A of the Act authorising
the first appellant to take over the management of the whole· of
~-~he·· said
undertaking.
The
respondents
challenged the
- legality of the order on the ground, inter alia, that on the
proper construction of
s,18 A the Central Government hac'
the right to make the order under that section on the ground
1981
ThtiD-i
TeaC<u, Ltd.
••
Crmihiia':i.~lrM ~'.
Aur~ral'
Jniiome .. tax,
Wes!B<ngal
Gajerzitloagadkar J.
1961
A"!11Jat 21.
19il
ShrFAlfi66l~l
M.Shah ·
••
lfa!lti.,ng/i ·
M~urt.g
au., f;f&
....
L1as Gupta .1.
172
StJPREME COURT REPORTS
that the compam· wa; being managed in a manner highly
dttrimcntal to public interest <Jnly \vhcrc the inYcstigation 1nade
under s.15
\Va'\ initL\ted on the basis of the op'tdun as
mentioned in s. IS{b),
"·herc.1~ in
the present case,
the
investigation ordered by the Central Go\·crnmcnt \vas initiate·d
<°')
..
j
'-~ .
on the formation of an opinion as mentioned in cl. (a)(i) of
s. l 5.
Held, that the order passed by the Central Government
under s.18 A was valid and that
the words used bv the
legislature ins. 181\ (l)(b) "in respect of which au investigation has been made under s. 15,. could not be cut down by
the restricting phrase ''based on an opinion that the industrial
undrrtaking is being n1anaged in a manner highly dctrin1cntal
to fl1c scheduled industry concerned or to public interest."
Section l8A (l)(b) empo\\ers the Central Government
to authorise a person to take over the management of an
industrial undertaking if the one con<li!ion of an investigation
made under s. 15 had Leen fulfilled irrespective of on what
opinion that investigation , ... as
iuitiateU, an<l the
further
rondition is fulfilled that the Central Government was of
opinion that such undtrcaking \vas
being
managtd -in a
manner highly detrimental to the scheduled industry concerned
or to public interest.
CIVIL APPELLATE ,TURI8DICTION: Civil Appeal
No. 285 of 1961.
·.
1
Appeal from th<' judgment all(! order dated
December 6, 1960, of the Gujra• High Court in
Special Civil Applicatioll No. 434 of HJGO.
r
H. N. Sanyal, Additional Solicitor.General of
India, R. H. Dhebar and
'J'. M. Sen, for
the
appella,nts.
I ..
M. Nanawti, 8. N. Andley, Rameshwar
•
Nrith and P. L. Vohrn, for the respondents.
'
l!l61. August 21. Th!' .Judgment of the Court
wa.s delivered by
DAH Ge PTA, J .-This •1ppeal by special lca.v.e
raises a qucAtion of the <·orrect intt>rpretation of
some
words in s. l 8A( l )( b)
of the Industries
(Development and Rcgnlrttion) Act, 1!)51.
Tho
Central Government made an onler under s. 15 of -111-·
that Aet appointing a committee of three . persons ·
for the purpose of·making full and complete inv.csti'
•
3 S.C.R.
SUP~EME COURT REPORTS
173
•' .
g111tion intp the oircumRtances o(thi;i .c11se as it was
of opinion that there had been or was likely to-be-11
substantial fall in the volume of production .in res·
pect of cotton textiles manufactured in the industrial
undertaking known as Hathisingh Manufacturing
Company Ltd., Ahmedabad,

## Text

38.C.R.
SUPREME COURT REPORTS
171
~
~~, i. • Act cannot legitimately be pressed into service for
the purpose of construing the relevant provisions
~
of the Act ; even so, incidentally it may be permis~
sible to observe that the construction of r. 4(2)
which we are inclined to adopt is consistent with
the respondent's case that s.2 (1 )(b)(i) includes
agricultural produce utilised by the appellant for
':!
its own business.
-
In the result the appeal fails and is dismissed
with costs.
Appeal dismissed.
1
SHRI AMBALAL M. SHAH AND ANOTHER
v.
HATRISINGH MANUFACTURING CO., LTD.
(K. N. WANCHOO, K. c. DAS GUPTA, J.C. SHAH
and RAGHUBAR DAYAL, JJ.)
Industrial Untkrtaking-lnvestigation into its affairs by
Central Government-Takinq over of manoqement by officer appoin·
ted by Government on the basis of report--Legality-lndust1·ies
(Development and Regulation) Act. 1961 (66 of 1961), ss. 16,
18 A(I)(b).
Being of the opinion that 1lhere had been a• substantial
fall in the volume of production in respect of cotton textiles
manufactured in the respondent company, an industrial undertaking, for which having regard to the economic CQnditions
•
prevailing there was no justification; the Central Government
,\ made an order under s.15 of the Industries (Development
and Regulation)
Act, 195 l,
appointing a committee of
three persons
for
the
purpose of making
a
full
and
complete investigation into the circumstances of the case.
After the committee madeits report, the Central Government
being of the opinion thereupon
that
the
company was
being managed in a manner highly detrimental to public
interest, made an order under s.
18 A of the Act authorising
the first appellant to take over the management of the whole· of
~-~he·· said
undertaking.
The
respondents
challenged the
- legality of the order on the ground, inter alia, that on the
proper construction of
s,18 A the Central Government hac'
the right to make the order under that section on the ground
1981
ThtiD-i
TeaC<u, Ltd.
••
Crmihiia':i.~lrM ~'.
Aur~ral'
Jniiome .. tax,
Wes!B<ngal
Gajerzitloagadkar J.
1961
A"!11Jat 21.
19il
ShrFAlfi66l~l
M.Shah ·
••
lfa!lti.,ng/i ·
M~urt.g
au., f;f&
....
L1as Gupta .1.
172
StJPREME COURT REPORTS
that the compam· wa; being managed in a manner highly
dttrimcntal to public interest <Jnly \vhcrc the inYcstigation 1nade
under s.15
\Va'\ initL\ted on the basis of the op'tdun as
mentioned in s. IS{b),
"·herc.1~ in
the present case,
the
investigation ordered by the Central Go\·crnmcnt \vas initiate·d
<°')
..
j
'-~ .
on the formation of an opinion as mentioned in cl. (a)(i) of
s. l 5.
Held, that the order passed by the Central Government
under s.18 A was valid and that
the words used bv the
legislature ins. 181\ (l)(b) "in respect of which au investigation has been made under s. 15,. could not be cut down by
the restricting phrase ''based on an opinion that the industrial
undrrtaking is being n1anaged in a manner highly dctrin1cntal
to fl1c scheduled industry concerned or to public interest."
Section l8A (l)(b) empo\\ers the Central Government
to authorise a person to take over the management of an
industrial undertaking if the one con<li!ion of an investigation
made under s. 15 had Leen fulfilled irrespective of on what
opinion that investigation , ... as
iuitiateU, an<l the
further
rondition is fulfilled that the Central Government was of
opinion that such undtrcaking \vas
being
managtd -in a
manner highly detrimental to the scheduled industry concerned
or to public interest.
CIVIL APPELLATE ,TURI8DICTION: Civil Appeal
No. 285 of 1961.
·.
1
Appeal from th<' judgment all(! order dated
December 6, 1960, of the Gujra• High Court in
Special Civil Applicatioll No. 434 of HJGO.
r
H. N. Sanyal, Additional Solicitor.General of
India, R. H. Dhebar and
'J'. M. Sen, for
the
appella,nts.
I ..
M. Nanawti, 8. N. Andley, Rameshwar
•
Nrith and P. L. Vohrn, for the respondents.
'
l!l61. August 21. Th!' .Judgment of the Court
wa.s delivered by
DAH Ge PTA, J .-This •1ppeal by special lca.v.e
raises a qucAtion of the <·orrect intt>rpretation of
some
words in s. l 8A( l )( b)
of the Industries
(Development and Rcgnlrttion) Act, 1!)51.
Tho
Central Government made an onler under s. 15 of -111-·
that Aet appointing a committee of three . persons ·
for the purpose of·making full and complete inv.csti'
•
3 S.C.R.
SUP~EME COURT REPORTS
173
•' .
g111tion intp the oircumRtances o(thi;i .c11se as it was
of opinion that there had been or was likely to-be-11
substantial fall in the volume of production .in res·
pect of cotton textiles manufactured in the industrial
undertaking known as Hathisingh Manufacturing
Company Ltd., Ahmedabad, for which having regard
to the economic conditions prevailing there was no
justification. After the committee made its report
the Central Government being of opinion thereupon
that this industrial undertaking was being managed
in a manner highly detrimental to public interest
made an order under s.ISA of the Act authorising
Ambalal Shah (the first appellant before us) to take
over the management of the whole of the said
undertaking.
Against this order the industrial undertaking
and its proprietor-who are the two respondents
before us-filed a petition in the Gujarat High
Court under Art. 226 of the Constitution praying for
issue of writs directing the authorised controller
and the Union of India not to take over the man111gement on the basis of the order under s.18A. The
' main ground on which the application was bas!)d
~-t
was that on a proper construction of s.ISA {l)(b)
the Central Government has the right to ,make an
order thereunder only where the investigation made
under s. 15 was initiated on the basis of the opinion
as mentioned in. s.15(b)-that the industrial under.
taking is being managed in a
manner highly
,
detrimental to the.scheduled industry concerned· or
,
to public interest. It was also urged that in fact
the committee appointed to investigate had r10t
directed its investigation into the question whether
the industrial undertaking was being managed in
the manner· mentioned above.
The other grounds
mentioned in the petition which were howev!')r
abandoned at the time of the hearing included one
that ~he alleged opinion formed by the Government
~......_as mentioned in the order under s.18A w~s in the
~~iience of an;y rq;iterial _for tl\e same in the report
-·-
Shri Aiiil>QlsL
M. 'Sl+sh
. : ·v,
Hstli>.ir;gh
Alrmufac1flr·ing
Co.; 'IJ_d.
pas ~uptaJ.
19'1
S,,_i Aoibolol
M.$114k
v:
H1llli .... gh
Manufacturing
Co., Lid.
DOI G•~la J.
.,
174
SUPREME COURT REPORTS
(1962)
of tb,e investigating committee and therefore WM
arbitrary, capricious and malafidc.
On bahalf of the Government and the authorised controller it was urged that the question which
one of the five opinions mentioned in s.15 formed
the basis of the investigation under that section
was wholly immaterial. The allegation that the
investigating committee hall not directed it.a
investigation into tho question whether the undertaking was being managed in a manner highly
detrimental to the scheduled industry concl'rnerl or
to public interest was also denied.
The High Court however came to the conclusion that on a correct construction of s. ISA (l)(b)
it was necessary before any order could be made
thereunder that the investigation should have been
initiated on the basis of the opinion mentioned in
s.15(b) of the Act. It also accepted the petitioners'
contention that no investigation had in fact been
held into the question, whether the undertaking
was being managed in a manner highly detrimental
to public interest. Accordingly it made an order
"setting aside the order of the Central Government
dated 28th July, 1960, and directing the respondentll not to interfere with or take over the
management of the undertaking of the
first
petitioner, namely "Hathisingh Mills" by virtue of
or in pursuance of the said order''. It is against
this decision that the present appeal is directed.
The principal question in appeal is whether
the High Court is right in its view as regards the
construction of section ISA.
The relevant portion
of s.ISA(l) runs thus :-
"If the Central Government is of opinion
that-
~)
x
x
x
x
·•
( b) an industrial undertaking in respect
of which an investigation has been made ,..... _,
\mder •· 15 (whether or not an;r directioiw
r
-
3.S.O.R.
SUPREME COURT ~EPORTS
175
hl!-ve been·. issued to. the 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 control as may be
specified in the order ............ "
The ~ispute is over the construction of the words
"an ·investigation has been made under section 15".
Section 15 is in these words :-
"Where the Central Government is of the
opinion that-
( a) in respect of any scheduled industry
· or industrial undertaking or undertakings-
( i) there has been, or is likely to be
a substantial fall in the volume of pro.
duction in respect of any article or class
of articles relatable to that industry or
manufactured or produced in the industrial
undertaking or undertakings, as the case
• may be, for which having regard to the
economic conditions prevailing, there is
no justification ; or
(ii) there has been or is likely to bea
marked deterioration in the quality of
any article or class of articles relatable
to that industry or manufactured or
produced in the industrial undertaking or ·
undertakings, as the case may be, which
could have been or can be avoided; or ·
(iii) there has been or is likely to be
a rise in the price of any article or class
of articles relatable to .that industry or
manufactured or produced in the indus-
.trial \!ndertakin¥3.>r undertakin$S as t4.e
1i61
SMi .lltiibalal
M. Shah ...
v.
HathiMingh
Manuf@turing
Co., Ltd.
Das GUpta J. .
IQdl
Slwi ..,,a/al
&t:SA.h
v.
n .ih4,U.,h
~latiUf.Wrin1
Co.; Lid.
Dai Gupta J.
17G
I
SUPRE!llE COURT·REPORTS
[1962]'
· ca'Be may ·be, for which there is no.justi-
'flcation ; or
·
·
(iv) it is necessary lo take any such
action as is 11rovidcd in this Chapter for
the purpose of conserving any resourOM
of national importanc0 which are utilized
in the industry or, the industria 1 unrlortak ing or 11ndcrt;i.kil1gs, as the case may
be;~·
.
(b) any induRtri&I undertaking is being
managed in a manner highly detrimental to
the scl1eduled industry concerned or to public
interest, the Central Government may make
or cause t<J be made a full and complete
investigation into the circumstances-. ,of the
case by such person or body of persons as it
may appoint for the purpose."
It may b~ mentioned here t11at s.15( b) as it
orginally stood was amended· il1 Hl:j[j and it
was after the
amendment that the words as
mc1itio11ed ·above appear. Reference may also be
made in passing to s.IG under which once an
.investigation under s.15 _has been commenced or
completed the Central Government if it considers
desirable; (llay issue directions to the industrial
undertaking or u1\dertakings concerned in several
matters. Socti6n 17 of the original Act was repealed
in l9ii3 by Act 26 of 1953. The same amending
Act introduced into this Act two new chaptersChapter IIIA and Chapt~r IIIB of which s.18A in
Chapter IIIA makes provisions as set out above for
an order by tho Central Government authorising
any person or body of persons to take over the
management of.the whole or any part of tho undertaking.
These provisions of s.18A it m'\y be mentioned
tako the place ·of tho pro;visions that previously
appeared in s.17 (1). That section, now repealed,
had empowered tho Central Government to authorise
any perMa, .or develo:p~ent :Council or a.n;r other
'
_,,_ ....
--
r
'
3 S.C.R.
SUPREl\iE COURT REPORTS
177
body <Jf persons to :take over:the roanagement of an.
undertaking or to exerc.ise with .. reepect thereto .such
functions of control as might bQ provided by the
order, in one class of cases only-viz., where after
a direction had been issued in pursuance of s. 16
the Central Government was of opinion that tha
directions had not been complied with and that the
industrial undertaking in respect of which directions
had been issued was being managed in a manner
highly detrimental to the scheduled industry concerne<j or to public interest. The present sJSA .
empowers the Government to authorise any person
or persons to take over the management or to
e:x:cercise such functious of control as may be
specified, in two classes of cases. The first of these
classes is mentioned in cl. (a} of s.ISA(l), viz.,
where the Central Government·· is of opinion that
dh·ections issued in pursuance ofs.16 have not been
complied with by an industrial . undertaking. The
S!lcond class with which we are here directly concerned is mentio11ed in cL (b )-viz., where the
Central Government is.· of the opinion that an
industrial undertaking in respect of which an investigation has been made under s.15 is being
managed in a manner highly detrimental to the
scheduled industry concerned or to public iriterestirrespective of whether any directions had bei:;n
issued in pursuance of s.16 or not. What is noticeable in the wording of this clause is that while an
investigation under s.15 may ·be initiated in respect
of an industrial undertaking where the Contra,!
Government is of any of the five opinions mentioned
in s.15(a)(i), 15(a)(ii), 15(a)(iii), l5(a)(iv) and s.15(b),
s;I8A(l)(b) does not refer to any of these opinions.
Inde!ld, it . does not refer at all to the question of
the initiation of tbe investigation and mentions
only the making of the investigation under s.15.
Read without the addition of anything more, the
language of s.18 A (I) (b) empowers the Central
Government to authorise .a person or persons to take
oyerthe manag<w.ie~t (;)fa,n ,in~ustrial ~gertakin¥
1D6J
-~-
Sltri~al
111~$/iah
v.
Halhja;.,h
Man'4,f~/llwillfl
CtJ.,LCd.
Das '"Gupta J.
111111 --
s 11ri Adalbl .
M:Sl.a>.·
v.
Ilalhi4ingh
M~ttri11q
Ci •• Lkl.
---.
Da' Gnpti:.i J.
li8
SUPREME COURT B.EPORTS · (1962)
or to exercise specified functions
of control
in respect of that undertaking, if the one condition
of an investigation made under s.15 has been fuJ.
filled irrespective of on what opinion that investigat.ion was initiated and the further condition is
fnfilllcd that the Ci:ntral Government is of opinion
that such undertaking is being managed in a manner
highly detrimental t') the scheduled industry coneernc<l or to public interest.
'I'hc contention made on behalf of the respondents hcfore ns which found favour with the Jligh
Court is tlmt when the legislature used the words
"an investigation has heen made under s.lG" it
meant. "an im·estigation has been made under s.l!i
ha.~ed on an opinion of the Central Go,·ernment
that the industrial undertaking is being managed
in a manner highly detrimental t-0 the scheduled
industry concerned or to public interest." ·we
should have thought that if the legislature wanted
to express such an intention it would not have
hesita t cd to use the additional words mentioned
abov<'-
It was urged, however, on behalf of the
respondents that these further words, i·iz., "baccd
on an opinion of the Central Government that the
industrial undertaking is being managed in a
manner highly detrimental t-0 the scheduled industry
concerned or to public interest" arc implicit in cl.(b)
of s. l8A. In his kngthy address to convince us of
the eorrectncss of this contention the learned
counsel advanced in substance only two arguments.
The first is tl11t it is only where tho im·estigation
under s.15 is hitiatcd on an opinion mentioned in
s.15(b)-that th~ industrial undertaking is being
managed in a manner highly detrimental to the
scheduled industry concerned or to public int<Jrostthat the report of the investigation can furnish the
government with materials on which any opinion
can be formed that an industrial undcrta1.ing is being
mana"cd in a manner highly detrimental to the
sched~led industry concerned or to public interest.
For this &ritlmen~ we can find no b~is. lt appears t~·
-
·'
3 S.C.R.
· SUPREME OOURT REPORTS
179
us that where the investigation has been initiated, in
r~$pect of an industrial undertaking, on an opinion
that there has been or is likely to be a fall in
the volume of production for which having regard
to the economic conditions there is no justification
s.15(a)(i) or an opinion that there has been or is
likely to be a marked deterioration in the quality
of any article which could have been or can be
avoided s.15(a)(ii); or an opinion that there has
been or is likely to be a rise in the price of any
article for which there is no justification s.15(a)(iii);
or an opinion that it is necessary to take
action for the purpose of conserving any resources of national importance s.15 (a)(iv), the
investigation in order to be complete must also
consider the quality of the management of the
undertaking just as it would so consider the quality
of management where the investigation is initiated
on an opinion that the industrial undertaking i<i
being managed in a manner highly detrimental to
the scheduled industry concerned or to public
interest. For, even when the investigation has
been initiated on the Government's forming any
of the opinions mentioned in the four sub-clauses
of cl. (a) of s.15, the investigator has necessarily
to examine three matters : ( 1) whether the opinion
formed by the Government is correct; secondly,
what are the causes of this state of things, viz., the
unjustifiable fall in the volume of production or the
deterioration in the quality of the article or the
rise in the price of the articles or the necessity of
an action for the purpose of conserving the resources ; and thirdly how this state of things, if it exists,
can be remedied. In considering the second of
these matters, viz., the cause of this state of things
the inyestigator must examine how far and in what
manner the quality of management is responsible
for it. He may come to the conclusion that the
management is in no way responsible and that some
other cause lies at the root of the difficulty.
Ile may
hold
on tfl.e other hand, th11t · the
.1«61. ·-
Skriiln.halal
M. Sliah
v.
Halhinngh
Mooujacturing
Co., ltd,
Das Gupta .l.
1;61
Shri i!rt!>alal
M.Shah
v.
Hathitingl•
MClrijacluring
Co., Ud.
Daa Gupt-0 J.
180
SUP.Rlμff. COUi:tT REPORTS
[1962J
nmnagcmont.is solely responsihle ; or he may hold
that while other causes also . pJay th<lir part the
defect in tho qualit.y of' managcnwnt is also in part
rcspon,iblr.
Indeed, \re find it difficult to under.
stand how an im·csti~ator having cmlmrked on an
invcstigatioi1 ordered by the Government in respect
of an industrial undertaking on the basis of one or
more of the opinions mentioned in s.15 (a) can
avoid an inquiry into the q11ality ·of the management of the industrial undertaking.
It is said
that the t18C of the words "for which h:winl! regard
to the l'conomic conditions prevailing there is no
justifi<·ation" in cl. (a)(i) imlir.'ltc and circumscribe
the scnpe of the enqniry and that the im·•·Rtigator
wo11hl only try to aseertain whether or not the
ecm1omic conditions arc such that do nr do not
justify the fall in the volume of production and
then to HCC', where neceswu\", how these C'COJ10111ic
conditions can be altered. ;ro say so is however
to miss the entire sd1cmc of
th~' legislation prv·
viding for the investigation and for action following
the ;;amc. Clearly, tho purpose of this legislation
is to enable tho Central Government to take ~uitablc
aetion to remedy the undesirable Htate of things
mentioned in the different dauBCH of s. Iii.
Tu order
that Go,·ernment ma.r ha\'e proper material:; to
know \\'hat action i;; ne<:essary ti}(' legi,Jaturc empower<·<! th•• GovernrnC'nt to make or <'ans" to be
made ·'a foll
and complete
im·estigation".
fn
s.18, it Plllpowered the person or body of persons
appointc•l to make investigation
to choose one
or more persons possessing speciq} knowledge to
assist in the
investigation and further vested
thn investigating committe<' with all the powers
of
the Civil Court
under the Code
of Civil
Procedure for the purpos<> of taking . evid<nee
on oath and for enforcing the att<'ndance of
witneSF<'s and compelling the production of do('U·
mentR and material
~bjects. The whole pm pc•e
of tho le~iela.tiun would be frustrated unkss the
investiga.tion 0 could be "full and ~o~plete." NQ -
3 S.C.R.
8UPREME COURT REPORl'S
181
im'estigation which has not examined the quality
of managAment of the industrial undertaking ('OUld
he said to be full or complete.
It was next co~tendcd that the use of the
words "circumstances of the ·case" shows that th(j"
investigation had to be made only into the matter
in respect of which the government has formed an
opinion and not into anything else. Assuming that
it is so and that the investigator has primarily to
conduct his investigation . where the investigation
has been .initiated on the basis of an opinion as
regards fall in production, into questions as regards
such fall ; and similarly, where the investigation
has been initiated on an opinion as regards the
deterioration in quality, into the question of such
deterioration, that does not alter the fact that the
investigator would have to . try tg ascertain the
causes of the fall in production or the deterioration
in quality and this part of the investigation \vould
necessarily include an investigation into the quality
of the management.
Learned Counsel contended that if an investigation made on the .basis of one or more of the
opinions mentioned in cl. (a) of s.15 was sufficient
to furnish the materials on which the Government
could form an opinion whether at not an indtlstrial
undertaking was. being managed in· a manner highly
detrimental to the scheduled industry concerned
or to public interest, cL (b) would be wholly unnecessary. With this we are unable to agree. There
may be many cases where there may be .information
justifying the formation of opinion that the indus'
trial .undertaking was being managed in a manner
highly detrimental to the scheduled industry
concerned or to public interest, even though there
are no materials for an opinion that there has been
or is likely to be an unjustifiable fall in production
or an avoidable deterioration in quality or an unjμijtifiab!e riso in prices or .. the .necessity of taking
action for the purpose of· conserving resources '"as
1961
shri):fi<balot
M. Shdh
. v . .. '
lfat.hMtiuh
Maiit(faetUYing
Co.; ·Ltrl.
Das Gupta ;i.
11161
SAr i A ..00 I .I
M. Shah
v.
Tlal1'i6iN}h
M-.J~
Co.,. Ltd.
Du Gupfa J.
i82
Sui>REME COURT REPORTS
[1962J
mentioned in the four tiUb-clauseti of cl. (a) of
8. 15.
It was also urged that it would be unfair to
expect the management, whcr6 the investigation has
been initiated on the formation of an opinion aH
mentioned in cl. 15( a), to lead any evidence aH
regards tho quality of its management and so there
is risk of the investigator being misled. We ca.n
ace no reason however for any management to have
any doubt on the question that investigation would
be directed among other things to the question of
quality of management. 'Ve believe that one of
tho first things that any manago~ont would do
when an investigation is initiated on the basis of
any such opinion would be to. try to show how
efficient it was and how in spite of the high quali~y
of its management the misdeeds of labour or the
unsympathetic attitude of Government or the difficulties of trail-sport or some other cause beyond thei.r
control was !·esponsihle for the undcsirao)e state of
thingR into which the
inve~tigation was being
held.
The argument that except where the investigation has been initiated on the basis of an opinion
mentioned ins. 15(b) thC'rc would be no mawrial
for the Government to form an opinion that the
industrial undertaking was being managed in a.
manner highly detrimental to the scheduled industry
concerned or to public intoreot, therefore fails.
Equally unwnablc is the second argument
advanced bv tho learned cmmsel that absurd results
would follo;v if the words "investigation has beon
made under section 15" arc held to include investigation8 based on any of the opinions mentioned in
s.15(a). Asked to mention what the absurd results
would he the learned counsel could only say that
an order under s. 18A( l )(b) would be unfair in such
cases, as the owner of an industrial undertaking
would have no notice thatthe quality of manage·
ment was ·being inve1ti&a.t-0d. That will be, Mys
1
3 S.d.R.
SUPR1l1ME COURT R:liIPOR'.rS
183
the learned counsel, condemning a person unheard.
This argument is really based on the assumption
that when the investigation has been initiated on
the basis of any of the opinions mentioned in cl. (a),
the quality of the management will not be investigated. As we have stated earlier, there is no .basis
for this assumption.
We have therefore come to the conclusion
that the plain words used by the legislature "in
respect of which an investigation has been made
under section 15" cannot be cut down by the
restricting phrase "based on an opinion that the
industrial undertaking is being managed in a manner
highly detrimental to the scheduled industry
concerned or to public interest." We must therefore
hold that the construction placed by the High Court
oh these words in s.lSA(l)(b) is not correct.
This brings us to the consideration of ·the
other question raised, viz., whether in fact the
investigation bad been held into the question
whether the industrial undertaking was being
managed in a manner highly detrimental to· the
scheduled industry concerned or to public interest.
On this question the High Court came to a coi1clusion
adverse to the appellants. It is not clear how the
respondents though abandoning the ground that
Government had no material before it for forming the
opinion that the undertaking was being n:ianaged
in a manner highly detrimental to the scheduled
industry concemed or to public interest, could
still urge that no investigation had been actually
held into the question whether the industrial undertaking was being managed in a ma~mer highly
detrimental to the scheduled industry concerned or
to public interest. The question whether investigation had in fact been held or not into the question
whether the industrial undertaking was being
managed in a.· manner highly detrimental to the
selwd11led industry concerned or to public interest,
would be relevant only to show that the Government
;1961
S~ri-4mbal;,l
/If; S/Jah
•V.
ll<!t.iiaingh
.Af """"l!<W•ing
Ctt.·, '!i;_tq,.·,
DaaGuptaJ,
i~z
Shr; A'no&.IW
M. Sltdh
v.
ll~h
JI~'""
CA., -I.JAi.
l>a• Gltf'li: J.
184
[1962]
acted without any material before it or aeted
malu fide. If the allegation of' mllfo fide or the
allegation that thoro was n<r material before thn
Government for forming its opinion is ;ibandoned,
the question whether an invcetigatiou had in fact
been held into the question whether the iudu~tria.l
undertaking was heing managed in a mannrr highly
detrimental t() the Bchcdulod imlustrv concl'rncd or
to public interest, hccomt'A irrcle\•ant·:
We are satisfied however tl1at the High Court
was wrong in it;i view that it, was not established
that invp,stiga.tion had in fact hecu held into this
question. We find that the assertion in the petition
uncle!" Art. 226 that the inve8tigatiou had not been
directed "towards any alleged mis-management· of
the mills:' was denied in the affidavit sworn on
behalf of the Union of India. When thereafter on
October IO, 1960, affidavit;; in rcjoinrler filed on
behalf of the petitioners affirmed that "no question
was put which would suggest that the committee
wl!'s
!?Ve8tigatin~ ~to any mismanagemen.t of the
mills, an affidavit of Mr. Thomae de Sa, who was
a member of the invest.igating committee was filed
on behalf of tho Union of. India. This affidavit
made the categorical assertion that the "committee
investigated not only into the question relating to
the fall in the volume of production iu respect of
cotton textiles manufactttred in the said industrial
undertaking but also made a full and complete
in\'C'Rtigation into the cjrcumstnnees of the working
of the saicl'--industrial unclcrtak:ng including the
management th"ercof and. as to whether tho said
imdertaking was being managed in a mannnr detrimental to tho indus.fi-y concerned or to public
interest." The High Court has thought it fit. to reject
this testimony of !\fr. De Sn. for reasons which·appear
to us to be Wholly insufficient. It appears that during the hearing the Ad.vo~ate.Gericral asked fortune
to file an sffidavit preferably of Mr. P.H. Bhl}ta
who 'was tli.e non-o11icial member of the e11tn.
mittce of i.ilvostigation but nltimatOly filed tho
>
3 s.c.R.
. SUPREME COURT REPORTS
185
affidavit of Mr. De Sa and not the affidavit of
Mr. Bhuta. ThP High Court seems to think that as
Mr. Bhuta was an independent member of the
investigation committee while Mr. De Sa was in thA
servjce of the Government Mr. De Sa's statement is
open to suspicion.
In our view such suspicion of
high public officials
i~ . J10t ordinarily ju$tifietf.
M.r. De Saw.as as niuch a member. of the in\'.e$t,igatiμg
committee as Mr. Bhuta .. a1Jd so noJess · 9om1mte.9Ji
than Mr. B!mt11 to testify~as.regards the iuat((Jrjri
iss11e.
We do :not think it right to .suspect. his
ho_n(Jsty merely because he is an officer of .the UPion
of India. The learned judges of the Jiigh Court
appear_ also to have lost sight of the fact th(lt tb~
questionnaire whieh annexed as annexure X tp the
affidavit of the second respondent Rajendl'll. Pro~ad
Manek Lal itself includes a number of· questions
which show unmistakably that the quality" of mana,gement was being enquired in~o .. ··.
·
· · ·
···
.-~.:
A circumstance which a."ppears. to ... have
weighed with the High Court is that the repo!'t
of the committee which as the learned.judges rightly
say would be the best evidence to show "that· there
was in fact an investigation into the question of the
management of the said undertaking" was not
produced by the Union of India when called upon
to do so by Mr. Nanavati on behalf of the pititioners.
It is proper to mention that it does not appl)ar
that the learned judges themselves directed or
desired the Advocate-General to produce the report
for their inspection. It further appears that no
written application for the production of tho clocu.
ment was made on behalf of the petitioners. It
does not seem to us to be fair to draw an inference
against the Union of India merely beca11se an
informal request by the petitioners' advocate was
not acceded to. In view of what happened in the
court below we
asked the appellants' counsel
whether he was prepared to produce the report
before us.
The learned counsel readily produced
the report and after examining the relevant portion
.1961
. shi-• Amb<Ztoz
M.Slt.ah.
¥·
Hatliiaingb
Manuj~inv
Og,,_f!d.
/,)•! a.iijji • . J.
lltJ --
isti
SUPREMJ<j OOURT REPOR'rS
(1862]
whero the report deals with the question of management, wa read it out in Court so that the reepo11dents' counsel could know the exact situation. This
portion of the report sa}'l! :-"that the management
is in the hands of a young and inexperienced
person ............ ; and the committee is of the opinion
that the .present manage.r is in~apable of handliuR
the aff'all'S of t.he mills ............ ; the
present
man11,ging agents are incapable of investing any
further ............ ". The fact that tho report does
contain Mlch an opinion iB sufficient to show that
&n invel!tigation was actually held into the question
of the quality of the management as affirmed by
Mr. De Sa. The High Court's view therefore that
no investigation was held into the question of ~he
management of the undertaking was wroni.
We have therefore comn to th1• cour!usio11
that tho respondents were not entitled tc1 any writ
<lirecting these appellants not to gi\'e effect to thu
Government's order under s.18A(l)(b). We thorofore allow the appeal, set aside the order of the
High Court directing the issue of the writ and order
that the application umkr Art. 226 of the Constitution be dismissed.
The appellants will get their
costs both here and below.
A ppwl allou-cd.
~··