1984 (2) TMI 357 - SC - Companies Law

Summary

Issues Involved:
1. Applicability of Section 23 of the University Grants Commission Act, 1956 to Commercial University Limited (CUL).
2. Legislative competence of Parliament to enact the University Grants Commission Act, 1956.
3. Right of minority communities to establish universities under Article 30 of the Constitution.
4. Resignation of the accused persons from CUL and its implications on prosecution.

Issue-Wise Detailed Analysis:

1. Applicability of Section 23 of the University Grants Commission Act, 1956 to Commercial University Limited (CUL):
The appellants were prosecuted under Section 24 of the University Grants Commission Act, 1956 for continuing to use the word "University" in the name of Commercial University Limited (CUL) beyond the two-year period allowed by the proviso to Section 23. The appellants argued that since CUL was incorporated under the Companies Act of 1913, it should be exempt from the prohibition in Section 23. The court disagreed, stating that the Act only recognizes universities established or incorporated under specific Central, Provincial, or State Acts, and not those incorporated under general statutes like the Companies Act. The court emphasized that the legislative intention was to eradicate the mischief of unauthorized institutions awarding degrees and using the term "University."

2. Legislative Competence of Parliament to Enact the University Grants Commission Act, 1956:
The appellants contended that the Act was ultra vires because "Education including universities" was a State subject under Entry 11 of List II of the Seventh Schedule of the Constitution. However, the court noted that the Act was intended to coordinate and determine standards in universities, which falls under Entry 66 of List I. The court held that Parliament had the competence to legislate on this matter, as the Act's primary purpose was to regulate standards in higher education, a field covered by Entry 66. The court also cited several precedents to support the view that incidental encroachments on State subjects do not invalidate a law if it is substantially within the legislative competence of Parliament.

3. Right of Minority Communities to Establish Universities under Article 30 of the Constitution:
The appellants argued that the Act's restrictions were ultra vires because Article 30 guarantees minority communities the right to establish educational institutions, including universities. The court referred to the case of S. Azeez Basha v. Union of India, which recognized the right of minority communities to establish universities. However, the court noted that CUL was not a minority institution, and therefore, the argument based on Article 30 was not applicable in this case. The court declined to examine the vires of the Act concerning minority rights as it was not relevant to the present appeals.

4. Resignation of the Accused Persons from CUL and Its Implications on Prosecution:
The appellants claimed that they had resigned from CUL between 1962 and 1970, similar to another accused, Shri Anand Singh, against whom the prosecution was withdrawn. The prosecution did not dispute these resignations. The court acknowledged that there was a bona fide belief among those connected with CUL that its incorporation under the Companies Act satisfied the requirements of the University Grants Commission Act. Given these circumstances, the court found it appropriate to acquit the appellants and set aside their convictions under Section 24 of the Act. The fines, if already paid, were ordered to be refunded.

Additional Considerations:
The court suggested that CUL could apply to the Central Government for recognition as a deemed university under Section 3 of the Act. This would allow CUL to confer degrees legally. The court also recommended that the Central Government consider whether institutions recognized under Section 3 should be exempt from the prohibition in Section 23, potentially through an amendment to the Act. The court provided CUL with a reasonable time until the end of 1984 to take appropriate steps to avoid further prosecution under the Act.

Conclusion:
The appeals were partly allowed, with the court acquitting the appellants and setting aside their convictions under Section 24 of the University Grants Commission Act, 1956. The court provided guidance on the potential for CUL to seek recognition as a deemed university and suggested legislative amendments to address the issues raised.