# THE STATE OF GUJARAT AND ANOTHER v. SHRI AMBICA MILLS LTD., AHMEDABAD, ETC

- **Citation:** [1974] 3 S.C.R. 760
- **Court:** Supreme Court of India
- **Decided:** 1974-03-26
- **Bench:** A. N. Ray, H. R. KHANNA.t K. K. MAmEW, Y. V. B Chandrachud, A. Alagiriswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-state-of-gujarat-and-another-v-shri-ambica-mills-ltd-ahmedabad-etc-6074
- **Pages:** 29

## Headnote

Consritution of India, 1950, Art. 13-Legislation void in relalion to citi·
~c11s as violating Art. 19-Jf corporation, a non-citizen, can contend that Jaw
u 11011-e:St.
Bombay Labour Welfare Fund .Act, 1953, liS amended by Guiarat AmendC
mmt Act, 1961 s. 2(4)-'Establishmellt' d!!jirlition of-if violates Art, 14.
After the State of Bombay was bifurcated the legislature of the State of
Gujarat enact~d the Bombay Labour Welfare Fund (Gujarat Extension and
Am~ndment) Act, 1961, mak:ing various amendments in the Bombay Labour
Welfare Fund Act, 1953.
The 1953-Act was passed with a view t\) provide
for the constitution of a· fund for financing activities for promoting the wel·
fare of labour in the State of Bombay. Section 3 as amended, provides that
the State Government shall constitute a fund called the Labour Welfare Fund
D
and that the. f;md shall consist of. among other things, all unpaid accumulations. Sec. 2 (1 0} defines unpaid accumulations as meaning all payments due
to the employees but not made to them within a period of three years from
the date on which they became due whether before or after the commencem~nt of the Act including wages and gratuity legally payable. Sec. 6A(l)
provides that \1Dpaid accumulations shall be deemed to· be abandoned property
anti that the Board, constituted under the Act, shall take them over. As soon
:1s the Board takes over the unpaid accumulations, notice as provided in the
E
section, will haw to be published and claims invited. Sub-section 3 to 6 provide for notice and sub-ss. 7 to 11 lay down the machinery for adjudication of
t:l:lims which might be received in response to the notice. It is only if no
clnim is made for a veriod of four years from the date of the publication of
the first no tic~. or if a claim is made but rejected wholly or in part, that the
St:He approp1 i:aes the unpaid accumulation, as borra mea/Ilia.
Section :!(4) of the Act defines 'establishment' and the definition includes
F
f:1ctories, tramway or motor omnibus services and any establishment carrying
on business or 'trade and employing more than SO persons; but excludes
nil
government establishments carrying on business or trade.
De1r.and for
the
parment of the unpaid accumulations having been made the respondents filet!
p~titions in th~ High Court challenging various provisions of the Act and the
High Court held that s. 3(1). in so tar as it relates to unpaid accumulations
specified in s. 3 (:!) (b), 3 ( 4) and 6A of the Act, and rules 3 and 4 of the
ral~s made ther~under nre unconstitutional and void on the grounds : (i) that
the impugned provisions violated the fundamental rights of citizen-employers
G
nnd employees under Art. 19(1)(0 and therefore were voi~ under Art. 13(~}
:-tnd hence ti1er~ \\':IS no law and the demands were thus wtthout the :mthonty
of bw; and l~) that discrimination was writ large in the definition of 'establ i,;hment'.
Allowing the nppeal to this Court,
HELD : ( 1 )(a) Unpaid accumulations represent the
obligations or the
employers to the employees and they are the property of the employe~s. In
H
o:hc-r words, what is being treated as abandoned property.
u~der fiA ts
the
C't,ligation to the employees owed by the employers and Y!htch IS property from
the standpoint of the emplo)·ees.
[771A-BJ
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GUJARAT v. AMBICA MlLLS LTD. (Mathew, /.)
761
(b) At common law, abandoned personal property could not be tho subject
of escheat. It could only be appropriated as bona vacantia.
Under the Act,
though unpnid accumulations are deemed to be abandoned. property under
s. 6A(l) they are appropriated as bona vacantia only after claims are invited
and disposed of, l770G.711A]
(c) lf unpaid accumulations are not claimed within a total
period of 7
years the inactivity on the part of the employees would furnish adequate basis.
for the administration by the State of the unasserted claims or demands. It
cannot be said that the period of 7 years allowed to the employees for
the
purpose cf claiming un

## Text

_Characters 0–39,876 of 94,847. This is a partial read: ask again with offset=39876 for what follows._

160
THE STATE OF GUJARAT AND ANOTHER
A
v.
SHRI AMBICA MILLS LTD., AHMEDABAD, ETC.
March 26, 1974
[A. N. RAY, C.J., H. R. KHANNA.t K. K. MAmEW, Y. V.
B
CHANDRACHUD AND A. ALAGIRISWAMI, JJ.]
Consritution of India, 1950, Art. 13-Legislation void in relalion to citi·
~c11s as violating Art. 19-Jf corporation, a non-citizen, can contend that Jaw
u 11011-e:St.
Bombay Labour Welfare Fund .Act, 1953, liS amended by Guiarat AmendC
mmt Act, 1961 s. 2(4)-'Establishmellt' d!!jirlition of-if violates Art, 14.
After the State of Bombay was bifurcated the legislature of the State of
Gujarat enact~d the Bombay Labour Welfare Fund (Gujarat Extension and
Am~ndment) Act, 1961, mak:ing various amendments in the Bombay Labour
Welfare Fund Act, 1953.
The 1953-Act was passed with a view t\) provide
for the constitution of a· fund for financing activities for promoting the wel·
fare of labour in the State of Bombay. Section 3 as amended, provides that
the State Government shall constitute a fund called the Labour Welfare Fund
D
and that the. f;md shall consist of. among other things, all unpaid accumulations. Sec. 2 (1 0} defines unpaid accumulations as meaning all payments due
to the employees but not made to them within a period of three years from
the date on which they became due whether before or after the commencem~nt of the Act including wages and gratuity legally payable. Sec. 6A(l)
provides that \1Dpaid accumulations shall be deemed to· be abandoned property
anti that the Board, constituted under the Act, shall take them over. As soon
:1s the Board takes over the unpaid accumulations, notice as provided in the
E
section, will haw to be published and claims invited. Sub-section 3 to 6 provide for notice and sub-ss. 7 to 11 lay down the machinery for adjudication of
t:l:lims which might be received in response to the notice. It is only if no
clnim is made for a veriod of four years from the date of the publication of
the first no tic~. or if a claim is made but rejected wholly or in part, that the
St:He approp1 i:aes the unpaid accumulation, as borra mea/Ilia.
Section :!(4) of the Act defines 'establishment' and the definition includes
F
f:1ctories, tramway or motor omnibus services and any establishment carrying
on business or 'trade and employing more than SO persons; but excludes
nil
government establishments carrying on business or trade.
De1r.and for
the
parment of the unpaid accumulations having been made the respondents filet!
p~titions in th~ High Court challenging various provisions of the Act and the
High Court held that s. 3(1). in so tar as it relates to unpaid accumulations
specified in s. 3 (:!) (b), 3 ( 4) and 6A of the Act, and rules 3 and 4 of the
ral~s made ther~under nre unconstitutional and void on the grounds : (i) that
the impugned provisions violated the fundamental rights of citizen-employers
G
nnd employees under Art. 19(1)(0 and therefore were voi~ under Art. 13(~}
:-tnd hence ti1er~ \\':IS no law and the demands were thus wtthout the :mthonty
of bw; and l~) that discrimination was writ large in the definition of 'establ i,;hment'.
Allowing the nppeal to this Court,
HELD : ( 1 )(a) Unpaid accumulations represent the
obligations or the
employers to the employees and they are the property of the employe~s. In
H
o:hc-r words, what is being treated as abandoned property.
u~der fiA ts
the
C't,ligation to the employees owed by the employers and Y!htch IS property from
the standpoint of the emplo)·ees.
[771A-BJ
A
B
c
D
E
F
G
H
GUJARAT v. AMBICA MlLLS LTD. (Mathew, /.)
761
(b) At common law, abandoned personal property could not be tho subject
of escheat. It could only be appropriated as bona vacantia.
Under the Act,
though unpnid accumulations are deemed to be abandoned. property under
s. 6A(l) they are appropriated as bona vacantia only after claims are invited
and disposed of, l770G.711A]
(c) lf unpaid accumulations are not claimed within a total
period of 7
years the inactivity on the part of the employees would furnish adequate basis.
for the administration by the State of the unasserted claims or demands. It
cannot be said that the period of 7 years allowed to the employees for
the
purpose cf claiming unpaid accumulations is an unreasonably short one which
will result in the infringement of any constitutional rights of the employees.
[771EJ
(d) There is no reason to think that the State will be, in fact less able or
less willing to pay the amounts when it has taken them over. [771E.F]
(e) lt. cannot also be assumed that the mere substitution of the State as:
the debtor will deprive the employees of their property or impose on them any
unconstitutional burden.
[771F]
(f) Since the employers are the debtors of the employees, they can inter-·
pose no objection if the State is lawfully entitled to demand the payment, for
in that case payment of the debt to the State under the statute reteases the
employers of their liability to the .employees. When the moneys representing
Lhe unpaid accumulations are paid to the Board the liability of the employers
to mlke payment to the employees in respect of their claims against the em- .
ployers w1>uld be discharged to the extent of the amount paid to the_ Board,
and on such liability being transferred to the Board, the debts or claims to that
extent cannot thereafter be enfoi;_ced against the employers.
[7710, G]
(g) As regards notice, all persons having property located within a state
and subject to its dominion must take. note. of its statutes affecting control and
disposition of such property and the procedure prescribed for those purposes.
The various modes of notice prescribed in s. 6A are sufficient to give reaso~
nblc information to the employees to come forward and claim the amount 1f
they .really want to do so. [7710-Hl
In the absence of a showing of injury, actual or threatened, there could be
no constitlllional argument, therefore, against the taking over of the unpaid
accumulations by the State.
[771F.G]
(2) But assumin~ that the impugned provisions
abridge the fundamental
rights of citizen-employers or citizen-employees under Art. 19(1) (f) the res·
pendent, a corporation and hence a non-e<itizen employer, could not claim
(i) that the taw was void as a~ainst non.citizen employers
also under Art.
13 (2), and (ii) that since a void law is a nullity, the privation of its property
was without the authority pf law. [7720)
(a} It is settled that a Corporation is not a citizen for the purposes of
Art. 19 and has, therefore no fundamental right under that Article.
[772E]
Tata Ertf!illefl'illf? and !oconiolive Co. Ltd. v. State of Bihar and orhers.
[19641 6 S.C. R. 885, R. C. Cooper v. Unio11 of India, [1970] 2 S.C.R. 530
and Bermcrt Cofeman & Co., etc. v. Unio11 of India and Otlrers [1972] 2 S.C.C.
788, followed.
(b) Courts shculd not adjudse on the constitutionality of a statute except
when they are called upon to do so when legal rights of the Jltigants are in
actual controversy; and as part of this rule, is the principle that one to whom
the application of R statute is constitutional will not be heard to attack the
statute on the ground that, it must al110 be taken as applying to other persons
to whom or sitt,Jations in which,
its ·application
may be
unconstitutional.
[77JH-772B]
United States v. Rainas, 362 U.S. 17, referred to.
762
SUPREME COURT REPORTS
(1974) 3 S.C.R,
(c) The same ~ch~me permeates both the sub-articles of .Art. 13, namely,
to make the law VOid m Art. 13 (I ) to the extent of the inconsistency with the
fundamental rights, and in Art ·13 (2) to the extent of the contra\·ention of
those rights. In other words, the voidness is not in rem but to the extent only
of inconsistency or contravention as the case may be, of the rights conferred
under Part llL
Therefore when Art. 13(2) uses the expression 'void' it can
only mean void as against persons whose fundamental rights are taken away
or abridged by a law.
[777G-H]
·
(d) If a pre-constitutional Jaw which takes away or abridges
the
rights
under Art. 19 could remain operative even after the Constitution came into
force as regards non-citizens, there is no reason why a post-constitutional Jaw
which takes away or abridges them should not be operative as respects
noncitizens, if the meaning of the word 'void' in Art. 13(1) is the
same as its
meaning in Art. 13(2). The reason why a pre-constitutional
law
remains
operative as against non-citizens is that it is void· only to the extent of its in-
·consistency with the rights conferred under Art. 19 and that its voidness is,
therefore, confined to citizens, as, ex hypot/Jrsi
the Jaw became in:onsistent
with their fundamental rights alone. Art. 13(2) is an injunction to th: State not
to pass any law which takes away or <lbridges the fundamental
ri~hts confened by Part III and the consequence of the contravention of the injunction
is that" the Jaw would be void to the extent of the contravention. The expression 'to the extent of the contravention' in the sub-article can only mean to
the extent of th~ contravention of the rights conferred under that Pa~t. Rights
always inhere in some person whether natural or juridical.
Just a3 a pre-
-constitutional Jaw taking away or abridging the fundamental rights under Art.
19 remains operative after the Constitution came into force as respects of noncitizens as it is not inconsistent that their fundamental rights so also a postconstitutional Jaw, offending Art. 19. remains operative as against non-citizens
as it is not in contravention of any of their fundamental rights. The hw might
be still-born so far as the persons, entities or denominations whose fundamental rights are taken away or abridged; but there is no reason why the law
should be void or stiH-born ~s against those who have no· fundamental rights.
[777B-D, E-G, H-778A]
(e) It could not be said that the expression 'to the extent of tl:e contravention' mean only that part of the law which contravenes the
fundamental
right would alone be void and not the other parts which do not so cc-ntravene.
The expression 'any law' occurring in the .latter part of the sub-article ,must
necessarily refer to the same expression in the former part and, therefore, the
·Constitution-makers have already made it clear that the Jaw that would be void
is only the law which contravenes the fundamental rights conferr~d by Part
JTI; and, so, the phrase 'lo the extent of the contravention' can mean only to
the extent of the contravention of the rights coof~rred. When it is s~en that
the I alter part of the sub-article is concerned with the effect of the violation
of the iniunction contained in the former part. the words 'to the extent of the
contravention' can only refer to the rights conferred under Part III r.nd denote
only the com!Jass of voidness with respect to persons or entities resu',dng from
the contravention of the rights conferred upon them. There is no rea~c.n wh~·
the Constilntion-maker~ wanted to state that th"e other sections which did not
violate the fundamental right~ wonld not be void_
Be~ides. any such categorical statement would be wrong as the other sections niil!ht be void if !hey are
inseparably knitted to the void one.
[778A-G]
(f) Assuming that this Court has rejected the distinction bet;'·ee~ legisla-
·tive incapacitv arising from lack of power under the relevant le~!ISJa:,ve e~try
and that ari•ing from a check upon lesrislative power on account of constttutional nrovisions like fund~mental rights, it does not follow that if the ht\1cn<Jcted bv the legislature having no capacity in the former sense \\-ould
be
void in rem a law passed by a legislature having no Je~is\ative cap~~it" in th~
lalter sense should also be void in rem, because : f778G-H]
(i) Tf on a textual reading of Art. 13 the conclusion. reached nam~IY. that
:a law passed by a legislature having no legislative capac1ty in th~ lr:::er sense
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GUJARAT v. AMBICA MILLS LTD. (Mathew, /,)
763
~~ ~nly ''~id qua those persons whose fundamental rights are taken away or·
abndged, IS the only reasonable one, there is no need to consider whether that
concll!~ion could not be arrived at except on the basis of such a
distinction;
and {n) Further, there is nothing strange in the notion of a legislature having
no inherent legislative capacity or power to take away or abridge by law the
fundamental rights conferred on citizens and yet having legislative power to
pass the same law in respect of non-eitizens who have no such fundamental
rights to be taken away or abridged. In other words, 1he le_gislative incapacity
subjectw:se with reference to Arts. 245 and 246 in. this context would be the
taking away or abridging by law the fundamental rights under Art.
19 of
citizens.
[779A-E]
M. P. V. Smu/araramaier v. State of A.P. (1958) S.C.R. 1422, referred
to.
(g) Th~ expression "that State shall not make any law" in Art. 13 (2) is
no doubt a clear mandate of the fundamental law of the land and, therefore,
it is case of total incapacity and total want of power.
But the mandate is
tbat !-he State shall not make any law which takes aw~y or abridges the rights
conferred by Part Ill. If no rights are conferr~d under Part TII upon a person,
or, if rights are conferred, but they are not taken away or abridged by Jaw
ther~ could not be incapacity of the legislature to make a law. If a law is
otherwise good and 'does not contravene any of their fundamental rights, noncitizens cannot ~ake · advantage of the voidness of the law for the reason. that
it contravenes the fundamental rights of citizens and claim that there is no
law at rill.
Such a proposition would not violate any principle of equality
before the Jaw, because, citizeqs and non-citizens are not similarly situated as
citizem have certain fundamental rights which non-citizens have not. ·[779 B-D:
780 D-EJ
Kesh:.;1·a Madha~'P Menon v. Stale of Bombay, [1951] S.C.R. 228, Bahran
Khurslu·d Pt>sikake v. State of Bo1nbav, £19551 1 S.C.R. 613. Bhikft(l/i Narain
Uhakras v. Stale 0/ M.P. [1955] 2 S.'C.R . 589, M. P. V. SwrdararaiTI(Jier v.
'Stale of A..P., [19j8] S .C .R . 1422. Deep Char.-1 v. State -of U.P. and Others,
[1959] Supp. 2 S.C.R . 8, Mahendra l.tll Jaini's case [1963] Supp. I S.C.R. 912
and
lu~:awrath v. Autlrori~ed Officer, Ltmd Reforms, [19711
2 S.C.C.
893,
referred lo.
(h) .Therefore, even assuming that under Art. 226 of the Constitution t~e ·
respondent was entitled to move the High Court and seek a remedy for Infringement of its ordinary right to property, the impugned provisions
could
not be treated as uon-esr. and the respondent cannot take the plea that his
rights to property are being taken away or abridged without the authority of
!aw. [7n H-773 A]
(3) The definition of 'establishment' in S. 2(4) does not violate Art. 14
and does not make the impugned provisions void.
(a) The equal protection of the l aws is a piedge of the protection of equal
taws. But courts have resolved the contradictory demands of legislative specialisation and constitutional generality by the ·doctrine of reasonable classification. (782 B·Gl
(bl A reas.onable classification is one which includes all who are similarly
situated, and none ·who are not, with respect to the purpose of the law [782
C-D]
(c) A cl as.~ification is under·inclusive when all wno are included in the
class are tainted with the mischief, but there are others also tainted wbooi the
cla~sification does not include>.
A classification is
over-inclusive
when
it
includes not only those who arc similarly situated with respect to the purpose
but also others who are not so situated. [782 D-FJ
(d) The Court has
recognised the very real
difficulties
under
which
legislatures operate difficulties ari~inJr out of both the nature of the le~islative
pr('(:C~~ aild of the societv which legislation
attempt..~ nerenniallv to rPShape
and it has reCused to strike down indiscriminately all legislation embodying-
764
SUPREME COURT REPORTS
{1974] 3 S.C.R.
classificatory inequality like the one here under consideration. The legislature
cannot be required to impose upon administrative agendes tasks which cannot
be carried out or which must be carried out on a large scale at a single stroke.
The piecemeal approach to a general
problem permitted by under-inclusive
classifications is JUstified especially when it is conscdered that legisl::ttion dealing
with such problem5 is usually an experimental matter. It is impossible to tell
how successful a particular approach may be, what dislocation may occur, what
evasions may develop or what new evils. might be generated in the attempt. A
legislation may take one step at a time addressing itself to the phase of the
probl~m which seems most acute to the legislative mind. Therefore, a legislature
might select only one phase of one field for application of a reml!dy.
Once:
an objective is decided to be within the legislative competence the working out
of classification should not be impeded by judicial negatives. The courts attitude
cannot be that the state either has to regulate nll busines~es or even all rel::tted
businesses and in the same way, or not at all. The court must b:! fiWare of
its own remoteness and lack of familiarity with the local problems. Cla5Sification
is dependent on the particular needs and specific difficulties of the community
which are beyond the easy ken of the court, and which the legislature alone wa~
competent to make. Consequently, lacking the capacity to inform itself fuliy
about the peculiarities of a J>articular local situation, a C()Urt should hesitate to
dub the
legislative
classification as
irrational.
[782 H-783 G;
784 A-D;
786 G-H; 787 A)
Missouri, K&T, Rly. v. M.-ry, [1904] 194 U.S. 267, 269, West ChM Hotrl
Company v. Parrish, 300 U.S. 379, 400, Two Guys from HarriSOI1·Allentowll
v. Me Ginley 366, U.S. 582, 592, Mutual Loan Co. v. Martell, 56 LEd. 175,
180, Tianer v. Texas 310 U.S. 141 and Carmiclrel v. Soutltem Coal & Coke
.co., 201. U.S. 495, referred to,
(e) The question whether, under Art. 14, a classification is reasonable or
unreasonable mu.st, in the ultimate analysis depend upon the judicial approach
to the problem. The more complicated society becomes, the greater the diversity
of its problems and the more does legislation direct itself to the diversities.
In
the utilities, tax and economic regulation cases, there are good I"casons
for
judicial self-restraint if not official deference to legislative judgment. The Courts
have only the power to destroy but not to ree()nstruct. When to this are added
the complexity of economic reg·ula!ion, the uncert::tinty, the liability to error,
the bewildering conflict of th.e cx!)erts, and the number of times the judges bave
been overruled by events self limitation can be seen to be the path t~ judicial
wisdom and institutional prestige and stability. [784 F-785 D)
(f) Laws regulating economic activity should be viewed
differently from
Jaws which touch and concern freedom of speech and religion,
voting
procreation, rights with respect to criminal procedure etc. Judicial dl!fetence to
legislature in instances of economic regulation is explained by th~ argument
that rationality of a classification depends upon local conditions ai>out which
local legislative or administrative bodies would be better informed th=:n a wort.
[784 D-E; 786 A]
(g) Tn the present case, the purpose of the Act is to g~t unpaiJ accumulations for utilising them for the welfare of labour in general.
H is from the
factories that the greatest amount of unpaid accumulations could be collected
and since the factories are bound to maintain records from which the amount
of unpaid accumulations could be easily· ascertained the legislature t-rought all
the factories within the definition of 'establishment'. It then addressed itself to
other establishments but thought that establishments employing less than 50 persons need not be brought within the purview of the definition as unpaid accumulations in those establishments would be tess and might not be sufficient to med
the administrative expenses of collection and as many of them might not be
maintaining records from which the amount of unpaid accumulations could be
ascertained. Admini~rative convenience in the collection of unpaid accumulations is a. factor to be taken into account in adjudging whether the classification
is reasonable. The reason why government establishments other than factories
were not included in the definition is that there are hardly any establishments run
by the Central or State Government.
[783 F·G: 785 E-H; 786 A-B)
(h) The justification for including tramways and motor omnibuses within the
purview of the definition is that the legislature of the State of Bombay, when it
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GUJARAT V. AMBICA MILLS LTD. (MatfleW, },)
765
enacted the Act in 1953, must have had reason to think that unp:lid accumulations in these concerns would be large, b:cause, they usually employed a large
amount of labour force, and they were bound to keep records of the wages earned
and paid. [786 C-D]
·
(i) Whether a court can remove the unreasonablenss of a cl:lssilication when
it is under-inclusive by extending the ambit of the legislation to cover the class
omitted to be included, or by applyins the doctrine of severability delete a
clause which makes a classification over-inclusive, are matters on which it is not
necessary to express any final opinion because the inclusion of tramway or motor
omnibus service in the definition of 'establishment' does not make the classification unrearonab)e having regard to the purpose of the legislation. [788 A-C)
CIVIL APPELLATE JURISDZCTIOX: Civil Appeals Nos.
1931
to
1933/68.
From the Judgment and Order dated the 19thj20thj2lst day of
July 1965 of the Gujarat High Court at Ahmedabad in Special Civil
Application Nos. 579 to 581 of 1963.
Civil Appeal No. 2271 of 1968.
From the judgment and order dated the 19th/20th/21st day of July
1965, of the Gujarat High Court at Ahmedabad in Special Civil Application No. 836 of 1962.
Civil Appeals Nos. 492 to 512 of 1969.
From the Judgment and order dated the 21st July; 1965 of the
Gujarat High Court at Ahmedabad in Special Civil Application Nos.
1069/62, 20, 21, 40, 49, 476, 699, 574 of 1963, 1070 to 1075 of
1962, 1086 to 1089 of 1962, 516, 727 and 728 of 1963.
Civil Appeals Nos. 1114 to 1129 of 1969.
\From the judgment and order dated the 21st July, 1965 of the
Gujarat High Court in Special Civil Applications Nos. 458 to 473 of
1963.
S. T. Desai, S. K. Dholakia and S. P. Nayar, for the appellants.
(In all the appeals).
V. B. Patel, D. N. Misra, J. B. Dadacllanji, 0. C. Mathur and
Ravinder Narain, for respondent no. 1 (in C. As. 1115, 1118, 1125/
69).
-
Ram Punjwani, P. C. Bhartari, J. B. Dada&hanji, 0. C. Mathur and
Ravinder Narain, for respondent no. 1 (in C.-A. 1931/68).
P. C. Bhartari, J. B. Dadacllanji, 0. C. Mathur and Ravinder
Narain, respondent no. 1 (in C. As. 1931-33/68, 49~·494, 497, 499,
500-502, 504-507, 511-512j69, 1117; 1122, 1124 and 1126-27/69).
M. C. Setalvad, V. B. Patel and I. N. Shroff, for respondent no. 1
(in C.A. 2271/68).
V. B. Patel and I. N. Shroff, for respondent no. 1 (In C.As. 1114,
1116, 1119 and 1128j69).
M. C. Bhandare and M. N. Shroff, for intervener.
The Judgment of the Court was delivered by
MATHEW, I.-The facts are similar in all.these cases. We prop9se
to deal with Civil Appeal No. 2271 of 1968.
The decisii.m. ~le ~:..:!l.
dispose of the other appeals.
The first respondent, a company registered under the Companies
Act, filed a Writ petition in the High Court of· Gujarat. In that
766
SUPREME COURT REPORTS
(1974] 3 S.C.R.
petition it impugned the provisions of sections 3, 6A and 7 of the
A
Bombay Labour Welfare Fund Act, 1953 (hereinafter referred to as
the Act) and s: 13 of the Bombay Labour Welfare Fund (Gujarat
Ext·:msion and Amendment) Act, 1961 (hereinafter referred to as the
First Amendment Act) and rules 3 and 4 of the Bombay Labour Welfare Fund Rules, 1953 (hereinafter referred to as the Rules) as unconstitutional and prayed for the issue of a writ in the nature of mandamus
or other arpropriate writ or direction against the respondents in the
B
writ petition to desist from enforcing the direction in the notice dated
August 2, 1962 of respondent No. 3 to the writ petition requiring the
petitioner-1 si respondent to pay the unpaid accumulations specified
therein.
The High Court held that s. 3 (1) of the Act in so far as it relates to
unpaid accumulations specified in s. 3 (2) (b), s. 3 ( 4) and s. 6A of the
Act and rules 3 and 4 of the Rules was unconstitutional and void.
In order to appreciate the controversy, it is necessary to state the
backgrom,d- of the amendment made by the Legislature of Gujarat in
the Act.
The Act was passed by the legislature of the then State of
Bombay b 1953 with a view to provide for the constitution of a fund
for financing the activities for promoting the. welfare of labour in the
State of Bombay.
Section 2(10) of the Act defined "unpaid accumlarion" as meaning all payments due to the employees but not made to
them within a period of three years from the date on which they beca~c
due, whether before or after the commencement of the Act, including
the wages and gratuity legally payable, but not including the amount of
contribution, if any, paid by any employer to a Provident Fund established under the Employees' Provident Fund Act, 1952. Section 3 ( l)
provided that the State Government shall constitute a fund caiJed the
Labour Welfare Fund and that notwithstanding anything contained in
any other Jaw for the time being in force, the sums specified in subsection (2) shall, subject to the provisions of sub-section ( 4) and sec-
: ion 6A be paid in to the fund.
Clause (b) of sub-section (2) of s. 3
provided that the Fund shall consist of "all unpaid accumulations".
Section 7 (1) provided that the fund shall vest in and be applied by the
Board of Trustees subject to the provisions and for the purposes of the
Act. Section 19 gave power to the State Government to make rules
and in the exercise of that power, the State Government made the Rules.
Rules 3 and 4 concernecf the machinery for enforcing the provisions of
the Act in regard to fines and unpaid accumulations.
In Bombay Dyeing & Manufacturing Co, Ltd.
v. The State of
Bombay and Others(l) this Court held that the provisions of sections
3 ( 1) and 3 (2) (b) were invalid on the ground that they violated the
fundamental right of the
employer under article 19(1)(0. The
reasoning of the Court was that the effect of the relevant provisions of
the Act was to transfer to the Board the debts due by the employer
to the employees free from the bar of limitation without discharging
the employer from his liability to the employees and that s.3(1) ~here
fore operated to take away the moneys of the employer wtthoul
releasing him from his liability to the employees.
The Court
also
(1) {1958] S.C.R. 112~
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GUJAII.AT v: AMBICA MILLS LTD. (Mathew, ],)
767
found that there was no machinery provided for adjudication of the
claim of the employees when. the amounts were required to be paid
to the fund.
The State sought. to justify the provisions of the' Act as ~ne relating
to abandoned property and, therefore, by their very nature, they could
not be held to violate the rig!tts of any person either under article
19(l)(f) or article 31 (2). The Court did not. accept the contention
of the S~ate but held that the purpose of a legislation with respect to
abandoned property being in the first instance to safeguard the
property for the benefit of the true owners and the State taking it over
only in the absence of such claims, the law which vests the property
absolutely in the Stat.e without regard to the claims of the true owners
cannot be considered as one relating to abandoned property.
On May 1, 19601 the State of Bo!Jlbay was bifurcated into the
States of Maharas.htra and Gujarat. The legislature of Gujarat thereafter enacted to First Amendment Act making various amendments
in the Act, some of them with retrospective effect. ·The First Amendment Act was intended to remedy the defects pointed out in the
decision of this Court in the Bombay Dyeing Case(l).. The preamble
to the First Amendment Act recites that "it is e~pedient to constitute
a Fund for the financing of .activities to promote welfare of labour in
the State of Gujarat, for conducting such activities and for certain
other purposes".
Section 2(2) defines
'employee'. Section 2(3)
defines 'employer' as any person who employs either directly or through
another person either on behalf of himself or any other person, one or
more employees in an establishment and includes certain other
persons: Section 2 ( 4) defines 'establishment' and that sub-section
as amended reads :-
"2 ( 4) 'Establishment' means :
(i) A factory;
(ii) A Tramway or motor omnibus service; and
(iii) Any
establishment
including a society registered
under the Societies Registration Act, 1960, and a
. charitable or other trust, whether registered
under
the Bombay Public. Trusts Act, 1950, or not, which
carries on any business or trade or arey work in
connection with or ancillary thereto and which
employs or on any working day during the preceding
twelve months employed more than fifty persons; but
does not include an establishment (not
being
a
factory) of the Central or any State Government."
Sub-section (10) of s. 2 defines 'unpaid accumulations' :
'"unpaid accumulations' means all payments due to the
employees but not made to them within a period of three
years from the date on which -they became due whether
before or after the commencement of this Act including the
H
wages and gratuity legally payable but not including the
amount of contribution if any, paid by an employer to a
(I) [1958} S.C.R. 1122.
6-L 84 Sup C 1/75
768
S1,]PR£M~ COURT .REPORTS
i1974] .3 S.C.R,
- provid~nt fund established under the Employees' Provident
Funds Act, 1952'.',
.
Section 3 is . retrospectively amended and the amended section in
its material part ·provides that the State Government shall · constitute
a fu...W ailled the Labour Welfare Fund and that the Fund shall consist of, among other things, all unpaid accumulations. It provides that
the sums specified shall be collected by such agencies and in such
manner and the accounts of the fund shall be maintained and audited
in such man~er as may be prescribed. The ~ection further. provides
that notwithstanding anything ~ontained in any law for the · time
being in force or any contract or instrument, all unpaid accumulations
shall be collecteq by such agencies and in s.uch manner as may be
prescribed and be paid in the first instance to the Board which shall
keep a separate account therefor untU claims thereto have been
decided in the manner provided in s.6A. Section 6A is a new section
introduced retrospectively in the Act .and sub-section (1) and (2) of
thai section state that all unpaid accumulations shall be deemed to be
:-:';:-.::::oned property and that any unpaid accumulations paid to the
Board in accordance with the provisiotts of s.3 shall, on such payment,
discharge an e~loyer of the· liability to make payment to an employee
in respect thereof, but to the extent only of the ·amount paid to the
Board and that the liability to make payment to the emplovee to
the extent ttforesaid shall, subject to the other ptovisions
of the
section, be deemed to be tramferred to the. Board. Sub-section (3)
provides that as soon as possible after any unpaid accumulation is
paid to the Board, the Board shall, by a public notice, call . upon
interested employees to submit to the Board their claims for any payment due to them. Sub-section ( 4) provides that such public notice
shall contain such particulars as may be prescribed and that it shall
be affixed on the notice board or in its absence on a conspicuous part
of the premises, of each establishment in which the unpaid accumulations were earned and shall be published in the Official Gazette and
also in any two newspapers in the language commonly understood
in the area in which such establishment is situated, or in such other
manner as may be prescribed, regard being had. to the amount of the
claim. · Sub-section (5)states that after the notice is first affixed and
published under sub-section ( 4) it shall be again affixed and published
from time to time for a period of three years from the date on which
it was first affixed and published, in the manner provided in that subsection in the months of June and December each year. Sub-section
(6) states that a certificate of the Board to the effect that the provisi\lns
of sub-section (4) at)d (5) were complied with shall be conclusive
evidence thereof. Sub-section (7) provides that any claim received
whether in answer to the notice or otherwise within a period of. four
years from the date of the first publicatioR of the notice in respect o(
such claim, shall be transferred by the Board to the authority appointed
under s. 15 of the Payment of Wages Act, 1936, having jurisdiction
in the area in which the factory or establishment is situated, and the
Authority shall proceed to adjudicate upon and decide sud1 da:.,. ~nJ
that in bearing such claim the Authority shall have the powers conferred by and shall fo1Iow the procedure (in so far as it is applicable)
. followed in giving effect to the provisions of that Act. Sub-section (8)
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GUJARAT v. AMBICA MILLS LTD' •. (Mathew, /,)
769
states that if in deciding any claim under sub-section (7), the Authority
allows· the whole or part of such claim, it shall declare that the. unpaid
accumulation in relation to which the claim is made shall, .to the extent
to which the claim is allowed ceases to be abandoned property and
snall order the Board to pay to the claimant the amount of the claim
as allowed by it and the Board shall make payment accordingly :
provided that the Board shall not be liable topay any sum in excess
of that paid under sub-section ( 4) of s.3 to the Board as unpaid
accumulations, in respect of the claim.
Sub-section (9) provides for
an appeal against the decision rejecting any claim. Sub-section (10)
provides. that the Board shall comply with any oi:der made in appeal.
Sub-section ( 11) makes the decision in appeal final and conclusive as
to the right to receive payment, the liablity of the Board to pay ana
also. as to the amount, if any: and sub-section (12) states that if no
claim is made within the, time specified in sub-section (7) or a- claim
or part thereof has been ·'rejected, then the unpaid accumulations in
respect of such claim shall accrue to and vest in the State as bQna
vacantia and shall thereafti!r without further assurance be deemed to
be transferred to ana form part of the Fund.
Section 7(1) provides that the Fund shall vest in and be held
and applied by the Board as Trustees subject to the prqvisions and for
the purposes of the Act and the moneys in the Fund shall be _utilized
by the Board to defray the cost of carrying out tneasures which may be
specified by the State Government. fro~ time to time to promote the
. welfare of labour and of their dependents.
Sub·section (2) of s.7
specifies various measures for the benefit of employees in general ' on
which the moneys in the Fund may be expended by the Board.
Section 11 provides for the appointment of an officer called the
Welfare Commissioner and defines his powers and duties.
Section 19 confers rule-making power on the State Government.
Section 22 empowers the State Government by notification in the
official gazette to exempt any cJass of·establishment from aU or any
of the provisions of the Act subject to ·such conditions as may be
specified in. the notification.
During the pendency of the writ petition before the High Court,
1he Gujarat Legislature passed the Bombay Labour Welfare
Func:l
(Gujarat Amendment) Act, 1962 on February 5, 1963 (hereinafter
referred to as the Second Amendment Act) introducing sub-section
(13) in s.6A with retrospective effect from the date of commencement
of the Act That sub-section provid~s as follows :
'' ( 13) Nothing in the foregoing provisions of this section
shall apply to unpaid accumulations not already paid to the
Board;
(a) in respect of which no separate accounts have been
maintained so that the unpaid claims of employ('es are
not traceable. or
·
(b) which are proved to have been spent before the sixth
d~y of December, _1961,
710
SUPREME COURT REPORTS
(1974) 3 '>.C:.R.
and accordingly such unpai~ accumulations . shall not be
A
liable to be collected and pa1d under sub-sectton ( 4) of section 3".
.
The State Govcrnn1ent, in the cxercis~ of its
rulc-maki~g power
under s. 19 amended the Rules by amendmg ~ulc ~ and addu~g a new
rule 3A setting out the particulars to be contamed rn the pubhc notice
issued under s. 6A (3) ·
B
The first respondent raised several contcn~ions before the High
Court but the Court rejected aU except two ot them and they were :
(1) that the impugned provisions violate~ the fundamental right of
citizen-employers and employees u~der arttclc 19 (1) (f) an~, t!Jerefore,
the provisions were void under arttclc 13 (2) of the Conshtutton and
hence there was no law, and so, the notice issued by the Welfare Commissioner was without the authority of law; and (2) that discrimination
C
was writ Iarac in the definition of 'establishment' in s. 2 ( 4) and since
the definitiOJ~ permeates through every part of the impungcd provisions
and is an integral part of the impugned provis!ons, the impugned provisions were violative of article 14 and were VOid.
So, the two questions in this appeal arc, whether the first respondent was competent to challenge the validity of the impugned provi-
~fons on the basis that they violated the fundamental right
und~r
article 19 (I) (f) of citizen-employers or employees and tbu.s show that
the law was void and non-existent and, therefore, the action taken
against it was bad; and whether the definition of 'establishment' iu
s. 2(4) violated the fundamental right of the respondent under article
14 and the impugned provisions were void for that reason.
Defore adverting to these questions, ir is necessary to see what the
Act, after it was amended, has purported to do.
By s. 6A(l) it was dedarcd that unpaid accumulations shall b.:
deemed to. be abandoned property and that the Board shaJJ taken them
over. As soon as the Board takes over the unpaid accumulations treating them a.s abandoned property, notice as provided in s. 6A will have
to~ published an.d claims invited.
Sulrsections (3) to (6) of s. 6A
pronde for a pu?ltc ~otice calling upon interested employees to su~mit
to the Board thetr cJaHns for any payment due to them and sulrsecttoo.~
(7~ to (~ 1) ol '· 6A Jay down the machinery for adjudication of claims
~htch m!gh~ be rccei\·ed in pursuance to the public notice. lt is oni,Y
Jf ~0 clatm IS made f~r a period Of 4 years from the date of the publJ-
~atton of the first nottcc, or, if a claim is malic but rejected wholly or
tn part,. that ~te State appropriates the unpaid accumulations as bot~a
· vacamla. .It ~s not as if unpaid accumulations become bona vaccmtw
on the c1:p1ratton of three years
They are no doubt deemed to bl!
~~;
1nd~ncd propcr~y under s .. 6A(l) •. but th~y arc not'appropriah:d ~:
.a l acam~a Untd after claimS are IOVitcd in
pursuance to
rubfl~;
OIJtla< and dL~poscd of.
·
·cct -~~ ~o~~on law, abandoned personal property could not be the sub·
J .
/.itltheat. It could only be appropriated by the sovereign as bona
;~c"!
1~f_J)e Ho!dsworth:s History of English Law. 2nd ed., vol . . 1·
' -.
; ' The So\·eretgn has a prcrogatiVI! right
tO aprropn:Lle"
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GUJARAT v. AMBICA MILLS LTD. (Mathew, J.)
711
bona vacantia.