# THE KESHAV MILLS COMPANY LTD. & ANR v. UNION OF·INDIA AND ORS

- **Citation:** [1973] 3 S.C.R. 22
- **Court:** Supreme Court of India
- **Decided:** 1972-12-08
- **Bench:** A. N. Grover, K. K. Mathew, A. K. Mukherjea
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-keshav-mills-company-ltd-anr-v-union-of-india-and-ors-5809
- **Pages:** 17

## Headnote

B
Ittdustries
(Development
and
Regulation) Act
1951-S. 18Awhether it is necessary to observe the rules of natural justice once during
the irivestigation anfl again when action is taken under S. lSA.
The Keshav Mills Co. Ltd. and another challenged the validity of an
order passed by the Governmen1 of India, ullder S. 18-A of the Industries
(Development and Regulation) Act, 1951 by which the Gujarat State
Textile Corporation Ltd.' has
been
appointed and a.uthorised controller
of the Company for a period of five years. The Company is the owner
of a cotton textile mill and it was established in 1934. Till 1965, the
Company made flourishing business.
After the year 1964·65, the Com·
pany fell on evil days and the textile mill of the company was one of the
12 sick textile mills i:n Gujarat, which had to be closed down during 1966
and 1968. On 31st May 1969, Government of India passed an order
appointing a Committee for investigation into the affairs of the Company
under the provisions of S. 15 of the Act.
In due course, the Investigat·
ing Committee completed its inquiry and submitted its report to the Government. On 24th November, 1970, the Government of India passed
an Order under S. 18-A of the Act autl)orising the Gujarat State Textile
Corporation to take over the management of the Company for a period
of five years from the date of public-.ition of that order in the Official
Gazette.
The Company filed a writ petition before the High .Court of Delhi
praying for appropriate relief.
The High Court dismissed the petition.
The main -contention of the appe1lants before the Delhi High Court was
that Government of India was not competent to proceed under S. 18-A
a11ainst the company without supplying before hand, a copy of the report
of the Investigating Committee to the Company.
Acocrding to the appel·
)ants. the Government should not only have supplied a copy of the report
to the Company, but should also have given a hearing to the Company
before finally deciding upon taking over the company's undertaking under
S. 18·A of the Act.
This contention was ' pressed on behalf of the appellants in spite of the fact that an opportunity had been given by the
Investigating Committee to the management and the employees of the
Company for adducing evidence and for making representation before the
r.ompletion of the investigation.
The only question that this Court had to decide was whether after the
undertaking had already been given an opportunity of being heard at the
time of investigation, the Company is entitled to have a copy of the
report and to make, if necessary, further representation about that report
before a final decision is made by the Government under S. 18-A of the
Act. The answer depended on the following questions; (I) Is it neces·
Sary to observe the rules of natural justice before enforcing a decision
under S. 18·A of the Act.
(2) What are the rules of natural justice in
such a case.
(3) (a) In the present case, have the rules to be observed
once during the investigation under S. 15 and then again, after the investigation is completed and action on the report of the Investigating Comc
D
F
G
H
A
B
c
D
E
F
G
KESHAV MILLS LTD. v. UNION (Mu,kherjea, J.)
23
mittee taken under S. lS.-A (b) Was it necessary to furnish a copy of the
Investigating Committee\ Report hefore passing an order of take over?
Dismissing the appeal,
HELD :
(i) Althoug 1 the order of the Government of India taking
over the management of th3 Company was a purely executive order, embodying an administrative decision, even so, the question of natural justice does arise in this case.
It is too lat~ nnw to contend that the principles of natural justice do not apply to administrative orders or proceedings. [29G]
Regina v. Gaming Board, exparte Benaim [1970] 2 W.L.R.
1009, re·
ferred to.
(ii) The concept of natural justice cannot be put 'into a straight jacket
It is futile to look for definition' or standards of natural justice.
The
only essential point that has to b

## Text

_Characters 0–39,941 of 45,257. This is a partial read: ask again with offset=39941 for what follows._

22
THE KESHAV MILLS COMPANY LTD. & ANR.
A
v.
UNION OF·INDIA AND ORS.
December 8, 1972
[A. N. GROVER, K. K. MATHEW AND A. K. MUKHERJEA, JJ.j
B
Ittdustries
(Development
and
Regulation) Act
1951-S. 18Awhether it is necessary to observe the rules of natural justice once during
the irivestigation anfl again when action is taken under S. lSA.
The Keshav Mills Co. Ltd. and another challenged the validity of an
order passed by the Governmen1 of India, ullder S. 18-A of the Industries
(Development and Regulation) Act, 1951 by which the Gujarat State
Textile Corporation Ltd.' has
been
appointed and a.uthorised controller
of the Company for a period of five years. The Company is the owner
of a cotton textile mill and it was established in 1934. Till 1965, the
Company made flourishing business.
After the year 1964·65, the Com·
pany fell on evil days and the textile mill of the company was one of the
12 sick textile mills i:n Gujarat, which had to be closed down during 1966
and 1968. On 31st May 1969, Government of India passed an order
appointing a Committee for investigation into the affairs of the Company
under the provisions of S. 15 of the Act.
In due course, the Investigat·
ing Committee completed its inquiry and submitted its report to the Government. On 24th November, 1970, the Government of India passed
an Order under S. 18-A of the Act autl)orising the Gujarat State Textile
Corporation to take over the management of the Company for a period
of five years from the date of public-.ition of that order in the Official
Gazette.
The Company filed a writ petition before the High .Court of Delhi
praying for appropriate relief.
The High Court dismissed the petition.
The main -contention of the appe1lants before the Delhi High Court was
that Government of India was not competent to proceed under S. 18-A
a11ainst the company without supplying before hand, a copy of the report
of the Investigating Committee to the Company.
Acocrding to the appel·
)ants. the Government should not only have supplied a copy of the report
to the Company, but should also have given a hearing to the Company
before finally deciding upon taking over the company's undertaking under
S. 18·A of the Act.
This contention was ' pressed on behalf of the appellants in spite of the fact that an opportunity had been given by the
Investigating Committee to the management and the employees of the
Company for adducing evidence and for making representation before the
r.ompletion of the investigation.
The only question that this Court had to decide was whether after the
undertaking had already been given an opportunity of being heard at the
time of investigation, the Company is entitled to have a copy of the
report and to make, if necessary, further representation about that report
before a final decision is made by the Government under S. 18-A of the
Act. The answer depended on the following questions; (I) Is it neces·
Sary to observe the rules of natural justice before enforcing a decision
under S. 18·A of the Act.
(2) What are the rules of natural justice in
such a case.
(3) (a) In the present case, have the rules to be observed
once during the investigation under S. 15 and then again, after the investigation is completed and action on the report of the Investigating Comc
D
F
G
H
A
B
c
D
E
F
G
KESHAV MILLS LTD. v. UNION (Mu,kherjea, J.)
23
mittee taken under S. lS.-A (b) Was it necessary to furnish a copy of the
Investigating Committee\ Report hefore passing an order of take over?
Dismissing the appeal,
HELD :
(i) Althoug 1 the order of the Government of India taking
over the management of th3 Company was a purely executive order, embodying an administrative decision, even so, the question of natural justice does arise in this case.
It is too lat~ nnw to contend that the principles of natural justice do not apply to administrative orders or proceedings. [29G]
Regina v. Gaming Board, exparte Benaim [1970] 2 W.L.R.
1009, re·
ferred to.
(ii) The concept of natural justice cannot be put 'into a straight jacket
It is futile to look for definition' or standards of natural justice.
The
only essential point that has to be kept in mind in all cases is that the
person concerned should have a reasonable opportunity of presenting his
case and u:lministrative
authority
concerned
should act fairly, imM
partia1Iy and reasonably.
It only means that such measure of natural
justice should be applied as was described by Lord Reid in Ridge v. Baldwin, as "insusceptible of exact definition. but what a reasonable man
would regard as a fair procedure in particular circumstances."
However,
every thing will depend on the actual facts and circumstances of the
case.
[30BJ
(iii) The Act was passed to provide for development and regulation
of irnporta;nt industries, the activities of which affect the country as a
whole and the development of which must be governed. by economic factors of all India import. For achieving this purpose, the Act confers certain powers on Government to secure the planning of future development
on sound and balanced line by the licensingi of all new undert'3.kings and
also by making rules for the registration of existing undertakings fo:r regulation and production and dcvelopme1t of the industries and also in c:!rtain cases, by taking over the control and m'3.nagcrnent of ~rtain industrial
concerns.
Since .the appellants have received a fair treatment -and also all
reasonable opportunities to make out their oWn case before Government,
they cannot be allowed tD make any grievance of the fact that they were
not given a formal notice calling upon them to show caus.e why their
undertaking should not be taken over, or that they had not been furnished with a copy of the report,
[30H, 35H]
(iv) rn the present Case non-disclosure of the report of the Investigating Committee has not caused any prejudice whatso~ver to the appelIa:nts.
Under the circumstances, the High Court's Order
i~ c·onfirmed.
r38FJ
Local Government Board v. Arlidge, [1915] A.C. 120, referred to.
CIVIL APPELLATE JURISDICTlON: Civil Appeal No. J 183 of
1972.
Appeal by special leave from the judgmenot and order dated
H
March 3, 1972 of the Delhi High Court in Civil Writ No. 1366 of
1970.
I. N. Shroff for the appellants.
24
SUPREME COURT REPORTS
[1973] 3 S.C.R.
F. S. Narimm1 Additional Solicitor General of India, P. P. Rao
and B. D. Sharma for respondent No. I.
·
J. L. Hathi, K. L. Hathi and P. C. Kapur for resp.mdent
Nos. 2 and 3.
The Ju:l~ment of the Court was delivered by
Mukllerjea, J.
This appeal by special leave from a judgment
and order of the Delhi High Court arises out of a petition under
Articles 226 and 227 of the Constitution cf India made by Keshav
Mills Company Limited (hereinafter referred to as the Company)
and Navin Chandra Chandulal Parekh who is a shareholder and a
Director of the Company challenging the validity of an
order
dated 24 November 1970 passed by the Government of India
under Sec. l 8A of the Industries (Development and Regulation)
Act, 1951 (65 of 1951) (hereinafter referred to as the Act) by
which the Gujarat State Textile Corporation Ltd. has been
appointed the authorisec! controller of the Company for a period
of five years. The Delhi High Court dismissed the writ petition
after hearing the parties and hence this appeal. The facts and
circumstances leading to the filing of the petition are briefly
stated as follows.
The Company is the owner of a cotton textile mill at Petlad
known as Kcshav Mills. The Company was established in 1934
and, as far as one can judge from the facts and figures cited in
the petition, the Company made flourishing business between the
years 1935 and 1965. Indeed, if the appellants' figures are to be
believed,-and there is no reason to disbelieve them, each holder
of the 250 ordinary shares of the Company seems to have
received Rs. 33,685 in course of a period of 30 years between
1935 and 1964-65 as profit on an initial investment of Rs. 1,000
only. On top of this the Company's capital block was increased
from Rs. I 0.62 lakhs in 1935 to Rs. 78,38,900 at the end of the
year 1964-65. All these profits, however, went to a close group
of people, since 80 per cent of the share capital belongs to petitioner Parekh, his family members, relations and friends and only
20 per cent share-capital is in the hands of the members of the
public. The Company, however, fell on evil days after the year
1964-65 and the textile mill of the Company was one of the 12
sick -textile mills in Gujarat which had to be closed down during
1966 and 1968. We are not here directly concerned with the
various causes wJiich were resoonsible for this sudden reversal of
the fortunes of this Company. Suffice it to say that on 31 May
1969 the Government of India passed an order appointing a committee for. investigating into the affairs of the Comp~ny under the
provisions of Sec. 15 of the Act. We shall hereafter refer to this
A
B
c
D
E
F
G
H
A
B
c
D
E
F
G
'H
I
KESHAV MILLS LTD. V. UNION (Mukherjea, !.)
25
Committee as the Investigating Committee. The material portion
of the order dated 31 May 1969 is reproduced as hereunder :-
"S.0./ l 5IDRAl 69 :-Whereas the Centt:al Government is of the opinion that there has ·been, or is likely to
be substantial fall in the volume of production in respect of cotton textiles manufactured in the industrial
undertaking known as the Petlad Keshav Mills Co. Ltd.,
Petlad (Gujarat) for which, having regard to the economic conditions prevailing there is no justification.
Now, therefore, in exercise of the powers conferred
by Section 15 of the Industries (Development and
Regulation) Act, 1951 (65 of 1951), the Central Government hereby appoints, for the purpose of making
full and complete investigation into the circumstances
of the case. a body of persons consisting of:-
Chairman
(1) Shri I. C Shah,
(2)
(3)
(4)
(General Manager,
Ambica Group of Mills,
Ahmedabad).
Members
Shri M. C. Mirchandani.
Director '(Technical),
·
National Textile Corporation.
Shri J. P. Singh,
Director (Finance),
National Textile Corporation.
Shri M. Sivagnanam,
Industries Commissioner,
Government of Gujarat,
Ahmed a bad.
(5) Shri V. A. Mahajan,
Senior Accounts Officer.
Office of the Regional Director,
Company Law Board, Bombay.
(6) Shri Y. L. N. Achar,
Inspecting Officer,
Office of the T•2xtile Commissioner,
Bombay.
In this connection it may be relevant to set out some extracts
from the COIDmunication that was sent out on 11 June 1969 by
the G?vemment of India t? t~e various members of the aforesaid
committee.
The communication which was in the nature of a
26
SUPREME COURT REPORTS
[J 973] 3 S.C.R.
supplemental order by the Government of India detailing
the
point of reference to the Investigating Committee was to the
followin~ effect :-
"Subject :-Appointment
of
Investigation Committee for
Pet!ad Keshav Mills
Co. Ltd.
Petlad
(Gujarat) under the Industries
(Development
and
Regulation) Act, 1951.
Sir,
I am directed to enclose a copy of order dated
31st May, 1969, issued under Section
15
of
the
Industries (Development and Regulation) Act, 1951,
setting up" a committ·~e to enquire into the affairs of
Petlad Keshav Mills Co. Ltd., Petlad,
Gujarat for
your information and necessary action.
The investigation should also be directed to the following specific
points:-
A
c
(a) Reasons for the present state of affairs.
n
(b) Deficiencies, if any, in the existing machinery.
( c) Immediate requirements, under &~parate heads
of accounts, of working capital if any.
( d) Requirement of long-term
capital for
mvdernisation/rehabilitation.
E
(e) financial result of:-
(i) Immediate working without further invest-,
ment on capital account.
(ii) Working after further investment on capital
account.
(f) Suggestion regarding source of funds required
under ( c) and ( d) and security available for
their re-payment.
I am further to request that 15 copies of the report
may kindly be submitted to this Ministry at a
very
early date."
In due course, the Investigating Committee completed its
inquiry and submitted its report to the Government some time
about January, 1970.
On or about 24 Nov>omber
1970
the
Government of India passed an order under Sec. 18A of the Act
authorising the Gujarat State Textile Corporation
(hereinafter
to be referred to as the Authorised Controller to take over the
management of the whole of the undertaking of the Compar.y
F
G
H
t
'
A
B
c
D
E
KESHAV MILLS LTD. V. UNION (Mukherjea, !.)
27
for a period of five years from the date of publication of that
order in the Official Ga:z>~tte. The relevant -order is
in
the
fo!lowinl! terms :-
"S.Q.-/18A/JDRA/70 Whereas the Central Government is of the opinion that the Keshav Mills Co. Ltd.,
Petlad, an industrial undertaking in respect of which
an investigation has been made under Section 15 of
the Industrial (Development and
Regulation)
Act,
1951 (65 of 1951 ), is being managed in a manner
highly detrimental to public interest.
Now, therefore, in exercise of the powers conferred
by section l 8A of the said Act, the Central Government authorises the Gujarat State Textile Corporation
(hereinafter referred to as Authorised Controller) to
take over the management of the whole of the said
undertaking namely, the Keshav Mills Co. Ltd., Petlad,
subject to
the
following
terms
and
conditions,
1iamely :-
( i) The Authorised Controller shall comply with all
directions issued from
lime to time
by ihe
Central Government;
(ii) The Authorised Controller shall hold office for
five years from the date of publication in the
official ga:z>~tte of this notified order;
(iii) The Central Government may
terminate the
appointment of the
Authorised Controller
earlier if it considers necessary to do so.
This order will have effect for a period of five years
commencing from 'the date of its
publication in the
F
offidal gazette."
On 5 December 1970 one R. C. Bhatt, Assistant Secretary
to the Authorised Controller went to the Company's office
at
Petlad and presented a letter from his principals authorisini: him
to take over possession of the mill of the Company and requested
the Company to hand over the keys of the office buildings, goG
downs and other departments as well as the office records, account
books etc. to Bhatt.
The Company handed over the keys of the
Company's premises to R. C. Bhatt under protest. ·On 15 December 1970 the Company filed a writ petition before the High
Court of Delhi under Articles 226 and 227 of the Constitution
of India praying for "appropriate reliefs".
H
Though several grounds were taken in the writ petition, the
main contention of the appelJants before the Delhi High Court
was that it wa> not competen't for the Government of India to
proceed under S·~c. I SA against the Company without supplying
28
SUPREME COURT REPORTS
(1973) 3 S.C.R.
beforehand a copy of the report of the Investigating Committee
to the Company.
The appellants complained that though the
Investigating Committee had submitted a report to the Government of India in January, 1970 the Government did not furnish
the management of the Company with the contents of the report.
According to the appellants the Government should not only have
supplied a copy of the report to the Company but should also
have given a hearing to the Company before· finally deciding upon
taking over the Company's undertaking under Sec. 18A of the
Act.
This contention was pressed on behalf of the appdlants
in spite of the .fact that an opportunity had been given by the
Investigating Committee to the management and the employees
of the Company for adducmg evidence and making representations before the completion of the investigation.
Reliance was
placed on behalf 0£ the appellants on a Bench decision of the
Delhi High Court in Bharat Kumar Chinubhai v. Union of India
and others(').
The corr.~~tness of that decision was, however,
seriously questioned on behalf of the respondents and the single
Judge before whom the instant petition came up for hearing
referred the matter to adjudication before a Full Bench of that
High Court.
The question of law that was referred for the decision of the Full Bench was framed by the learned Judge in the
'following manner :-
"Whether in view of Rule 5 of the Investigation of
Industrial Undertakings (Procedure) Rules of
1967
provjding for an opportunity of hearing before the
Investigator and the absence of any specific provision
either in the Act or in the Rules for supplying a copy
of the Investigator's report to the management,
the
taking over of the industrial undertaking, without supplying a copy of the Invelltigator's report is vitiated?"
The Full Bench of the Delhi High Court after hearing the
parties answered the above question of law in the negative and
since this was the only question argued before them,
dismissed
the petition.
The whole dispute between the parties is in substanoo a question regarding the exact requirement of the rules of natural justice
in the facts and situation of the case.
There can be no question
that whenever an order is made under Sec. 18A against a company it has far-reaching consequences on the rights of that company, its shareholders, its employees and all persons who have
contractual dealings and transactions with that company;
It is
also not seriously questioned that before passin11: an order of "takeover" under Sec. 1 SA it is incumbent on the Government to giye
at some stage a reasonabl~_<,>pportunity to the undertaking con0) Civil Writ No. 560 of 1969: Judgment delivered on 10 February 1970.
A
B
c
D
E
F
G
H
A
B
c
D
E
F
G
KESHAV MILLS LTD. v. UNION (Mukherjea, I.)
29
cerned for making suitable representations against the proposed
take-over.
In fact, under the rule-making power conferred by
Sec. 30 of the Act the Government of India has already made a
rule viz. Rule 5 which provides for such an opportunity.
Rule 5
runs as follows :-
"5. Opportunity for
hearingr--The
Investigator
shall, before completion of his investigation, give the
Management and the employees of the undertaking or
undertakings in respect of which the investigation is
ordered, reasonable opportunity of being heard including opportunity to adduce any evidence."
The only question that we have to decide now is whether after the
undertaking has already been given such an opportunity at the
time of investi_gation it is entitled to have a copy of the report and
to make, if necessary, further representation about that report
before a final decision is made by the Government about taking
action under Sec. I SA of the Act.
Our decision on this question will depend on· our answers to the following questions :-
( i) Is it necesary at all to obesrve the rules of
natural justice before enforcing a decision
under Sec. I SA of the Act ?
(ii) What are the rules of natural justice in such a
case?
(iii) (a) In the facts and circumstances of the present case, have the rules to be observed
once during the investigation under Sec.
15 and then again after the investigation is
complete and action on the report of the
Investigating Committee taken under Sec.
ISA?
(b) Was it necessary to furnish a copy of the
Investigating Committee's Report before
passing the order of take-over ?
H
The first of these questions does not present any difficulty. It
is true that the order of the Government of India that has been
challenged by the appellants was a purely executive order embodying on administration decision.
Even so the question
of
natural _justice does arise in this case. It is too late now to cont~nd 1that the principles of natural justice need not apply to administrative orders or proceedings; in tile language of Lord Deuning
M.R. in Regina v. Gaming Board ex-parte Benaim(I)
"that
heresy was.scotched in Ridge v. Baldwin"(").
(I) [1970] 2 W.Z.R. 1009.
(2) [1964] A.C. 40.
30
SUPREME COURT REPORTS
f1973] 3 S.C.R.
The second question, however, as to what are the principles
.of natural justice that should regulate an administrative act . or
order is a much more difficult one to answer. We do not tlunk
it either feasible or even desirable to Jay down any fixed or
rigorous yard-stick in this manner.
The concept of natural
justic·~ cannot be put into a straight-jacket. It is futile,
therefore, to look for definitions or standards of natural justice from
various decisions and then try to apply them to the facts of any
given case. The only essential point that has to be kept in mind
in all cases is that the person concerned should have a reasonable opportunity of presenting his case and that the administrative authority concerned should act fairly, impartially
and
reasonably.
Where administrative officers are concerned,
the
duty is not so much to act judicially as to act fairly.
See, for
instance, the cbservations of Lord Parker in In re II. K. tan
infant) ( 1).
It only means that such measure of natural justice
should be applied as was described by Lord Reid in Ridge v.
Baldwin(') as "in susceptible of exact definition but what a
reasonable man would regard as a fair procedure in particular
circumstances".
However, even the application of the concept
of fair play requires real flexibility.
Every thing will dei)end on
the actual facts and circumstances of a case.
As Tucker L. J.
observed in Russell v. Duke of Norfolk(').
"The requirements of natural justice must depend
on the circumstances of the case, the nature of the
enquiry, ihe rules under which the tribunal is acting,
the subject matter that is being dealt with and so forth."
We now turn to the third and the last question which is in
two parts.
For answering that question we shall keep in mind
the observations of Tucker L. J. set out just now and examine
the nature and scope of the inquiry that had been carried out by the
Investigating Committee set up by the Government, the scope
and purpose of the Act and rules under which the Investigating
Committee was supposed to act, the matter that
was
being
investigated by the Committee and finally the opportunity that
was afforded to the appellants for presenting their case before
the Invesligating Committee.
The Act was passed
to
provide
for
development
and
regulation of importarrt industries the activities of which according to the Sta1ement of Objects and Reasons of the BIB which
resulted in the Act "affect the country as a whole and the development of which must be governed by economic factors of all-India
import".
For achieving this purpose the Act confers
certain
(I) [1967] 2 Q.B. 617.
(2) [ 1964] A.C. 40.
(3) [194911 All. E.R. 109
A
B
c
D
E
F
G
H
B
c
D
E
F
G
H
lCESHAV MILLS LTD, v. UNION (Mukherjea, J,)
31
powers on Government to secure the planning of future development on sound and balanced lines by the licensing of all new
undertakings and also by making rules for the registration of
existing undertakings, for regulating the production and ~evelop
ment of the industries and also, in certam cases, by takmg over
the control and management of certain industrial co~cerns. The
various powers conferred on Government as aforesaid are to be
exercised after carrying out suitable investigations.
Sec. 2 of the
Act states categorically that it is expendient in the public intere%t
that the Union should take under its control the industries specified in the First Schedule.
No attempt was made before us to
question the expediency of control by the Central Government
over any industry mentioned in the Schedule or any undertaking
pertaining to such an industry.
The industry engaged in the
manufacture and production of 'textiles' is item 23 of the First
Schedule to the Act.
Therefore, we start from the premise that
the Central Government as a matter of public policy is interested
in the well-being and ef!iciezrt administration of any undertaking
relating to the textile industry and .is also entitled to exercise some
degree of control over it. Sec. 15 empowers the Government to
cause investigation to be made into any scheduled industry or
industrial undertaking under certain circumstances, namely ( i)
if there has been or is likely to be a substantial fall in production
of articles relatable to that industry or produced by the undertaking concerned for which, in the light of the economic conditions prevailing, there is no justification; or (ii) if there has been
or is a marked deterioration in the quality of the articles relatable
to that industry or produced by the undertaking; or (iii) if there
is an unjustifiable rise in the price of such articles; or (iv) Government considers it necessary for the purpose of conserving any
resources of national importance which are utilised in that particular industry or undertaking.
Central Government may cause
such an inv~stigation also if an industrial undertaking is
being
managed in a manner which is detrimental to the scheduled industry
or to public interest.
Sec . .16 of the Act empowers the Government to issue appropriate directions to the industrial undertaking
or undertakings concerned after the investigation under Sec. 15
has been completed.
Such directions may be given for the purpose of regulating the production or fixing the standards of production of any article or articles or for taking steps to stimulate
the de~lopment of the industry or for preventing any act or practice which might reduce the production capacity or economic
value of the industrial undertaking and, finally, for controlling the
price or regulating the distribution of any article or class of articles which have been the subject matter of the investigatiton. In
certain case§, however, such indirect control may not be enough
and Government may interfere and take up the direct management or control of industrial undertakings.
Sec. 18A details the
32
SUPREME COURT REPORTS
[1973] 3 S.C.R.
circwnstances when the Government may impose such control by
authorising a person or body of persons to take over the management of the whole or any part of the undertaking.
Before the
Government assumes such management or control, the Government must be of the opinion that the undertaking concerned has
failed to comply with th·~ directions issued under Sec. 16 of the
Act or that the industrial undertaking regarding which there has
been an investigation under Sec. 15 "is being managed in a manner highly detrimental to the scheduled industry concerned or to
public interest".
In the instant case, the Government of India came to hold the
opinion that there was a substantial fall in the volume of production in respect of the Company's production of cotton textiles for
which Government apparently found no justification having re;.
gard to the prevailing economic conditions.
The Government
was perfectly within its rights to appoint, under the terms of Sec.
15, an investigating body for the purpose of making full and complete investigation into the circumstances of the case.
This
is
what the Government did and the appellants do not, as indeed
they cannot. find fault with 'this action of th·~ Government. It is
th.e admitted case that for three years prior to 1969 the Company
had been running into continual difficulties as a result of which
the Company suffered losses which amounted upto Rs.
56.76
lakhs.
In fact the mill had to be closed by the end of 1968. It
was only on 31 May 1969 that Government of India appointed
the Investigating Committee to investigate into the affairs of the
Company's mill.
The appellants do not make any grievance
against the Investigating Committee regarding the manner in
which they carried out the investigation.
It is admitted that the
Committee gave to the Company a full opportunity of being
heard and also an opportunity of adducing evidence. There. can
therefore, be no complaint that upto this stage there was any failure to observe the rules of natural justice.
In January 1970 the report of the Investigating Committee
was submitted to Government and, on the appellants' own showing. they knew that there was a liklihood Qf Government appointinl! a Controller under Sec. 18A to take over the
appellants
undertaking.
There can be no question that the appellants were
fully aware of the scope and amplitude of the investigation initiated by Government.
A copy of the letter dated 11 June 1969
which had been addressed to the members of the Investigating
Commit~~e was sent also to the-Company at the time of setting up
of the Committee. We have already set out this letter in extenso.
The Government clearly indicated in that letter the scope
of the investigation ordered under Sec. 15. It is not possible to
suggest that the appellants were not aware of the Company's distressing economic position about the middle of 1969. The
A
B
c
D
E
F
G
II
A
ll
c
D
E
F
G
ff
KBSHAV MILLS LTD. v. UNION (Mukherjea, I.)
3 3
terms of reference of the Committee would make it clear even to
one not aware of the economic condition of the Company that
the Government was genuinely concerned about its financial
position.
Even though the enquiry itself was ordered under the
provisions of Sec. 15 (a), the Committee and the Government
had authority to treat the report as if it was also made under
Sec. 15 (b) of the Act.
In the case Qf Shri Ambalal M. Shah
and Anr. v. Hathisingh Manufacturing Co., Ltd.(') the Central
Government made an order under Sec. 15 of the Act by which a
committee of three persons was appointed for the purpose of
making a full and complete investigation into the circumstances
of the case.
Before appointing this committee the Government
came to hold the opinion that there had been a substantial fall in
the volume of production in respect of cotton textiles manufac- ·
tured by Hathisingh Manufacturing Co., Ltd. for which, having
regar<! to the economic conditions prevailing at that time there
was according to Government no justification.
After the committee had submitted its report the Central Government held the
opinion that the company was being managed in a manner highly
detrimental to public interest and made an order under Sec. 18A
of the Act authorising Ambalal M. Shah to take over the management of the -whole of the undertaking of that company.
The
legality of the order was challenged on the ground that the order
under Sec. 18A could have been made only after the Central
Government had initiated an investigation on the basis of the
opinion mentioned in Sec. 15(b) that is to say on the strength of
the opinion that the company was being managed in a manner
highly detrimental to public interest. It was argued that in so
far as the investigation ordered by the Central Gowrnment was
initiated on the formation of an opinion as mentioned in clause
(a){i) of Sec. 15, the order was illegal.
This Court held, however, the order to be perfectly valid, because the words used by
the legislature in Sec. 18A (I )(b) viz. "in respect of which an
investigation has been made under Sec. 15" could not 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".
Once an investigation has been validly made under Sec. 15 it wu
held sufficient to empower the Central Government to authorisea person to take over the management of an industrial undertaking irrespective of the nature or content of the opinion on
which the investigation was initiated.
In view of this decision
it is not possible far the appellants to contend that they were not
aware that as a result of the report of the Investigating Committee the Government could pass an order under Sec. 18A (I)-
(b) and assume management or control of the Company's under-
(!) [19621 3 S. C. R. 171.
4-L631Sup.C.l.173
34
SUPREME COURT REPORTS
[1973) 3 S.C.R.
taking.
In fact, rt appears from a letter .addressed by appellant
No. 2 Navinchandra Chandulal Parikh on behalf of the Company
to Shri H. K. Bansal, Deputy Secretary, Ministry of Foreign Trade
and Supply on 12 &ptember 1970 that the appellants had come
to know that the Government of India was in fact considering
the question· of appointing an authorised controller under Sec.
18A of the Act in respect of the appellants' undertaking.
Jn
that letter a detailed account of the facts and circumstances under
which the mill had to be closed down was given.
There is also
an account of the efforts made by the Company's Directors to
restore the mill.
There is no attempt to minimise the financial
difficulties of the Company i•1 that letter. Parikh only seeks to
make out that the Company was facing a serious financial crisis
in common with other textile mills in the country which also had
to face closure.
He speaks of the various approaches made by
the company to the Government of Gujarat for getting financial
assistance.
The letter specifically mentions
the
company's
application ~o the Gujarat State Textile Corporation Ltd. for
financial help.
It appears clearly from this letter that though
according to Parikh some progress had been made in the matter
of securing assistance from the Gujarat State Textile Corporation
Ltd. the Corporation ultimately failed to come to the succour
of the company.
Parikh requested Government not to appoint
an authoriSP.,d controller and further prayed that the Government
of India should ask the State Government and the Gujarat State
Textile Corporation lJtd. to give a financial guarantee to the
Company.
Two things appear quite clearly from that letter;
first, that the appellants required a mininmm sum of Rs. 20 lakhs
as inlmediate aid and, secondly, that the Company in spite of
various approaches had not succeeded in securing the same.
Only a few days before this letter had been addressed, Parikh,
it appears, had an interview with the Minister of Foreign Trade
on 26 August 1970 when the Minister gave him, as a special
case, four weeks' time with effect from 26 August 1970 to obtain
the necessary financial guarantee from the State or the Gujarat
State Textile Corporation without which
the Company had
expressed its inability to reopen and run the mill. In a letter of
22 September 1970 Bansal infonned Parikh in clear language
that if the Company failed to obtain the necessary guarantee by
26 September 1970 Government was proceeding to take action
under the Act. It is obvious, therefore, that the appellants were
aware all long that as a result of the report of the Investigating
Committee the Company's undertaking was going to be taken
up by Government.
Parikh had not only made written re·
presentations but had also seen the Minister ol Foreign Trade
and Supply.
He had requested the Minister not to take over
the undertaking and, on the contrary, to lend his good offices
so that the Company could get financial support from the Gujarat
A
c
D
E
F
G
H
8
c
D
E
F
G
H
l:ESHAV MILLS LTD. v. UNION (Mukherjea, /.)
35
State Textile Corporation or from the Gujarat State Governuu:nt.
All these circumstances leave us in no manner of doubt that
the Company had full opportunities to make all possible representil!tions before the Government against the proposed takeover of its mill under Sec. 18A. In this connection it is significant
that even after 'the writ petition had been filed bo~fore the Delhi
High Court the Government of India had given the appellants
at their own request one month's time to obtain the necessary
funds to commence the working of the mill.
Even then, they
failed to do so.
Th.~re are at least five features of the case whlch make it
impossible for us to give any weight to the appellants' complaint
that the rules of natural justice have not been observed.
First,
on their own showing they were perfectly aware of the grounds
on which Government had passed the order under Sec. 18A of
the Act. Secondly, they are not in a position to deny (a) that
the Company had sustained such heavy losses that its mill had
to be closed down indefini~~ly, and (b) that 1here was not only
loss of production of textiles but at least 1200 persons had been
thrown out of employment.
Thirdly, it is transparently clear
from the affidavits that the Company was not in a position to
raise the resources to recommence the working of the
mill.
Fourthly, the appellants were given a fulJ hearing at the time of
the investigation held by fu~ Investigating Committee and were
also given opportunities to adduce evidence. Finally, even after
the Investigating Committee had submitted
its
report,
the
appellants were in constant communion with the
Government
and were in fact negotiating with Government for such help as
might enable them to reopen the mill and to avoid a take-over
of their undertaking by the Government.
Having regard
to
these features it is impossible for us to accept the
contention
that the appe_Ilants did not get any reasonable opportunity to
nfake out a case against the take-over of their undertaking or
that the Government has not treated the appellants fairly. There
is not fhe slightest justification in this case for the complaint
that there has been any denial of natural justice.
We must, however, deal with the specific point raised by
the appellants that they should have been given further hearing
by the Government before they took the final decision of taking
over their undertaking under Sec. 18A of the Act and that in
any event, they should have been supplied with a copy of' the
report of the Investigating Committee.
:CO our opinion, since the appellants have received a fair
treatment and also all reasonable opportunities to make out their
own case before Government they cannot be allowed to make
any grievance of the fact that they were not given a formal
36
SUPREME COURT REPORTS
(1973] 3 S.C.R.
notice calling upon them to show cause why their undertaking
should not be taken over or that they had not been furnished
with a copy of the report. They had made all the representations
that they could possibly have made against the proposed takeover.
By no stretch of imagination, can it be said that the
order for take-over took them by surprise. In fact Government
gave them ample opportunity to reopen and run the mill
on
their own if they wanted to avoid the take-over. The blunt fact
is that the appellants just did not have the necessary resources
to do so.
Insistence on formal hearing in such circnmstances
is nothing but insistence' on empty formality.
The question still remains
whether the
appellants
were
entitled to get a copy of the report. It is the same question which
arose in the celebrated case of Local Government Board v.
Arlidge('). That was a case in which a local authority made a
closing order jn respect of a dwelling house in their district on
the ground that the house was unfit for human habitation. The
owner of the dwelling house who had a right to appeal to the
Local Government Board against the closing order made such
an appeal. Sec. 39 of the Housing, Town Planning, & c., Act,
1909 provided that the procedure to be followed in such an
appeal was to be such as the Local Government Board might
determine by rules. The section, however, required the rules to
provide that the Board was not to dismiss any appeal without
having first made a public local enquiry. The Local Government
Board had made such rules and in conformity with these rules
held an enquiry in the appeal preferred against the closing order.
The house-owner attended the enquiry with his solicitor and
also adduced evidence. After considering the facts and the evidence given at the enquiry as well as the report of the inspector
who inspected the house the Local Government Board refuse<l
A
C:
D
E.
to interfere with the decision of the Borough Council not to
F
determine the closing order. The house-owner thereu,_pon obtain- ·
ed an order nisi for a writ of certiorari for the purpose of quashing of the closing order. One of the principal grounds urged by
the house-owner was that he was entitled to see the report of
the appellant's inspector but the report had not been shown to
him. A Divisional Court discharged the order nisi but the Court
of Appeal reversed the decision and ordered the writ of certiorari
te mue.