The Keshav Mills Company Ltd. & ANR
Vs. Union of India & Ors  INSC 293 (8 December 1972)
MATHEW, KUTTYIL KURIEN
CITATION: 1973 AIR 389 1973 SCR (3) 22 1973
SCC (1) 380
E&F 1981 SC 818 (17,19,67,68,69,71,72,73)
F 1986 SC2030 (9) R 1990 SC1402 (23)
Industries (Development and Regulation) Act
1951-S.18Awhether it is necessary to observe the rules of natural justice once
during the investigation and again when action is taken under S. 18A.
The Keshav Mills Co. Ltd. and another
challenged the validity of an order passed by the Government of India, under S.
18-A of the Industries (Development and Regulation) Act, 1951 by which the
Gujarat State Textile Corporation Ltd. has been appointed and authorised
controller of the Company for a period of five years. The Company is the owner
of a cotton textile mill and it was established in 1934. Till 1965, the Company
made flourishing business.
After the year 1964-65, the Company fell on
evil days and the textile mill of the company was one of the 12 sick textile
mills in Gujarat, which had to be closed down during 1966 and 1968. On 31st May
1969, Government of India passed an order appointing a Committee for
investigation into the affairs of the Company under the provisions of S. 15 of
the Act. In due course, the Investigating Committee completed its inquiry and
submitted its report to the Government. On 24th November, 1970, the Government
of India passed an Order under S. 18-A of the Act authorising the Gujarat State
Textile Corporation to take over the management of the Company for a period of
five years from the date of publication of that order in the Official Gazette.
The Company filed a writ petition before the
High Court of Delhi praying for appropriate relief. The High Court dismissed
the petition. The main contention of the appellants before the Delhi High Court
was that Government of India was not competent to proceed under S. 18-A against
the company without supplying before hand, a copy of the report of the
Investigating Committee to the Company.
According to the appellants, the Government
should not only have supplied a copy of the report to the Company, but should
also have given a hearing to the Company before finally deciding upon. taking
over the company's undertaking under S.. 18-A of the Act. This contention was
pressed on behalf of the appellants in spite of the fact that an opportunity
had been given by the Investigating Committee to the management and the
employees of the Company for adducing evidence and for making representation
before the completion of the investigation.
The only question that this Court had to
decide was whether after the undertaking had already been given an opportunity
of being heard at the time of investigation, the Company is entitled to have a
copy of the report and to make, if necessary, further representation about that
report before a final decision is made by the Government under S. 18-A of the
Act. The answer depended on the following questions;
(1) Is it necessary to observe the rules of natural
justice before enforcing a decision under S. 18-A of the Act. (2) What-are the
rules of natural justice in such a case. (3) (a) In the present case, have the
rules to be observed once during the investigation under S. 15 and then again,
after the investigation is completed and action on the report of the
Investigating Committee taken under S. 18-A (b) Was it necessary to furnish a
copy of the Investigating Committee's Report before passing an order of take
over ? Dismissing the appeal,
HELD : (i) Although the order of the
Government of India taking over the management of the Company was a purely
executive order, embodying an administrative decision, even so, the question of
natural justice does arise in this case.
It is too late now to contend that the
principles of natural justice do not apply to administrative orders or proceedings.
[29G] Regina v. Gaming Board, exparte Benaim  2 W.L.R. 1009, referred to.
(ii) The concept of natural justice cannot be
put into a straight jacket. It is futile to look for definitions or standards
of natural justice. The only essential point that has to be kept in mind in all
cases is that the person concerned should have a reasonable opportunity of
presenting his case and administrative authority concerned should act fairly,
impartially and reasonably. It only means that such measure of natural justice
should be applied as was described by Lord Reid in Ridge v. Baldwin, as
"insusceptible of exact definition, but what a reasonable man would regard
as a fair procedure in particular circumstances." However, everything will
depend on the actual facts and circumstances of the case. [30B] (iii)The Act
was passed to provide for development and regulation of important industries,
the activities of which affect the country as a whole and the development of
which must be governed by economic factors of all India import.
For achieving this purpose, the Act conferscer
powers on Government to secure the planning of future development on sound and
balanced line by the licensing of all new under takings and also by making
rules for the registration of existing undertakings for regulation and
production and development of the industries and also in certain cases, by
taking over the control and management of certain industrial concerns. Since
the appellants have received a fair treatment and also all reasonable
opportunities to make out their own case before Government, they cannot be
allowed to make any grievance of the fact that they were not given a formal
notice calling upon them to show cause why their undertaking should not be
taken over, or that they had not been furnished with a copy of the report.
[30H, 35H] (iv) In the present case non-disclosure of the report of the Investigating
Committee has not caused any prejudice whatsoever to the appellants. Under the
circumstances, the High Court's Order is confirmed. [38F] Local Government
Board v. Arlidge,  A.C. 120, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1183 of 1972.
Appeal by special leave from the judgment and
order dated March 3, 1972 of the Delhi High Court in Civil Writ No. 1366 of
I. N. Shroff for the appellants.
24 F. S. Nariman Additional Solicitor General
of India, P. P. Rao and B. D. Sharma for respondent No. 1.
J. L. Hathi, K. L. Hathi and P. C. Kapur for
respondent Nos. 2 and 3.
The Judgment of the Court was delivered by
Mukherjea, J. This appeal by special leave from a judgment and order of the
Delhi High Court arises out of a petition under Articles 226 and 227 of the
Constitution of India made by Keshav Mills Company limited (hereinafter
referred to as the Company) and Navin Chandra Chandulal Parekh who is a
shareholder and a Director of the Company challenging the validity of an order
dated 24 November 1970 passed by the Government of India under Sec. 18A of the
Industries (Development and Regulation) Act, 1951 (65 of 1951) (hereinafter
referred to as the Act) by which the Gujarat State Textile Corporation Ltd. has
been appointed the authorised controller of the Company for a period of five
years. The Delhi High Court dismissed the writ petition after hearing the
parties and hence this appeal. The facts and circumstances leading to the
filing of the petition are briefly stated as follows.
The Company is the owner of a cotton textile
mill at Petlad known as Keshav Mills. The Company was established in 1934 and,
as far as one can judge from the facts and figures cited in the petition, the
Company made flourishing business between the years 1935 and 1965. Indeed, if
the appellants' figures are to be believed,-and there is no reason to
disbelieve them, each holder of the 250 ordinary shares of the Company seems to
have received Rs. 33,685 in course of a period of 30 years between 1935 and 1964-65
as profit on an initial investment of Rs. 1,000 only. On top of this the
Company's capital block was increased from Rs. 10.62 lakhs in 1935 to Rs.
78,38,900 at the end of the year 1964-65.
All these profits, however, went to a close
group of people, since 80 per cent of the share capital belongs to petitioner
Parekh, his family members, relations and friends and only 20 per cent
share-capital is in the hands of the members of the public. The Company,
however, fell on evil days after the year 1964-65 and the textile mill of the
Company was one of. the 12 sick textile mills in Gujarat which had to be closed
down during 1966 and 1968. We are not here directly concerned with the various
causes which were responsible for this sudden reversal of the fortunes of this
Suffice it to say that on 31 May 1969 the
Government of India passed an order appointing a committee for investigating
into the affairs of the Company under the provisions of Sec. 15 of the Act. We
shall hereafter refer to this 25 Committee as the Investigating Committee. The
material portion of the order dated 31 May 1969 is reproduced as hereunder :"S.O./15IDRA/69:-Whereas
the Central Government is of the opinion that there has been, or is likely to
be substantial fall in the volume of production in respect of cotton textiles
manufactured in the industrial undertaking known as the Petlad Keshav Mills Co.
Ltd., Petlad (Gujarat) for which, having regard to the economic conditions
prevailing there is no justification.
Now, therefore, in exercise of the powers
conferred by Section 15 of the Industries (Development and Regulation) Act,
1951 (65 of 1951), the Central Government hereby appoints, for the purpose of
making full and complete investigation into the circumstances of the case, a
body of persons consisting of :Chairman (1) Shri 1. C. Shah, (General Manager,
Ambica Group of Mills, Ahmedabad).
Members (2) Shri M. C. Mirchandani, Director
(Technical), National Textile Corporation.
(3) Shri J. P. Singh, Director (.Finance),
National Textile Corporation.
(4) Shri M. Sivagnanam, Industries
Commissioner, Government of Gujarat, Ahmedabad.
(5) Shri V. A. Mahajan, Senior Accounts
Officer, Office of the Regional Director, Company Law Board, Bombay.
(6) Shri Y. L. N. Achar, Inspecting Officer,
Office of the Textile Commissioner, Bombay.
In this connection it may be relevant to set
out some extracts from the communication that was sent out on 11 June 1969 by
the Government of India to the various members of the aforesaid committee. The
communication which was in the nature of a 26 supplemental order by the
Government of India detailing the point of reference to the Investigating
Committee was to the following effect "Subject:-Appointment of
Investigation Committee for Petlad Keshav Mills Co. Ltd. Petlad (Gujarat) under
the Industries (Development and Regulation) Act, 1951.
Sir, I am directed to enclose a copy of order
dated 31st May, 1969, issued under Section 15 of the Industries (Development
and Regulation) Act, 1951, setting up' a committee to enquire into the affairs
of Petlad Keshav Mills Co. Ltd., Petlad, Gujarat for your information and
The investigation should also be directed to
the following specific points :(a) Reasons for the present state of affairs.
(b) Deficiencies, if any, in the existing
(c) Immediate requirements, under separate
heads of accounts, of working capital if any.
(d) Requirement of long-term capital for
(e) financial result of :(i) Immediate
working without further investment on capital account.
(ii) Working after further investment on
(f) Suggestion regarding source of funds
required under (e) and (d) and security available for their repayment.
I am further to request that 15 copies of the
report may kindly be submitted to this Ministry at a very early date." In
due course, the Investigating Committee completed its inquiry and submitted its
report to the Government some time about January, 1970. On or about 24 November
1970 the Government of India passed an order under Sec. 18A of the Act
authorising the Gujarat State Textile Corporation (hereinafter to be referred
to as the Authorised Controller to take over the management of the whole of the
undertaking of the Company 27 for a period of five years from the date of
publication of that order in the Official Gazette. The relevant order is in
following terms:"S.O.-/18A/IDRA/70 Whereas the Central Government is of
the opinion that the Keshav Mills Co. Ltd., Petlad, an industrial undertaking
in respect of which an investigation has been made under Section 15 of the
Industrial (Development and Regulation) Act, 1951 (65 of 1951), is being
managed in a manner highly detrimental to public interest.
Now, therefore, in exercise of the powers
conferred by section 18A of the said Act, the Central Government authorises the
Gujarat State Textile Corporation (hereinafter. referred to as Authorised
Controller) to take over the management of the whole of the said undertaking
namely, the Kesbav Mills Co. Ltd., Petlad, subject to the following terms and
conditions, namely :
(i) The Authorised Controller shall comply
with all directions issued from time to time by the Central Government;
(ii) The Authorised Controller shall hold
office for five years from the date of publication in the official gaztte of
this notified order;
(iii) The Central Government may terminate
the appointment of the Authorised Controller earlier if it considers necessary
to do so.
"This order will have effect for a
period of five years commencing from the date of its publication in the
official gazette." On 5 December 1970 one R. C. Bhatt, Assistant
Secretary, to the Authorised Controller went to the Company's office at Petlad
and presented a letter from his principals authorising him' to take over
possession of the mill of the Company and requested' the Company to hand over
the keys of the office buildings, godowns and other departments as well as the
office records, account books etc. to Bhatt. The Company handed over the keys
of the Company's premises to R.C. Bhatt under protest. On 15 December 1970 the
Company filed a writ petition before the High, Court of Delhi under Articles
226 and 227 of the Constitution, of India praying for "appropriate
Though several grounds were taken in the writ
petition, the main contention of the appellants before the Delhi High Court was
that it was not competent for the Government of India to proceed under Sec. 18A
against the Company without supplying28 beforehand a _copy of the report of the
Investigating Committee to the Company. The appellants complained that though
the Investigating Committee had submitted a report to the Government of India
in January, 1970 the Government did not furnish the management of the Company
with the contents of the report. According to the appellants the Government
should not only have supplied a copy of the report to the Company but should
also have given a hearing to the Company before finally deciding upon taking
over the Company's undertaking under Sec.. 18A of the Act. This contention was
pressed on behalf of the appellants in spite of the fact that an opportunity
had been given by the Investigating Committee to the management and the
employees ,of the Company for adducing evidence and making representations
before three completion of the investigation. Reliance was placed on behalf of
the appellants on a Bench decision of the Delhi High Court in Bharat Kumar
Chinubhai v. Union of India and others(1). The correctness of that decision
was, however, .seriously questioned on behalf of the respondents and the single
.Judge before whom the instant petition came up for hearing referred the matter
to adjudication before a Full Bench of that 'High Court. The question of law
that was referred for the decision of the Full Bench was framed by the learned
Judge in the 'following manner :"Whether in view of Rule 5 of the
Investigation of Industrial Undertakings (Procedure) Rules of 1967 providing
for an opportunity of hearing before the Investigator and the absence of any
specific provision either in the Act or in the Rules for supplying a copy of
the Investigator's report to the management, the taking over of the industrial
undertaking, without supplying a copy of the Investigator's report is vitiated
?" The Full Bench of the Delhi High Court after hearing the parties
answered the above question of law in the negative and since this was the only
'question argued before them, dismissed the petition.
The whole dispute between the parties is in
substance a question regarding the exact requirement of the rules of natural
justice in the facts and situation of the case.
There can be no question that whenever an
order is-made under Sec. 18A against a company it has far-reaching consequences
on the rights of that company, its shareholders, its employees and all persons
who have contractual dealings and transactions with that company. It is also
not seriously questioned that before passing an order of "takeover"
under Sec. 18A it is incumbent on the Government to give at some stage a
reasonable opportunity to the undertaking con(1) Civil Writ No. 560 of 1969:
Judgment delivered on 10 February 1970.
29 cerned for making suitable representations
against the proposed take-over. In fact, under the rule-making power conferred
by Sec. 30 of the Act the Government of India has already made a rule viz. Rule
5 which provides for such an opportunity. Rule 5 runs as follows :"5.
Opportunity for hearing. The Investigator shall, before completion of his
investigation, give the Management and the employees of the undertaking or
undertakings in respect of which the investigation is ordered, reasonable
opportunity of being heard including opportunity to adduce any evidence."
The only question that we have to decide now is whether after the undertaking
has already been given such an opportunity at the time of investigation it is
entitled to have a copy of the report and to make, if necessary, further
representation about that report before a final decision is made by the
Government about taking action under Sec. 18A of the Act. Our decision on this
question will depend on our answers to the following questions :(i) Is it
necessary at all to observe the rules of natural justice before enforcing a
decision under Sec.
18A of the Act ? (ii) What are the rules of
natural justice in such a case ? (iii) (a) In the facts and circumstances of
the present case have the rules to be observed once during the investigation
under Sec. 15 and then again after the investigation is complete and action on
the report of the Investigating Committee taken under Sec. 18A ? (b) Was it
necessary to furnish a copy of the Investigating Committee's Report before
passing the order of take-over ? The first of these questions does not present
any difficulty. It is true that the order of the Government of India that has
been challenged by the appellants was a purely executive order embodying on
Even so the question of natural _justice does
arise in this case. It is too late now to contend that the principles of natural
justice need not apply to administrative orders or proceedings; in the language
of Lord Denning M.R. in Regina v. Gaming Board ex-parte Benalm(1) "that
heresy was scotched in Ridge v. Baldwin" (2) .
(1)  2 W.Z.R. 1009. (2)  A.C.
30 The second question, however, as to what
are the principles of natural justice that should regulate an administrative
act order is a much more difficult one to answer. We do not this it either
feasible or even desirable to lay down any fixed rigorous yard-stick in this
manner. The concept of natural justice cannot be put into a straight-jacket. It
is futile, therefore, to look for definitions or standards of natural justice for
various decisions and then try to apply them to the facts of a given case. The
only essential point that has to be kept in mind in all cases is that the
person concerned should have a reasonable opportunity of presenting his case
and that the administrative authority concerned should act fairly, impartially
Where administrative officers are concerned,
the duty is not so much to act judicially as to act fairly. See, for instance,
the observations of Lord Parker in In re H. K. (a infant) (1). It only means
that such measure of natural justice should be applied as was described by Lord
Reid in Ridge Baldwin(2) as "in susceptible of exact definition but what
reasonable man would regard as a fair procedure in particular
circumstances". However, even the application of the concept of fair play
requires real flexibility. Everything will depend the actual facts and
circumstances of a case. As Tucker L. ,observed in Russell v. Duke of
"The requirements of natural justice
must depend on the circumstances of the case, the nature of the enquiry, the
rules under which the tribunal is acting, the subject matter that is being
dealt with and so forth." We now turn to the third and the last question
which is in two parts. For answering that question we shall keep in mind the
observations of Tucker L. J. set out just now and examine the nature and scope
of the inquiry that had been carried out by the Investigating Committee set up
by the Government, the scope and purpose of the Act and rules under which the
Investigating Committee was supposed to act, the matter that was being investigated
by the Committee and finally the opportunity that was afforded to the
appellants for presenting their case before the Investigating Committee.
The Act was passed to provide for development
and regulation of important industries the activities of which, according to
the Statement of Objects and Reasons of the Bill which resulted in the Act
"affect the country as a whole and the development of which must be
governed by economic factors of all-India import". For achieving this
Purpose the Act confers certain (1) 2 Q.B. 617. (2)  A.C. 40.
(3)  1 All. ER. 109 31 powers on
Government to secure the planning of future development on sound and balanced
lines by the licensing of all new undertakings and also by making rules for the
registration of existing undertakings, for regulating the production and
development of the industries and also, in certain cases, by taking over the
control and management of certain industrial concerns. The various powers
conferred on Government as aforesaid are to be exercised after carrying out
suitable investigations. Sec. 2 of the Act states categorically that it is
expedient in the public interest that the Union should take under its control
the industries specified in the First Schedule. No attempt was made before us
to question the expediency of control by the Central Government over any
industry mentioned in the Schedule or any undertaking pertaining to such an
The industry engaged in the manufacture and
production of 'textiles' is item 23 of the First Schedule to the Act.
Therefore, we start from the premise that the
Central Government as a matter of public policy is interested in the well-being
and efficient administration of any undertaking relating to the textile
industry and is also entitled to exercise some degree of control over it. Sec.
15 empowers the Government to cause. investigation to be made into any
scheduled industry or industrial undertaking under certain circumstances,
namely (i) if there has been or is likely to be a substantial fall in
production of articles relatable to that industry or produced by the
undertaking concerned for which, in the 'light of the economic conditions
prevailing, there is no justification; or (ii) if there has been or is a marked
deterioration in the quality of the' articles relatable to that industry or
produced by the undertaking;
or (iii) if there is an unjustifiable rise in
the price of such articles; or (iv) Government considers it necessary for the
purpose of conserving any resources of national importance which are utilised
in that particular industry or undertaking. Central Government may cause such
an investigation also if an industrial undertaking is being managed in a manner
which is detrimental to the scheduled industry or to public interest. Sec. 16
of the Act empowers the Government to issue, appropriate directions to the
industrial undertaking or undertakings concerned after the investigation under
Sec. 15 has been completed. Such directions may be given for the purpose of
regulating the production or fixing the standards of production of any article
or articles or for taking steps to stimulate the development of the industry or
for preventing any act or practice which might reduce the production capacity
or economic value of the industrial undertaking and, finally, for controlling
the price or regulating the distribution of any article or class of articles
which have been the subject matter of the investigation. In certain cases,
however, such indirect control may not be enough and Government may interfere
and take up the direct management or control of industrial undertakings. Sec.
18A details the 32 circumstances when the Government may impose such control by
authorising a person or body of persons to take over the management of the
whole or any part of the undertaking.
Before, the Government assumes such
management or control, the Government must be of the opinion that the
undertaking concerned has failed to comply with the directions issued under
Sec. 16 of the Act or that the industrial undertaking regarding which there has
been an investigation under Sec.
15 "is being managed in a manner highly
detrimental to the scheduled industry concerned or to public interest".
In the instant case, the Government of India
came to hold the opinion that there was a substantial fall in the volume of
production in respect of the Company's production of cotton textiles for which
Government apparently found no justification having regard to the prevailing
economic conditions. The Government was perfectly within its rights to appoint,
under the terms of Sec. 15, an investigating body for the purpose of making
full and complete investigation into the circumstances of the case. This is
what the Government did and the appellants do not, as indeed they cannot, find
fault with this action of the Government.
It is the admitted case that for three years
prior to 1969 the Company had been running into continual difficulties as a
result of which the Company suffered losses which amounted upto Rs. 56.76
lakhs. In fact the mill had to be closed by the end of 1968. It was only on 31
May 1969 that Government of India appointed the Investigating Committee to
investigate into the affairs of the Company's mill. The appellants do not make
any grievance against the Investigating Committee regarding the manner in which
they carried out the investigation. It is admitted that the Committee gave to
the Company a full opportunity of being heard and also an opportunity of
adducing evidence. There can therefore, be no complaint that up to this stage
there was any failure to observe the rules of natural justice.
In January 1970 the report of the
Investigating Committee was submitted to Government and, on the appellants' own
showing, they knew that there was a likelihood of Government appointing a
Controller under Sec. 18A to take over the appellants undertaking. There can be
no question that the appellants were fully aware of the scope and amplitude of
the investigation initiated by Government. A copy of the letter dated 1 June
1969 which had been addressed to the members of the Investigating Committee was
sent also to the Company at the time of setting up of the Committee. We have
already set out this letter in extenso. The Government clearly indicated in
that letter the scope of the investigation ordered under Sec. 15. It is not
possible to suggest that the appellants were not aware of the Company's
distressing economic position about the middle of 1969. The 33 terms of
reference of the Committee would make it clear even to, one not aware of the economic
condition of the Company that the Government was genuinely concerned about its
financial position. Even though the enquiry itself was ordered under the
provisions of Sec. 15(a), the Committee and the Government had authority to
treat the report as if it was also made under Sec. 15 (b) of the Act. In the
case of Shri Ambalal M. Shah and Anr. v. Hathisingh Manufacturing Co., Ltd.(1)
the Central Government made an order under Sec.15 of the Act by which a
committee of three persons was appointed for the purpose of making a full and
complete investigation into the circumstances of the case. Before appointing
this committee the Government came to hold the opinion that there had been a
substantial fall in the volume of production in respect of cotton textiles
manufactured by Hathisingh Manufacturing Co., Ltd. for which, having regard to
the economic conditions prevailing at that time there was according to
Government no justification. After the committee had submitted its report the
Central Government held the opinion that the company was being managed in a
manner highly detrimental to public interest and made an order under Sec. 18A
of the Act authorising Ambalal M. Shah to take over the management of the whole
of the undertaking of that company. The legality of the order was challenged on
the ground that the order under Sec. 18A could have been made only after the
Central Government had initiated an investigation on the basis of the opinion
mentioned in Sec.
15(b) that is to say on the strength of the
opinion that the company was being managed in a manner highly detrimental to
public interest. It was argued that in so far as the investigation ordered by
the Central Government was initiated on the formation of an opinion as
mentioned in clause (a) (i) of Sec. 15, the order was illegal. This Court held,
however, the order to be perfectly valid, because the words used by the
legislature in Sec. 18A (1) (b) viz. "in respect of which an investigation
has been made under Sec. 15" could not be cut down by the restricting
phrase "based on an opinion that the industrial undertaking is being
managed in a manner highly detrimental to the scheduled industry concerned or
to public interest". Once an investigation has been validly made under
Sec. 15 it was held sufficient to empower the Central Government to authorise a
person to take over the management of an industrial undertaking irrespective of
the nature or content of the opinion on which the investigation was initiated.
In view of this decision it is not possible for the appellants to contend that
they were not aware that as a result of the report of the Investigating
Committee the Government could pass an order under Sec. 18A(1)(1)  3 S.
C. R. 171.
L63ISup.C.I./73 34 taking. In fact, it
appears from a letter addressed by appellant No. 2 Navinchandra Chandulal
Parikh on behalf of the Company to Shri H. K. Bansal, Deputy Secretary,
Ministry of Foreign trade and Supply on 12 September 1970 that the appellants
had come to know that the Government of India was in fact considering the
question of appointing an authorised controller under Sec. 18A of the Act in
respect of the appellants' undertaking. In that letter a detailed account of
the facts and circumstances under which that mill had to be closed down was
given. There is also an account of the efforts made by the Company's Directors
to restore the mill.
There is no attempt to minimise the financial
difficulties of the Company in that letter. Parikh only seeks to make out that
the Company was facing a serious financial crisis in common with other textile
mills in the country which also had to face closure. He speaks of the various
approaches madeby the company to the Government of Gujarat for getting
financial assistance. The letter specifically mentions the company's
application to the Gujarat State Textile Cooperation Ltd. for financial help.
It appears clearly from this letter that though according to Parikh some
progress had been made in the matter of securing assistance from the Gujarat
State Textile Corporation Ltd.
the Corporation ultimately failed to come to
the succor of the company. Parikh requested Government not to appoint an
authorised controller and further prayed that the Government of India should
ask the State Government and the Gujarat State Textile Corporation Ltd. to give
a financial guarantee to the Company. Two things appear quite clearly from that
letter; first, that the appellants required a minimum sum of Rs. 20 lakh is as
immediate aid and, secondly, that the Company in spite of various approaches
had not succeeded in securing the same. Only a few days before this letter had
been addressed, Parikh, it appears, had an interview with the Minister of
Foreign Trade on 26 August 1970 when the Minister gave him, as a special case,
four weeks' time with effect from 26 August 1970 to obtain the necessary
financial guarantee from the State or the Gujarat State Textile Corporation
without which the Company had expressed its inability to reopen and run the
mill. In a letter of 22 September 1970 Bansal informed Parikh in clear language
that if the Company failed to obtain the necessary guarantee by 26 September
1970 Government was proceeding to take action under the Act. It is obvious,
therefore, that the appellants were aware all Ionia that as a result of the
report of the Investigating Committee the Company's undertaking was going to be
up by Government. Parikh had not only made written representations but, had
also seen the Minister of Foreign Trade and Supply. He had requested the
Minister not to take over the undertaking and, on the contrary, to lend his
good offices so that the Company could get financial support from the Gujarat
35 State Textile Corporation or from the Gujarat State Government.
All these circumstances leave us in no manner
of doubt that the Company had full opportunities to make all possible representations
before the Government against the proposed takeover of its mill under Sec. 18A.
In this connection it is significant that even after the writ petition had been
filed before the Delhi High Court the Government of India had given the
appellants at their own request one month's time to obtain the necessary funds
to commence the working of the mill. Even then, they failed to do so.
There are at least five, features of the case
which make it impossible for us to give any weight to the appellants' complaint
that the rules of natural _justice have not been observed. First, on their own
showing they were perfectly aware of the grounds on which Government had passed
the order under Sec. 18A of the Act. Secondly, they are not in a position to
deny (a) that the Company had sustained such heavy losses that its mill had to
be closed down indefinitely, and (b) that there was not only loss of production
of textiles but at least 1200 persons had been thrown out of employment.
Thirdly, it is transparently clear from the affidavits that the Company was not
in a position to raise the resources to recommence the working of the mill.
Fourthly, the appellants were given a full hearing at the time of the investigation
held by the Investigating Committee and were also given opportunities to adduce
evidence. Finally, even after the Investigating Committee had submitted its
report, the appellants were in constant communion with the Government and were
in fact negotiating with Government for such help as might enable them to
reopen the mill and to avoid a take-over of their undertaking by the
Government. Having regard to these features it is impossible for us to accept
the contention that the appellants did not get any reasonable opportunity to
make out a case against the take-over of their undertaking or that the
Government has not treated the appellants fairly. There is not the slightest
justification in this case for the complaint that there has been any denial of
We must, however, deal with the specific
point raised by the appellants that they should have been given further hearing
by the Government before they took the final decision of taking over their
undertaking under Sec. 18A of the Act and that, in any event, they should have
been supplied with a copy of the report of the Investigating Committee.
In our opinion, since the appellants have
received a fair treatment and also all reasonable opportunities to make out
their own case before Government they cannot be allowed to make any grievance
of the fact that they were not given a formal 36 notice calling upon them to
show cause why their undertaking should not be taken over or that they had not
been furnished with a copy of the report. They had made all the representations
that they could possibly have made against theproposed takeover. By no stretch
of imagination,, can it be said that the order for take-over took them by
surprise. In fact Government gave them ample opportunity to reopen and run the
mill on their own if they wanted to avoid the take-over. The blunt fact is that
the appellants just did not have the necessary resources to do so. Insistence
on formal hearing in such circumstances is nothing but insistence on empty
The question still remains whether the
appellants were entitled to get a copy of the report. It is the same question
which arose in the celebrated case of Local Government Board v. Arlidge(1).
That was a case in which a local authority made a closing order in respect of a
dwelling house in their district on the ground that the house was unfit for
human habitation. The owner of the dwelling house who had a right to appeal to
the Local Government Board against the closing order made such an appeal. Sec.
39 of the Housing, Town Planning, & c., Act, 1909 provided that the
procedure to be followed in such an appeal was to be such as the Local
Government Board might determine by rules. The section, however, required the
rules to provide that the Board was not to dismiss any appeal without having
first made a public local enquiry.
The Local Government Board had made such
rules and in conformity with these rules held an enquiry in the appeal
preferred against the closing order. The house-owner attended ;the enquiry with
his solicitor and also adduced evidence. After considering the facts and the
evidence given at the enquiry as well as the report of the inspector who
inspected the house the Local Government Board refused to interfere with the
decision, of the Borough Council not to determine the closing order. The
house-owner thereupon obtained an order nisi for a writ of certiorari for the
purpose of quashing of the closing order. One of the principal grounds urged by
the house-owner was that he was entitled to see the report of the appellant's
inspector but the report had not been shown to him. A Divisional Court
discharged the, order nisi but the Court of Appeal reversed the decision and
ordered the writ of certiorari to issue.
The matter then went up to the House of Lords
who allowed the appeal and upheld the closing order. Viscount Haldane L.C., in
his judgment held that though the decision of the Board must be come to in the
spirit and with the sense of responsibility of a tribunal whose duty it is to
mete out justice it does not follow that the procedure of every such tribunal
must be the same. In the absence of a declaration to the contrary, the 1 
A. C. 120 37 Board was intended by Parliament to follow the procedure which is
its own and is necessary if the administration is to be capable of doing its
work efficiently. AR that was necessary for the Board was to act in good faith
and to listen fairly to both sides. (Emphasis is ours). As to the contention
that the report of the inspector should have been disclosed, his Lordship
observed :.lm15 " It might or might not have been useful to disclose this
report, but I do not think that the Board was bound to do so, any more than it
would have been bound to disclose all the minutes made on the papers in the
office before a decision was come to".
Lord Moulton in his judgment observed that
since the appeal provided by the legislature is an appeal to an administrative
department of a State and not to a be judicial body it was enough if the Local
Government Board preserved a judicial temper and performed its duties
consciously with a proper feeling of responsibility. On the question whether it
was necessary 'to disclose the report, his Lordship observed :"Like every
administrative body, the Local Government Board must derive its knowledge from
its agents, and I am unable to see any reason why the reports which they make
to the department should be made public. It would, in my opinion, cripple the
usefulness of these enquires........ I dissociate myself from the remarks which
have been made in this case in favour of a department making reports of this
kind public. Such a practice would, in my opinion, be decidedly
mischevious." In a later case namely Danby & Sons Ltd. v. Minister of
Health(1) the law stated in Local Government Board v.Arlidge (2) was
reaffirmed. Indeed, the law in England still stands unchanged.
The law relating to observation of the rules
of natural justice has, however, made considerable strides since the case of
Local Government Board v. Arlidge(2) . In particular, since the decision in
Ridge v. Baldwin(3) a copious case-law on the subject of natural justice has
produced what has been described by some authorities as detailed law of
"administrative due process' in India also the decisions of this Court
have extended the horizons of the rules of natural justice and their
application. I See, for instance the judgment of this Court in Kraipak and (1)
 1 K.B. 337.
(2)  A.C. 120.
(3)  A.C. 40.
38 Others v. Union of India(1). The problem
has also received considerable attention from various tribunals and committees
set up in England to investigate the working of administrative tribunals and,
in particular, the working of such administrative procedures as the holding of
an enquiry by or on behalf of a Minister. In fact, a parliamentary committee
known as the Franks Committee was set up in 1955 to examine this question. This
Committee specifically dealt with the question of what is described as
"Inspectors' Reports". The Committee mentions that the evidence that
the Committee received, other than the evidence from Government departments was
overwhelmingly in favour of "some degree of publication" of such
reports. After summarising various arguments given in favour of as well as against
the publication of the reports, the Committee recommended that "the right
course is to publish the inspectors' reports".
The Committee also recommended that the
parties concerned should have an opportunity if they so desired to propose
corrections of facts stated in the reports. It may be mentioned, however that
these recommendations of the Committee were not accepted by the British
In our opinion it is not possible to lay down
any general principle on the question as to whether the report of an investigating
body or of an inspector appointed by an administrative authority should be made
available to the persons concerned in any given case before the authority takes
a decision upon that report. The answer to this question also must always
depend on the facts and circumstances of the case. It is not at all unlikely
that there may be certain cases where unless the report is given the party
concerned cannot make any effective representation about the action that
Government takes or proposes to take on the basis of that report. Whether the
report should be furnished or not must therefore depend in every individual
case on the merits of that case. We have no doubt that in the instant case
non-disclosure of the report of the Investigating Committee has not can used
any prejudice whatsoever to the appellants.
In this view of the matter We confirm the
order of the Delhi High Court and dismiss this appeal. In the facts and
circumstances of the case we direct that the parties will bear their respective
(1)  1 S.C.R. 457.