Shri Ram Krishna Dalmia Vs. Shri
Justice S. R. Tendolkar & Ors [1958] INSC 30 (28 March 1958)
28/03/1958 DAS, SUDHI RANJAN (CJ) DAS, SUDHI
RANJAN (CJ) AIYYAR, T.L. VENKATARAMA SINHA, BHUVNESHWAR P.
DAS, S.K.
SARKAR, A.K.
CITATION: 1958 AIR 538 1959 SCR 279
ACT:
Commission of Inquiry-Legislation empowering
Government to appoint Commission-Constitutionality-If violates guarantee of
equality before the law-Notification setting up Commission and conferring
Powers there upon Legality of-If ultra vires the Act Whether Commission usurps
judicial functions-Commissions of Enquiry Act, 1952 (LX of 1952), s. 3-Constitution
of India, Arts. 14 and 246 : Seventh Schedule, Entry 94, List I and Entry 45,
List III.
HEADNOTE:
In exercise of the powers conferred upon it
by S. 3 of the Commissions of Enquiry Act, 1952, the Central Government by a
notification dated December 11, 1956, appointed a Commission of Inquiry to
inquire into and report in respect of certain companies mentioned in the
Schedule attached to the notification and in respect of the nature and extent
of the control and interest which certain persons named in the notification
exercised over these companies. By subsequent notifications the Central
Government made all the provisions of sub-ss. (2), (3), (4) and (5) Of s. 5 Of
the Act applicable to the Commission and fixed a period Of 2 years from
February 11, 1957, as the period within which the Commission was to exercise
its function and to make its report. The four persons named filed three
applications under Art. 226 of the Constitution before the Bombay High Court
questioning the validity of the Act and of the notification and praying for
writs for quashing the same.
The High Court dismissed the applications and
ordered that the said notification was legal and valid except as to the last
part of cl. 10 thereof which empowered the Commission to recommend the action
which should be taken as and by way of securing redress or punishment or to act
as a preventive in future cases. The petitioners as well as the Union of India
filed appeals :
Held, that the Act wag' valid and intra vires
and that the notification was also valid excepting the words " as and by
way of securing redress or punishment " in cl. 10 thereof which went
beyond the Act.
The Act was enacted by Parliament under entry
94 of List I and entry 45 of List III of the Seventh Schedule of the
Constitution which relate to inquiries for the purposes of any of the matters
in List I and in Lists 11 and III respectively. The inquiry which may be set up
by a law made under these entries is not limited, 280 in its scope and ambit,
to future legislative purposes only.
Such a law may also be for administrative
purposes and the scope of the inquiry under such a law will cover all matters
which may properly be regarded as ancillary to such inquiries.
The Act does not delegate to the Government
any arbitrary or uncontrolled power and does not offend Art. 14 Of the
Constitution. The discretion given to the Government to set up a Commission of
Inquiry is guided by the policy laid down in the Act that the executive action
is to be taken only when there exists a definite matter of public importance
into which an inquiry is necessary.
Kathi Raning Rawat v. State of Saurashtra,
[1952] S. C. R. 435, applied.
The Commission is merely to investigate,
record its findings and make its recommendations which are not enforceable
proprio vigore. The inquiry or report cannot be looked upon as judicial inquiry
in the sense of its being an exercise of judicial function properly so called
and consequentlyParliament or the Government cannot be said to have usurped the
functions of the judiciary.
The notification was well within the powers
conferred on the Government by s. 3 Of the Act and did not go beyond the
provisions of the Act. The conduct of an individual person or company or a
group of individual persons or companies may, in certain circumstances, become
a definite matter of public importance within the meaning Of s. 3(i) and call
for an inquiry. Besides, s. 3 authorises the Government to appoint a
Commission. of Inquiry not only for the purpose of making an inquiry into a
definite matter of public importance but also for the purpose of performing
such functions as may be specified in the notification.
It has not been established that the
petitioners and their companies have been arbitrarily singled out for the
purpose of hostile and discriminatory treatment and subjected to a harassing
and oppressive inquiry. In matters of this kind the Government has of necessity
to act upon the information available to it. It is the best judge of the
reliability of the source of the information and if it acts in good faith and
honestly comes to the conclusion that the act and conduct of the petitioners
and the affairs of their companies constitute a definite matter of public
importance the Court will be slow to adjudge the action to be bad and illegal.
The bare possibility that the powers may be misused or abused cannot Per se
make the power bad. The power having been entrusted to the Central Government
and not to any petty official, abuse of power cannot be easily assumed.
In determining whether there is any
intelligible differentia on the basis of, which the petitioners and their
companies have been grouped together it is permissible to look not only at the
facts appearing in the notification but also the facts brought to the notice of
the Court upon affidavits.
The facts in the present case 281 afford
sufficient support to the presumption of constitutionality of the notification
and the petitioners have failed to discharge the onus which was on them to
prove that other people or companies, similarly situated have been left out and
that the petitioners and their companies have been singled out for
discriminatory and hostile treatment.
The recommendations of the Commission of
Inquiry are of great importance to the Government in order to enable it to make
up its mind as to what legislative or administrative measures should be adopted
to eradicate the evil found or to implement the beneficial objects it has in
view. There can be no objection to the Commission recommending the imposition
of some form of punishment which will, in its opinion, be sufficiently
deterrent to delinquents in future.
But the Commission cannot be asked to make
recommendations for taking any action " as and by way of securing redress
or punishment " in respect of wrongs already done or committed as this is
the function of a Court of law.
Even though the original notification
appointing the Commission did not fix the time within which the Commission was
to complete its report the Government could validly do so by a subsequent
notification.
CIVIL APPELLATE JURISDICTION: Civil Appeals
'Nos. 455 to 457 and 656 to 658 of 1957.
Appeals from the judgment and order dated April
29, 1957, of the Bombay High Court in Misc. Applications Nos. 48 to 50 of 1957.
G. S. Pathak, S. K. Kapur, P. N. Bhagwati and
Ganpat Rai, for the appellant in C. A. No. 455 of 1957 & respondent in C.
A. No. 656 of 1957.
Sachin Choudhry, R. J. Joshi, J. B.
Dadachanji, Rameshwar Nath and St N. Andley, for the appellants in C. As. Nos. 456
& 457 of 1957 and respondents in C. As. Nos. 657 & 658 of 1957.
C. K. Daphtary, Solicitor-General for India,
G. N. Joshi, K. H. Bhabha and R. H. Dhebar, for respondent No. 4 in C.
As. Nos. 455 to 457 of 1957 and appellant in
C. As. Nos. 656 to 658 of 1957.
1958. March 28. The Judgment of the Court was
delivered by DAS C. J.-These six several appeals are directed against a common
judgment and order pronounced on 36 282 April 29, 1957, by a Division Bench of
the Bombay High Court in three several Miscellaneous Applications under Art.
226 of the Constitution, namely, No. 48 of 1957 filed by Shri Ram Krishna
Dalmia (the appellant in Civil Appeal No. 455 of 1957), No. 49 of 1957 by Shri
Shriyans Prasad Jain and Shri Sital Prasad Jain (the appellants in Civil Appeal
No. 456 of 1957) and No. 50 of 1957 by Shri Jai Dayal Dalmia and Shri Shanti
Prasad Jain (the appellants in Civil Appeal No. 457 of 1957). By those Miscellaneous
Applications the petitioners therein prayed for an appropriate direction or
order under Art. 226 for quashing and setting aside notification No. S. R. 0.
2993 dated ]December 11, 1956, issued by the Union of India in exercise of
powers conferred on it by s. 3 of the Commissions of Enquiry Act (LX of 1952)
and for other reliefs. Rules were issued and the Union of India appeared and
showed cause. By the aforesaid judgment and order the High Court discharged the
rules and dismissed the applications and ordered that the said notification was
legal and valid except as to the last part of cl. (10) thereof from the words
" and the action" to the words " in future cases " and
directed the Commission not to proceed with the inquiry to the extent that it
related to the aforesaid last part of cl. (10) of -the said notification.
The Union of India has filed three several
appeals, namely, Nos. 656, 657 and 658 of 1957, in the said three Miscellaneous
Applications complaining against that part of the said judgment and order of
the Bombay High Court which adjudged the last part of el. (10) to be invalid.
The Commissions of Inquiry Act, 1952
(hereinafter referred to as the Act), received the assent of the President on
August 14, 1952, and was thereafter brought into force by a notification issued
by the Central Government under s. 1 (3) of the Act. As its long title states,
the Act is one " to provide for the appointment of Commissions of Inquiry
and for vesting such Commissions with certain powers ". Sub-section (1) of
s. 3, omitting the proviso not material for our present purpose, provides:
The appropriate Government may, if it is of
283 opinion that it is necessary so to do, and shall, if a resolution in this
behalf is passed by the House of the, People or, as the case may be, the
Legislative Assembly of the State, by notification in the Official Gazette,
appoint a Commission of Inquiry for the purpose of making an inquiry into any
definite matter of public importance and performing such functions and within
such time as may be specified in the notification, and the Commission so
appointed shall make the Inquiry and perform the functions accordingly."
Under sub-s. (2) of that section the Commission may consist of one or more
members and where the Commission consists of more than one member one of them
may be appointed as the Chairman thereof. Section 4 vests in the Commission the
powers of a civil court while trying a suit under the Code of Civil Procedure
in respect of the several matters specified therein, namely, summoning and
enforcing attendance of any person and examining him on oath, requiring
discovery and production of any document, receiving evidence on affidavits,
requisitioning any public record or copy thereof from any court or officer,
issuing commissions for examination of witnesses or documents and any other
matter which may be prescribed. Section 5 empowers the appropriate Government,
by a notification in the Official Gazette, to confer on the Commission
additional powers as provided in all or any of the sub-ss. (2), (3), (4) and
(5) of that section. Section 6 provides that no statement made by a person in
the course of giving evidence before the commission shall subject him to, or be
used against him in, any civil or criminal proceeding except a prosecution for
giving false evidence by such statement provided that the statement is 'made in
reply to a question which he is required by the Commission to answer or is
relevant to the subject matter of the inquiry. The appropriate Government may
under s. 7 issue a notification declaring that the Commission shall cease to
exist from such date as may be specified therein. By s. 8 the Commission is
empowered, subject to any rules that may be made, to regulate its own procedure
including the time and place of its 284 sittings and may act notwithstanding
the temporary absence of any member or the existence of any vacancy among its
members. Section 9 provides for indemnity to the appropriate Government, the
members of the Commission or other persons acting under their directions in
respect of anything which is done or intended to be done in good faith in
pursuance of the Act. The rest of the sections aye not material for the purpose
of these appeals.
In exercise of the powers conferred on it by
s. 3 of the Act the Central Government published in the Gazette of India dated
December 11, 1956, a notification in the following terms:
MINISTRY OF FINANCE (Department of Economic
Affairs) ORDER New Delhi, the 11th December, 1956 S. R. O. 2993-Whereas it has
been made to appear to the Central Government that:
(1) a large number of companies and some
firms were promoted and/or controlled by Sarvashri Ramakrishna Dalmia, Jaidayal
Dalmia, Shanti Prasad Jain, Sriyans Prasad Jain, Shital Prasad Jain or some one
or more of them and by others being either relatives or employees of the said
person or persons, closely connected with the said persons;
(2) large amounts were subscribed by the
investing public in the shares of some of these companies;
(3) there have been gross irregularities
(which may in several respects and materials amount to illegalities) in the
management of such companies including manipulation of the accounts and
unjustified transfers and use of funds and assets;
(4) the moneys subscribed by the investing
public were in a considerable measure used not in the interests of the
companies concerned but contrary to their interest and for the ultimate
personal benefit of those in control and/or management; and (5) the investing
public have as a result suffered considerable losses.
285 And Whereas the Central Government is of
the opinion that there should be a full inquiry into these matters which are of
definite public importance both by reason of the grave consequences which
appear to have ensued to the investing public and also to determine such
measures as may be deemed necessary in order to prevent a recurrence thereof;
Now, therefore, in exercise of the powers
conferred by section 3 of the Commissions of Inquiry Act (No. 60 of 1952), the
Central Government hereby appoints a Commission of Inquiry consisting of the
following persons, namely :
Shri Justice S. R. Tendolkar, Judge of the
High Court at Bombay, Chairman.
Shri N. R. Modi of Messrs A. F. Ferguson
& o., Chartered Accountants, Member.
Shri S. C. Chaudhuri, Commissioner of
Income-tax, Member.
1.The Commission shall inquire into and
report on and in respect of:
(1) The administration of the affairs of the
companies specified in the schedule hereto;
(2) The administration of the affairs of such
other companies and firms as the Commission may during the course of its
enquiry find to be companies or firms connected with the companies referred to
in the schedule and whose affairs ought to be investigated and inquired into in
connection with or arising out of the inquiry into the affairs of the companies
specified in the schedule hereto;
(3)The nature and extent of the control,
direct and indirect, exercised over such companies and firms or any of them by
the aforesaid Sarvashri Ram Krishna Dalmia, Jaidayal Dalmia, Shanti Prasad
Jain, Sriyans Prasad Jain, their relatives, employees and persons connected
with them;
(4)The total amount of the subscription
obtained from the investing public -and the amount subscribed by the aforesaid
persons and the extent to which the funds and assets thus obtained or acquired
were misused, misapplied or misappropriated;
(5) The extent and nature of the investments
by 286 and/or loans to and/or the use of the funds or assets by and transfer of
funds between the companies aforesaid;
(6)The consequences or results of such
investments, loans transfers and/or use of funds and assets ;
(7)The reasons or motives of such
investments, loans transfers and use and whether there was any justification
for the same and whether the same were made bona fide, in the interests of the
companies concerned ;
(8) The extent of the losses suffered by the
investing public, how far the losses were avoidable and what steps were taken
by those in control and/or management to avoid the losses;
(9) The nature and extent, of the personal
gains made by any person or persons or any group or groups of persons whether
herein named or not by reason of or through his or their connection with or
control over any such company or companies;
(10) Any irregularities frauds or breaches of
trust or action in disregard of honest commercial practices or contravention of
any law (except contraventions in respect of which criminal proceedings are
pending in a Court of Law) in respect of the companies and firms whose affairs
are investigated by the Commission which ma come to the knowledge of the
Commission and the action which in the opinion of the Commission should be
taken as and by way of securing redress or punishment or to act as a preventive
in future cases.
(11) The measures which in the opinion of the
Commission are necessary in order to ensure in the future the due and Proper
administration of the funds and assets of companies and firms in the interests
of the investing public.
SCHEDULE 1. Dalmia Jain Airways Ltd.
2. Dalmia Jain Aviation Ltd., (now known as
Asia Udyog Ltd.)
3. Lahore Electric Supply Company Ltd., (now
known as South Asia Industries Ltd.) 4. Sir Shapurji Broacha Mills Ltd.
287 5. Madhowji Dharamsi Manufacturing
Company Ltd.
6. Allen Berry and Co. Ltd.
7. Bharat Union Agencies Ltd.
8. Dalmia Cement and Paper Marketing Company
Ltd., (now known as Delhi Glass Works Ltd.)
9. Vastra Vyavasaya Ltd. Ordered that the
Order be published in the Gazette of India for public information.
(No. F. 107 (18INS/56)).
H.M. Patel Secretary.
It should be noted that the above
notification did not specify the time within which the Commission was to
complete the inquiry and make its report.
On January 9, 1957, the Central Government
issued another -notification providing that all the provisions of sub-ss. (2),
(3), (4), and (5) of s. 5 should apply to the Commission. As the notification
of December 11, 1956, did not specify the time within which the Commission was
to make its report, the Central Government on February 11, 1957, issued a third
notification specifying two years from that date as the time within which the
Commission of Inquiry should exercise the functions conferred on it and make
its report. On February 12, 1957, three several Miscellaneous Applications were
filed under art. 226 of the Constitution questioning the validity of the Act
and the notification dated December 11, 1956, on diverse grounds and praying
for a writ or order for quashing the same.
It will be convenient to advert to a few
minor objections urged before us on behalf of the petitioners in support of
their appeals before we come to deal with their principal and major
contentions. The first objection is that the notification has gone beyond the
Act. It is pointed out that the Act, by s. 3, empowers the appropriate
Government in certain eventualities to appoint a Commission of Inquiry for the
purpose of making an inquiry into any definite matter of public importance and
for no other purpose. The contention is that the conduct of an individual
person 288 or company cannot possibly be a matter of public importance and far
less a definite matter of that kind. We are unable to accept this argument as
correct. Widespread floods, famine and pestilence may quite easily be a
definite matter of public importance urgently calling for an inquiry so as to
enable the Government to take appropriate steps to prevent their recurrence in
future. The conduct of villagers in cutting the bunds for taking water to their
fields during the dry season may cause floods during the rainy season and we
can see no reason why such unsocial conduct of villagers of certain villages
thus causing floods should not be regarded as a definite matter of public
importance. The failure of a big bank resulting in the loss of the life savings
of a multitude of men of moderate means is certainly a definite matter of
public importance but the conduct of the. persons in charge -and management of
such a bank which brought about its collapse is equally a definite matter of
public importance. Widespread dacoities in particular parts of the country is,
no doubt, a definite matter of public importance but we see no reason why the
conduct, activities and modes operandi of particular dacoits and thugs
notorious for their cruel depredations. should not be regarded as definite
matters of public importance urgently requiring a sifting inquiry. It is
needless to multiply instances. In each case the question is: is there a
definite matter of public importance which calls for an inquiry ? We see no warrant
for the proposition that a definite matter of public importance must
necessarily mean only some matter involving the public benefit or advantage in
the abstract, e. g., public health, sanitation or the like or some public evil
or prejudice, e. g., floods, famine or pestilence or the like. Quite
conceivably the conduct of an individual person or company or a group of
individual persons or companies may assume such a dangerous proportion and may
so prejudicially affect or threaten to affect the public well-being as to make
such conduct a definite matter of public importance urgently calling for a full
inquiry.
Besides, s. 3 itself authorises the
appropriate Government to appoint a Commission 289 of Inquiry not only for the
purpose of making an inquiry into a definite matter of public importance but
also for the purpose of performing such functions as, may be specified in the
notification. Therefore, the notification is well within the powers conferred
on the appropriate Government by s. 3 of the Act and it cannot be questioned on
the ground of its going beyond the provisions of the Act.
Learned counsel for the petitioners
immediately replies that in the event of its being held that the notification
is within the terms of the Act, the Act itself is ultra vires the Constitution.
The validity of the Act is called in question in two ways. In the first place
it is said that it was beyond the legislative competency of Parliament to enact
a law conferring such a wide sweep of powers. It is pointed out that Parliament
enacted the Act in exercise of the legislative powers conferred on it by Art.
246 of the Constitution read with entry 94 in List I and entry 45 in List III
of the Seventh Schedule to the Constitution. The matters enumerated in entry 94
in List 1, omitting the words not necessary for our purpose, are "
inquiries......... for the purpose of any of the matters in this List ",
and those enumerated in entry 45 in List III, again omitting the unnecessary
words, are " inquiries............ for the purposes of any of the matters
specified in List II or List 111. " Confining himself to the entries in so
far as they relate to " inquiries ", learned counsel for the
petitioners urges that Parliament may make a law with respect to inquiries but
cannot under these entries make a law conferring any power to perform any
function other than the power to hold an inquiry. He concedes that, according
to the well recognised rule of construction of the provisions of a
Constitution, the legislative heads should be construed very liberally and that
it must be assumed that the Constitution intended to give to the appropriate
legislature not only the power to legislate with respect to the particular
legislative topic but also with respect to all matters ancillary thereto.
Indeed the very use of the words " with respect to in Art. 246 supports
this principle 37 290 of liberal interpretation. He, however, points out that
the law, which the appropriate legislature is empowered to make under these
entries must be with respect to inquiries for the purposes of any of the
matters in the relevant lists and it is urged that the words " for the
purpose of " make it abundantly clear that the law with respect to
inquiries to be made under these two entries must be for the purpose of future
legislation with respect to any of the legislative heads in the relevant lists.
In other words, the argument is that under these two entries the appropriate
legislature may make a law authorising the constitution of a Board or
Commission of Inquiry to inquire into and ascertain facts so as to enable such
legislature to undertake legislation with respect to any of the legislative
topics in the relevant lists to secure some public benefit or advantage or to
prevent some evil or harm befalling the public and thereby to protect the
public from the same. But if an inquiry becomes necessary for, say,
administrative purposes, a law with respect to such an inquiry cannot be made
under these two entries. And far less can a law be made with respect to an
inquiry into any wrongs alleged to have been committed by an individual person
or company or a group of them for the purpose of punishing the suspected
delinquent. This argument has found favour with the High Court, but we are,
with great respect, unable to accept this view. To adopt this view will mean
adding words to the two entries so as to read " inquiries for the purpose
of future legislation with respect to any of the matters in the List or Lists
mentioned therein. The matter, however, does not rest here. A careful perusal
of the language used in entry 45 in List III does, in our view, clinch the
matter. Entry 45 in List III, which is the Concurrent List, speaks, inter alia,
of " inquiries for the purpose of any of the matters in List II or List
111. Under Art. 246 read with this entry, Parliament as well as the Legislature
of a State may make a law with respect to " inquiries for the purpose of
any of the matters in List II." Parliament, under Art. 246, has no power
to make a law with respect to any of the 291 matters enumerated in List 11.
Therefore, when Parliament makes a law under Art. 246 read with., entry 45 in
List III with respect to an inquiry for the purposes of any of the matters in
List 11, such law can never be one for inquiry for the purpose of future legislation
by Parliament with respect to any of those matters in List 11. Clearly
Parliament can make a law for inquiry for the purpose of any of the matters in
List 11 and none the less so though Parliament cannot legislate with respect to
such matters and though none of the State Legislatures wants to Legislate on
such matters. In our opinion, therefore, the law to be made by the appropriate
legislature with respect to the two legislative entries referred to above may
cover inquiries into any aspect of the matters enumerated in any of the lists
mentioned therein and is not confined to those matters as mere heads of
legislative topic. Quite conceivably the law with respect to inquiries for the
purpose of any of the matters in the lists may also be for administrative
purposes and the scope of the inquiry under such a law will cover all matters
which may properly be regarded as ancillary to such inquiries. The words "
for the purposes of " indicate that the scope of the inquiry is not
necessarily limited to the particular or specific matters enumerated in any of
the entries in the list concerned but may extend to inquiries into collateral
matters which may be necessary for the purpose, legislative or otherwise, of
those particular matters. We are unable, therefore to hold that the Inquiry
which may be set up by a law made under these two entries is, in its scope or
ambit, limited to future legislative purposes only.
Learned counsel then takes us through the
different heads of inquiry enumerated in the notification and urges that the
inquiry is neither for any legislative nor for any administrative purpose, but
is a clear usurpation of the functions of the judiciary. The argument is that
Parliament in authorising the appointment of a Commission and the Government in
appointing this Commission have arrogated to themselves judicial powers which
do not, in the very nature 292 of things, belong to their respective domains
which must be purely legislative and executive respectively. It is contended
that Parliament cannot convert itself into a court except for the rare cases of
dealing with breaches of its own privileges for which it may punish the
delinquent by committal for contempt or of proceedings by way of impeachment.
It cannot, it is urged, undertake to inquire or investigate into alleged
individual wrongs or private disputes nor can it bring the supposed culprit to
book or gather materials for the purpose of initiating proceedings, civil or
criminal, against him, because such inquiry or investigation is clearly not in
aid of legislation. It is argued that if a criminal prosecution is to be
launched, the preliminary investigation must be held under the Code of Criminal
Procedure and it should not be open to any legislature to start investigation
on its own and thereby to deprive the citizen of the normal protection afforded
to him by the provisions of the Code of Criminal Procedure. This line of
reasoning also found favour with the High Court which, after considering the
provisions of the Act and the eleven heads of inquiry enumerated in the
notification, came to the conclusion that the last portion of el. (10)
beginning with the words " and the action " and ending with the words
',in future cases" were ultra vires the Act and that the Government was not
competent to require the Commission to hold any inquiry or make any report with
regard to the matters covered by that portion of cl. (10), for such inquiry or.
report amounts to a usurpation of the judicial powers of the Union or the State
as the case may be.
While we find ourselves in partial agreement
with the actual conclusion of the High Court on this point, we are, with great
respect, unable to accept the line of reasoning advanced by learned counsel for
the petitioners, which has been accepted by the High Court for more reasons
than one.
In the first place neither Parliament nor the
Government has itself undertaken any inquiry at all. Parliament has made a law
with respect to inquiry and has left it to the appropriate Government to set up
a Commission of Inquiry under 293 certain circumstances referred to in s. 3 of
the Act. The Central Government, in its turn, has, in exercise of the powers
conferred on it by the Act, set up this Commission.
It is, therefore, not correct to say that
Parliament or the Government itself has undertaken to hold any inquiry. In the
second place the conclusion that the last portion of cl.
(10) is bad because it signifies that
Parliament or the Government had usurped the functions of the judiciary appears
to us, with respect, to be inconsistent with the conclusion arrived at in a
later part of the judgment that as the Commission can only make recommendations
which are not enforceable proprio vigore there can be no question of usurpation
of judicial functions. As has been stated by the High Court itself in the
latter part of its judgment, the only power that the Commission has is to
inquire and make a report and embody therein its recommendations. The
Commission has no power of adjudication in the sense of passing an order which
can be enforced proprio vigore. A clear distinction must, on the authorities,
be drawn between a decision which, by itself, has no force and no penal effect
and a decision which becomes enforceable immediately or which may become
enforceable by some action being taken.
Therefore, as the Commission we are concerned
with is merely to investigate and record its findings and recommendations
without having any power to enforce them, the inquiry or report cannot be
looked upon as a judicial inquiry in the sense of its being an exercise of
judicial function properly so called and consequently the question of
usurpation by Parliament or the Government of the powers of the judicial organs
of the Union of India cannot arise on the facts of this case and the elaborate
discussion of the American authorities founded on the categorical separation of
powers expressly provided by and under the American Constitution appears to us,
with respect, wholly inappropriate and unnecessary and we do not feel called
upon, on the present occasion, to express any opinion on the question whether
even in the absence of a specific provision for separation of powers in our
Constitution, such as there is 294 under the American Constitution, some such
division of powers-legislative, executive and judicial-is, nevertheless
implicit in our Constitution. In the view we have taken it is also not
necessary for us to consider whether, had the Act conferred on the appropriate
Government power to set up a Commission of Inquiry with judicial powers, such
law could not, subject, of course, to the other provisions of the Constitution,
be supported as a law made under some entry in List I or List III authorising
the setting up of courts read with these two entries, for a legislation may
well be founded on several entries.
Learned Counsel appearing for the
petitioners, who are appellants in Civil Appeals Nos. 456 and 457 of 1957, goes
as far as to say that while the Commission may find facts on which the
Government may take action, legislative or executive, although he does not
concede the latter kind of action to be contemplated, the Commission cannot be
asked to suggest any measure, legislative or executive, to be taken by the
appropriate Government. We are unable to accept the proposition so widely
enunciated. An inquiry necessarily involves investigation into facts and
necessitates the collection of material facts from the evidence adduced before
or brought to the notice of the person or body conducting the inquiry and the
recording of its findings on those facts in its report cannot but be regarded
as ancillary to the inquiry itself, for the inquiry becomes useless unless the
findings of the inquiring body are made available to the Government which set
up the inquiry. It is, in our judgment, equally ancillary that the person or
body conducting the inquiry should express its own view on the facts found by
it for the consideration of the appropriate Government in order to enable it to
take such measure as it may think fit to do. The whole purpose of setting up of
a Commission of Inquiry consisting of experts will be frustrated and the
elaborate process of inquiry will be deprived of its utility if the opinion and
the advice of the expert body as to the measures the situation disclosed calls
for cannot be placed before the Government 295 for consideration
notwithstanding that doing so cannot be to the prejudice of anybody because it
has no force of its own.
In our view the recommendations of a
Commission of Inquiry are of great importance to the Government in order to enable
it to make up its mind as to what legislative or administrative measures should
be adopted to eradicate the evil found or to implement the beneficial objects
it has in view. From this point of view, there can -be no objection even to the
Commission of Inquiry recommending the imposition of some. form of punishment
which will, in its opinion, be sufficiently deterrent to delinquents in future.
But seeing that the Commission of Inquiry has no judicial powers and its report
will purely be recommendatory and not effective proprio vigore and the
statement made by any person before the Commission of Inquiry is, under s. 6 of
the Act, wholly inadmissible in evidence in any future proceedings, civil or
criminal, there can be no point in the Commission of Inquiry making
recommendations for taking any action " as and by way of securing redress
or punishment " which, in agreement with the High Court, we think, refers,
in the context, to wrongs already done or committed, for redress or punishment
for such wrongs, if any, has to be imposed by a court of law, properly
constituted exercising its own discretion on the facts and circumstances of the
case and without being in any way influenced by the view of any person or body,
howsoever august or high powered it may be. Having regard to all these
considerations it appears to us that only that portion of the last part of cl.
(10) which calls upon the Commission of Inquiry to make recommendations about
the action to be taken " as and by way of securing redress or punishment
", cannot be said to be at all necessary for or ancillary to the purposes
of the Commission. In our view the words in the latter part of the section,
namely, " as and by way of securing redress or punishment ", clearly
go outside the scope of the Act and such provision is not covered by the two
legislative entries and should, therefore, be deleted. So deleted the latter
portion of cl. (10) would read and the action which in the opinion of the
Commission 296 should be taken to act as a preventive in future cases ".
Deletion of the words mentioned above from
cl. (10) raises the question of severability. We find ourselves in substantial
agreement with the reasons given by the High Court on this point and we hold
that the efficacy of the notification is in no way affected by the deletion of
the offending words mentioned above and there is no reason to think that the
Government would not have issued the notification without those words. Those
words do not appear to us to be inextricably wound up with the texture of the
entire notification.
The principal ground urged in support of the
contention as to the invalidity of the Act and/or the notification is founded
on Art. 14 of the Constitution. In Budhan Choudhry v. The State of Bihar (1) a
Constitution Bench of seven Judges of this Court at pages 1048-49 explained the
true meaning and scope of Art. 14 as follows:
" The provisions of Article 14 of the
Constitution have come up for discussion before this court in a number of
cases, namely, Chiranjit Lal Choudhuri v. The Union of India (2) The State, of
Bombay v. F. N.Balsara(3),The state of west Bengal v. Anwar Ali Sarkar (4 ),
Kathi Baning -Rawat v. The State of Saurashtra(5) Lachmandas Kewalram Ahuja v.
The State Of Bombay (6), Qasim Razvi v. The State of Hyderabad (7) and Habeeb
Mohamad v. The State of Hyderabad (8). it is, therefore, not necessary to enter
upon any lengthy discussion as to the meaning, scope and effect of the article
in question. It is now well established that while article 14 forbids class legislation,
it does not forbid reasonable classification for the purposes of legislation.
In order, however, to pass the test of
permissible classification two conditions must be fulfilled, filled namely, (i)
that the classification must be founded on an intelligible differentia which
distinguishes persons or things that are grouped together (1) [1955] 1 S.C.R.
1045.(2) [1950] S.C.R. 869.
(3) [1951] S.C.R. 682.(4) [1952] S.C.R. 284.
(5) [1952] S.C.R. 433.(6) [1952] S.C.R. 710.
(7) [1953] S.C.R. 581 (8) [1953] S.C.R. 661.
297 from others left out of the group and,
(ii) that that differentia must have a rational relation to the object sought
to be achieved by the statute in question. The classification may be founded on
different bases, namely, geographical, or according to objects or occupations
or the like. What is necessary is that there 'Must be a nexus between the basis
of classification and the object of the Act under consideration. It is also
well established by the decisions of this Court that article 14 condemns
discrimination not only by a substantive law but also by a law of
procedure." The principle enunciated above has been consistently adopted
and applied in subsequent cases. The decisions of this Court further establish(a)
that a law may be constitutional even though it relates to a single individual
if, on account of some special circumstances or reasons applicable to him and
not applicable to others, that single individual may be treated as a class by
himself;
(b) that there is always a presumption in
favour of the constitutionality of an enactment and the burden is upon him who
attacks it to show that there has been a clear transgression of the
constitutional principles;
(c) that it must be presumed that the
legislature understands and correctly appreciates the need of its own people,
that its laws are directed to problems made manifest by experience and that its
discriminations are based on adequate grounds;
(d) that the legislature is free to recognise
degrees of harm and may confine its restrictions to those cases where the need
is deemed to be the clearest ;
(e) that in order to sustain the presumption
of constitutionality the court may take into consideration matters of common
knowledge, matters of common report, the history of the times and may assume
every state of facts which can be conceived existing at the time of
legislation;
and (f)that while good faith and knowledge of
the existing conditions on the part of a legislature are to be presumed, if
there is nothing on the face of the 38 298 law or the surrounding circumstances
brought to the notice of the court on which the classification may reasonably
be regarded as based, the presumption of constitutionality cannot be carried to
the extent of always holding that there must be some undisclosed and unknown
reasons for subjecting certain individuals or corporations to hostile or
discriminating legislation.
The above principles will have to be
constantly borne in mind by the court when it is called upon to adjudge the
constitutionality of any particular law attacked as discriminatory and
-violative of the equal protection of the laws.
A close perusal of the decisions of this
Court in which the above principles have been enunciated and applied by this
Court will also show that a statute which may come up for consideration on a
question of its validity under Art. 14 of the Constitution, may be placed in
one or other of the following five classes:(i) A statute may itself indicate
the persons or things to whom its provisions are intended to apply and the
basis of the classification of such persons or things may appear on the face of
the statute or may be gathered from the surrounding circumstances known to or
brought to the notice of the court. In determining the validity or otherwise of
such a statute the court has to examine whether such classification is or can
be reasonably regarded as based upon some differentia which distinguishes such
persons or things grouped together from those left out of the group and whether
such differentia has a reasonable relation to the object sought to be achieved
by the statute, no matter whether the provisions of the statute are intended to
apply only to a particular person or thing or only to a certain class of
persons or things. Where the court finds that the classification satisfies the
tests, the court will uphold the validity of the law, as it did in Chiranjitlal
Chowdhri v. The Union of India (1), The State of Bombay v. F. N. Balsara (2),
Kedar Nath (1) [1950] S.C.R. 869.
(2) [1951] S.C.R. 682, 299 Bajoria v. The
State of West Bengal (1), V. M. Syed Mohammad & Company v. The State of
Andhra (2) and Budhan Choudhry v. The State of Bihar (3).
(ii)A statute may direct its provisions
against one individual person or thing or to several individual persons or
things but, no reasonable basis of classification may appear on the face of it
or be deductible from the surrounding circumstances, or matters of common
knowledge.
In such a case the court will strike down the
law as an instance of naked discrimination, as it did in Ameerunnissa Begum v.
Mahboob Begum (4) and Ramprasad Narain Sahi v. The State of Bihar (3).
(iii)A statute may not make any
classification of the persons or things for the purpose of applying its
provisions but may -leave it to the discretion of the Government to select and
classify persons or things to whom its provisions are to apply. In determining
the question of the validity or otherwise of such a statute the court will not
strike down the law out of hand only because no Classification appears on its
face or because a discretion is given to the Government to make the selection
or classification but will go on to examine and ascertain if the statute has
laid down any principle or policy for the guidance of the exercise of discretion
by the Government in the matter of the selection or classification. After such
scrutiny the court will strike down the statute if it does not lay down any
principle or policy for guiding the exercise of discretion by the Government in
the matter of selection or classification, on the ground that the statute
provides for the delegation of arbitrary and uncontrolled power to the
Government so as to enable it to discriminate between persons or things
similarly situate and that, therefore, the discrimination is inherent in the
statute itself. In such a case the court will strike down both the law as well
as the executive action taken under such law, as it did in State of West Bengal
v. Anwar, Ali Sarkar (6), Dwarka Prasad Laxmi Narain v. The State of Uttar Pradesh(7)
(1) [1954] S.C.R. 30. (2) [1954] S.C.R. I 117.
(3) [1955] 1 S.C.R. 10045 (4) [1953] S.C.R.
44 (5) [1953] S.C. R. 1129. (6) [1952] S.C.R. 284.
(7) [1954] S.C.R. 803.
300 and Dhirendra Krishna Mandal v. The
Superintendent and Remembrancer of Legal Affairs (1).
(iv) A statute may not make a classification
of the persons or things for the purpose of applying its provisions and may
leave it to the discretion of the Government to select and classify the persons
or things to whom its provisions are to apply but may at the same time lay down
a policy or principle for the guidance of the exercise of discretion by the
Government in the matter of such selection or classification, the court will
uphold the law as constitutional, as it did in Kathi Raning Rawat v. The State
of Saurashtra (2).
(v) A statute may not make a classification
of the persons or things to whom their provisions are intended to apply and
leave it to the discretion of the Government to select or classify the persons
or things for applying those provisions according to the policy or the
principle laid down by the statute itself for guidance of the exercise of
discretion by the Government in the matter of such selection or classification.
If the Government in making the selection or classification does not proceed on
or follow such policy or principle, it has been held by this Court, e. g., in
Kathi Raning Rawat v. The State of Saurashtra (2) that in such a case the
executive action but not the statute should be condemned as unconstitutional In
the light of the foregoing discussions the question at once arises: In what
category does the Act or the notification impugned in these appeals fall ? It
will be apparent from its long title that the purpose of the Act is to provide
for the appointment of Commissions of Inquiry and for vesting such Commissions
with certain powers. Section 3 empowers the appropriate Government, in certain
circumstances therein mentioned, to appoint a Commission of Inquiry for the
purpose of making an inquiry into any definite matter of public importance and
performing such functions within such time as may be specified in the
notification. It seems clear-and it has not been controverted-that on a proper
construction of this (1) [1955] 1 S.C.R. 234.
(2) [1952] S.C.R. 435.
301 section, the functions the performance of
which is contemplated must be such as are ancillary to and in aid of the
inquiry itself and cannot be read as a function independent of or unconnected
with such inquiry. That being the position, as we conceive it to be, the
question arises as to the scope and ambit of the power which is conferred by it
on the appropriate Government. The answer is furnished by the statute itself,
for s. 3 indicates that the appropriate Government .can appoint a Commission of
Inquiry only for the purpose of making an inquiry into any definite matter of
public importance and into no other matter. In other words the subject matter
of the inquiry can only be a definite matter of public importance. The
appropriate Government, it follows, is not authorised by this section to
appoint a Commission for the purpose of holding an inquiry into any other
matter. Learned Solicitor-General, in the premises, submits that the section
itself on the face of it, makes. a classification so that this statute falls
within the first category mentioned above and contends that this classification
of things is based on an intelligible differentia which has a reasonable
relation to the object sought to be achieved by it, for a definite matter of
public importance may well call for an inquiry by a Commission. In the
alternative the learned Solicitor-General urges that in any case the section
itself quite clearly indicates that the policy of Parliament is to provide for
the appointment of Commissions of Inquiry to inquire into any definite matter
of public importance and that as there is no knowing when, where or how any
such matter may crop up Parliament considers it necessary or expedient to leave
it to the appropriate Government to take action as and when the appropriate
moment will arrive. In the tempo of the prevailing conditions in modern society
events occur which were never foreseen and it is impossible for Parliament or
any legislature to anticipate all events or to provide for all eventualities
and, therefore, it must leave the duty of taking the necessary action to the
appropriate Government.
This delegation of authority, however, is not
unguided or uncontrolled, 302 for the discretion given to the appropriate
Government to set up a Commission of Inquiry must be guided by the policy laid
down, namely, that the executive action of setting up a Commission of Inquiry
must conform to the condition of the section, that is to say, that there must
exist a definite matter. of public importance into which an inquiry is, in the
opinion of the appropriate Government, necessary or is required by a resolution
in that behalf passed by the House of the People or the Legislative Assembly of
the State. If the preambles or the provisions of the statutes classed under the
first category mentioned above could be read as making a reasonable
classification satisfying the requirements of Art. 14 and if the preamble to
the statute considered in the case of Kathi Raning Rawat (1) could be construed
as laying down sufficiently clearly a policy or principle for the guidance of
the executive, what objection can there be to construing s. 3 of the Act now
under our consideration as also making a reasonable classification or at any
rate as declaring with sufficient clarity the policy of Parliament and laying
down a principle for the guidance of the exercise of the powers conferred the
appropriate Government so as to bring this statute at least in the fourth
category, if not also in the first category ? On the authorities, as they stand,
it cannot be said that an arbitrary and uncontrolled power has been delegated
to the appropriate Government and that, therefore, the law itself is bad.
Learned counsel for the petitioners next
contends that if the Act is good in the sense that has declared its policy and
laid down some principle for the guidance of the Government in the exercise of
the power conferred on it, the appropriate Government has failed to exercise
its discretion property on the basis of a, reasonable classification.
Article 14 protects all persons from
discrimination by the legislative as well as by the executive organ of the
State.
"State" is defined in Art. 12 as
including the Government and "law " is defined in Art. 13 as
including any notification or order' It has to be conceded, therefore, that (1)
[1952] S.C.R. 435.
303 it is open to the petitioners also to
question the constitutionality of the notification. The attack against, the
notification is that the Government has not properly implemented the policy or
followed the principle laid down in the Act and has consequently transgressed
the bounds of the authority delegated to it. It is pointed out that in March,
1946, one Shri Tricumdas Dwarkadas, a solicitor of Bombay, had been appointed
an officer on Special Duty to indicate the lines on which the Indian Companies
Act was to be revised. He made a report which was, however, incomplete in
certain particulars. Thereupon the Government appointed Shri Thiruvenkatachari,
the Advocate-General of Madras, to make further inquiry. The last mentioned
gentleman submitted his report and on the basis of that report, it is said, a
memorandum containing tentative proposals was prepared and circulated to elicit
the opinions of various organisations. On October 28, 1950, a Committee called
the Indian Company Law Committee-popularly known as the Bhaba Committee-was
appointed. That Committee went round and collected materials and made its
comprehensive report on the basis of which the new Indian Companies Act has
recently been remodeled. As nothing new has since then happened why, it is
asked', should any further inquiry be made ? The conclusion is pressed upon us
that there can, in the circumstances, be no definite matter of public
importance which can possibly call for an inquiry. We find no force in this
argument. In the first place the Bhaba Committee at p. 29 of its Report
recommended that further inquiries may, in future, have to be made regarding
some matters relating to Companies and, therefore, the necessity for fresh
inquiry cannot be ruled out. In the next place the appropriate Government is
empowered to appoint a Commission of Inquiry if, in its opinion, it is
necessary so to do. The preambles to the notification recite that certain
matters enumerated under five heads had been made to appear to the Central
Government in consequence of which the Central Government had come to the
conclusion that there should be a full inquiry into those matters which, 304 in
its opinion, were definite matters of public importance both by reason of the
grave consequences which appeared to have ensued to the investing public and
for determining such measures as might be deemed necessary in order to prevent
a recurrence thereof. Parliament in its wisdom has left the matter of the
setting up of a Commission of Inquiry to the discretion of the appropriate
Government and if the appropriate Government has formed the opinion that a
definite matter of public importance has arisen and calls for an inquiry the
court will not lightly brush aside the opinion.
Learned counsel for the petitioners argues
that granting that the question as to the necessity for constituting a
Commission of Inquiry has been left to the subjective determination of the
appropriate Government the actual setting up of a Commission is conditioned by
the existence 'of some definite matter of public importance. If there be no
such definite matter of public importance in existence then no question of
necessity for appointing a Commission can arise. Reference is then made to the
first preamble to the notification and it is pointed out that all the matters
alleged to have been made to appear to the Central Government relate to some
supposed act or conduct of the petitioners. The contention is repeated that the
act and conduct of individual persons can never be regarded as definite matters
of public importance. We are unable to accept this argument as sound, for as we
have already stated, the act or conduct of individuals may assume such
dangerous proportions as may well affect the public wellbeing and thus become a
definite matter of public importance. We do not, therefore, agree that the
notification should be struck down for the absence of a definite matter of
public importance calling for an inquiry.
The point which is next urged in support of
these appeals and which has given us considerable anxiety is that the
petitioners and their companies have been arbitrarily singled out for the
purpose of hostile and discriminatory treatment and subjected to a harassing
and oppressive inquiry. The provisions of Art. 14, 305 it is contended, protect
every person against discrimination by the State, namely, against the law as
well as the executive action and this protection extends to State action at all
its stages. The petitioners' grievance is that the Government had started
discrimination even at the earliest stage when it conceived the idea of issuing
the notification. Reference is made to the Memorandum filed by the Bombay
Shareholders' Association before the Bhaba Committee showing that the same or similar
allegations had been made not only against the petitioners and their companies
but against other businessmen and their companies and that although the
petitioners and their companies and those other persons and their companies
were thus similarly situate, in that allegations had been made against both,
the Government arbitrarily applied the Act to the petitioners and their
companies and issued the notification concerning them but left out the others
from its operation. It is true that the notification primarily or even solely
affects the petitioners and their companies but it cannot be overlooked that
Parliament having left the selective application of the Act to the discretion
of the appropriate Government, the latter must of necessity take its decision
on the materials available to it and the opinion it forms thereon. The
appropriate Government cannot in such matters be expected to sit down and hold
a judicial inquiry into the truth of the materials brought before it, and
examine the informants on oath in the presence of the parties who are or may be
likely to be affected by its decision. In matters of this kind the appropriate
Government has of necessity to act upon the information available to it. It is
the best judge of' the reliability of its source of information and if it acts
in good faith on the materials brought to its notice and honestly comes to the
conclusion that the act and conduct of the petitioners and the affairs of their
companies constitute a definite matter of public importance calling for an
inquiry with a view to devise measures for preventing the recurrence of such
evil, this Court, not being in possession of all the facts will, 39 306 we
apprehend, be slow to adjudge the executive action to be bad and illegal. We
are not unmindful of the fact that a very wide discretionary power has been
conferred on the Government and, indeed, the contemplation that such wide
powers in the hands of the executive may in some cases be misused or abused and
turned into an engine of oppression has caused considerable anxiety in our
mind. Nevertheless, the bare possibility that the powers may be misused or
abused cannot per se induce the court to deny the existence of the powers. It
cannot be overlooked that Parliament has confided this discretion, not to any
petty official but to the appropriate Government itself to take action in
conformity with the policy and principle laid down in the Act. As this Court
'has said in Matajog Dobey v. H. C. Bhari (1), " a discretionary power is
not necessarily a discriminatory power and that abuse of power is not to be
easily assumed where the discretion is vested in the Government and not in a
minor official. " We feel sure, however, that if this law is administered
by the Government " with an evil eye and an unequal hand " or for an
oblique or unworthy purpose the arms of this Court will be long enough to reach
it and to strike down such abuse with a heavy hand. What, then, we inquire, are
the salient facts here ? The Central Government appointed investigators to
scrutinise the affairs of three of the petitioners' concerns. Those
investigators had made their reports to the Central Government. The Central
Government had also the Bhaba Committee Report and all the Memoranda filed
before that Committee. It may also have had other information available to it
and on those materials it formed its opinion that the act and conduct of the
petitioners and the affairs of their companies constituted a definite matter of
public importance which required a full inquiry. Up to this stage there is no
question of legal proof of the allegations against the petitioners as in a
court of law. The only question is: do those allegations if honestly believed,
constitute a definite matter of public importance ? We are unable to say that
they do not.
(1) [1955] S.C.R. 925, 932.
307 Reference is again made to the several
matters enumerated in the five clauses set out in the first, preamble to the
notification and it is urged that those matters do not at all disclose any
intelligible differentia on the basis of which the petitioners and their
companies can be grouped together as a class. On the part of the Union of India
reference is made to the affidavits affirmed by Shri H. M. Patel, the Principal
Secretary to the Finance Ministry of the Government of India purporting to set
out in detail as the background thereof, the circumstances which led to the
issue of the impugned notification and the matters recited therein and the
several reports referred to in the said affidavit. Learned counsel for the petitioners
take the objection that reference cannot be made to any extraneous matter and
that the basis of classification must appear on the face of the notification
itself and reliance is placed on certain observations in the dissenting
judgments in Chiranjitlal Chowdhury's case (1) and in item (2) of the summary
given by Fazl Ali J. in his judgment in F. N. Balsara's case (2). In
Chiranjitlal Chowdhury's case (1) the majority of the Court read the preamble
to the Ordinance which was replaced by the Act which was under consideration
there as part of the Act and considered the recitals, reinforced as they were
by the presumption of validity of the Act, as prima facie sufficient to
constitute an intelligible basis for regarding the company concerned as a class
by itself and held that the petitioner there had not discharged the onus that
was on him. The dissenting Judges, after pointing out that the petition and the
affidavit did not give any indication as to the differentia on the basis of
which the company had been singled out, went on to say that the statute also
did not on the face of it indicate any basis of classification. This was
included in cl. (2) of the summary set out in the judgment in F. N. Balsara's
case (2). Those observations cannot, therefore, be read as meaning that the
classification must always appear on the face of the law itself and that
reference cannot be made to (1) [1550] S.C.R. 869.
(2) [1951] S.C.R. 682.
308 any extraneous materials. In fact in
Chiranjitlal Chowdhury's case (1) parliamentary proceedings, in so far as they
depicted the surrounding circumstances and furnished the background, were
referred to. In Kathi Raning Rawat's case (2) the hearing was adjourned in
order to enable the respondent to put in an affidavit setting forth the
material circumstances. In Kedarnath Bajoria's case (3) the situation brought
about by the war conditions was taken notice of The same may be said of the
cases of A. Thanyal Kunju Musaliar v. V. Venkitachulam Potti (4) and Pannalal
Binjraj v. Union of India (5). In our judgment, therefore, there can be no
objection to the matters brought to the notice of the court by the affidavit of
Shri H. M. Patel being taken into consideration along with the matters
specified in the notification in order to ascertain whether there was any valid
basis for treating the petitioners and their companies as a class by
themselves.
Learned counsel for the petitioners next
urges that even if the matters referred to in Shri H. M. Patel's affidavits and
those appearing on the face of the notification are taken into consideration
one cannot deduce there from any differentia which may be taken to distinguish
the petitioners and their companies from other persons and their companies. The
qualities and characteristics imputed to the petitioners and their companies
are not at all peculiar or exclusive to them but are to be found equally in
other persons and companies and yet they and their companies have been singled
out for hostile and discriminatory treatment leaving out other persons and
companies which are similarly situate. There is no force in this argument.
Parliament has confided the task of the selective application of the law to the
appropriate Government and it is, therefore for the appropriate Government to
exercise its discretion in the matter. It is to be expected-and, until the
contrary is proved, it is to be presumed-that the Government, which is
responsible to Parliament, will act honestly, properly and in conformity with
the (1) [1950] S.C.R. 869. (2) [1952] S.C.R. 435.
(3) [1954] S.C. R. 30. (4) [1955] 2 S.C.R.
1196.
(5) [1957] S.C.R. 233.
309 policy and principle laid down by
Parliament. It may well be that the Central Government thought that even if
one, or more of the particular qualities and characteristics attributed to the
petitioners and their companies may be found in another person or company, the
combination of those qualities and characteristics which it thought were
present in the petitioners and their companies was of a unique nature and was
not present in any other person or company.
In its appreciation of the material facts
preparatory to the exercise of the discretion left to it by Parliament the
Central Government may have thought that the evil was more pronounced in the
petitioners and their concerns than any other person or concern and that the
need for an inquiry was more urgent and clear in the case of the petitioners
and their companies than in the case of any other person or company. What is
the gist and substance of' the allegations against the petitioners and their
companies ? They are that a small group of persons had from before 1946
acquired control over a number of companies including a blanking company and an
insurance company ; that some of these companies were private companies and the
others were public companies in which the public had invested considerable
moneys by buying, shares; that the financial years of some of these companies
were different from those of the others;
that the funds of' the limited companies were
utilised in purchasing shares in other companies having large reserve funds
with a view to get control over them and to utilise those funds for acquiring
shares in other companies or otherwise utilise those funds for the personal
benefit of these individuals; that the shares were acquired on blank transfer
deeds and were not registered in the names of the companies with whose funds
they were purchased so as to permit the same shares to be shown in the balance
sheets of the different companies having different financial years;
that after 1951 several of these companies
were taken into voluntary liquidation or their assets were transferred to
another company under some pretended scheme of' arrangement or re-organisation;
that after getting control of 310 a company they appointed some of themselves
as managing director or selling agent on high remuneration and after a while
cancelled such appointment on paying fabulous amounts as and by way of
compensation; that funds of one company were transferred to another company to
cover up the real financial position. It is needless to add other allegations
to explain the matter. The question before us is not whether the allegations
made on the face of the notification and in the affidavits filed on behalf of
the Union of India are true but whether the qualities and characteristics, if
honestly believed to be found in the petitioners, are so peculiar or unique as
to constitute a good and valid basis on which the petitioners and their
companies can be regarded as a class by themselves. We are not of opinion that
they do not. It is not for us to say on this application and we do not in fact
say or even suggest that the allegations about the petitioners and their
concerns are at all well founded. It is sufficient for our present purpose to
say that the facts disclosed on the face of the notification itself and the
facts which have been brought to our notice by the affidavits afford sufficient
support to the presumption of constitutionality of the notification. There
being thus a presumption of validity in favour of the Act and the notification,
it is for the petitioners to allege and prove beyond doubt that other persons
or companies similarly situate have been left out and the petitioners and their
companies have been singled out for discriminatory and hostile treatment. The
petitioners have, in our opinion, failed to discharge that onus. Indeed nowhere
in the petitions is there even an averment that there are other persons or
companies similarly situate as the petitioners and their companies. It has to
be remembered that the allegations set forth in the memorandum submitted by the
Bombay Shareholders' Association to the Bhaba Committee have not been proved by
legal evidence. And further that report itself contains matters which may be
taken as calculated to lend support to the view that whether regard is had to
the combination of a variety of evils or to their degree, the petitioners may
quite conceivably 311 be grouped as a class by themselves. In our judgment the
plea of the infraction of the equal protection, clause of our Constitution
cannot be sustained.
The next contention is that the notification
is bad, because the action of the Government in issuing it was mala fide and
amounted to an abuse of power. Learned counsel appearing for the petitioner,
who is the appellant in Civil Appeal No.
455 of 1957, makes it clear that no personal
motive or ill will against the petitioners is imputed to anyone, but he points
out that the Bhaba Committee had been set up and the Companies Act has been remodelled
and, therefore, the present Commission was not set up for any legitimate
purpose. The main idea, according to learned counsel, was to obtain information
which the Government could not get by following the ordinary procedure under
the Code of Criminal Procedure and this ulterior motive clearly makes the
governmental action mala fide. This point has been further emphasised by
learned counsel appearing for the petitioners, who are appellants in Civil
Appeals Nos. 456 and 457 of 1957. He has drawn our attention to the affidavits
filed by his clients and contends that it was well-known to the Government that
none of them was concerned in promoting or managing any of the companies and
their position being thus well-known to the Government, their inclusion in the
notification was both outside the power conferred by the Government and also
constituted a mala fide exercise of the power conferred on it. No substantial
ground in support of this point has been brought before us and we are not
satisfied that the circumstances referred to in the notification and the
affidavits filed on behalf of the Union of India, may not, if true, be the
basis of a further inquiry into the matter. It will be for the Commission to
inquire into the allegations and come to its own findings and make its report
containing its recommendations. It is not desirable that we should say anything
more on this point. All that we need say is that the charge of mala fides has
not been brought home to the Government.
312 A point was taken that the original
notification was defective in that it did not fix the time within which the
Commission was to complete its report and that a subsequent notification fixing
a time could not cure that defect. We do not think there is any substance in
this too. The third notification quoted above amended the original notification
by fixing a time. There was nothing to prevent the Government from issuing a
fresh notification appointing a Commission and fixing a time. If that could be
done, there was no reason why the same result could not be achieved by the
combined effect of two notifications. In any case the amending notification
taken together with the original notification may be read as a fresh
notification within the meaning of s. 3 of the Act, operative at least from the
date of the later notification.
It is feebly argued that the notification is
bad as it amounts to a delegation of essential legislative function.
Assuming that there is delegation of
legislative function, the Act having laid down its policy, such delegation of
power, if any, is not vitiated at all, for the legislation by the delegates
will have to conform to the policy so laid down by the Act. Lastly a point is
raised that the notification is bad because it violates Art. 23 of the Constitution.
It is frankly stated by the learned counsel.
that this point is rather premature at this
stage and that he desires to reserve his client's right to raise it in future.
No other point has been urged before us and
for reasons stated above the appeals Nos. 455, 456 and 457 of 1957 are
dismissed with costs. Appeals Nos. 656, 657 and 658 of 1957 succeed only in
part, namely, to the extent that only the word-, " by way of redress or
punishment " occurring in the latter portion of el. (10) will be deleted so
that the latter portion of cl. (10) will read as: " and the action which
in the opinion of the Commission should be taken.................. to act as a
preventive in future cases " as indicated above. We make no order as to
the costs of these three appeals.
C. A. Nos. 455, 456 and 457 of 1957
dismissed.
C. A. Nos. 656, 657 and 658 of 1957 Partly
allowed.
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