1951 (4) TMI 15 - HC - Companies Law

Summary

Issues Involved:
1. Legislative Competence of the Provincial Legislature.
2. Violation of Section 299(2) of the Government of India Act, 1935, and Fundamental Rights under Articles 19(f) and 31 of the Constitution.
3. Validity of Specific Provisions of the Act.

Issue-wise Detailed Analysis:

1. Legislative Competence of the Provincial Legislature:

The primary contention was whether the Madras Electricity Supply Undertakings (Acquisition) Act, 1949, was within the legislative competence of the Provincial Legislature. The argument centered on whether the Act was a law with respect to "electricity" (a subject in the Concurrent List) or "corporations" (a subject in the Union List). The Court examined the pith and substance of the Act, concluding that the Act's primary objective was the acquisition of electricity undertakings, which falls under the subject of "electricity" in the Concurrent List. The Act did not affect the status or capacity of the companies but merely took over part of their business. Thus, the Act was held to be within the legislative competence of the Provincial Legislature.

2. Violation of Section 299(2) of the Government of India Act, 1935, and Fundamental Rights under Articles 19(f) and 31 of the Constitution:

The petitioners argued that the Act violated Section 299(2) of the Government of India Act, 1935, and Articles 19(f) and 31 of the Constitution, as it did not provide for just compensation and deprived them of their property. However, the Act had been certified by the President under Article 31(6) of the Constitution, which precluded any challenge on these grounds. The Court noted that the certificate by the President barred the petitioners from questioning the validity of the Act on the grounds that it contravened Section 299(2) or Article 31(2). The Court also clarified that the requirement for acquisition to be for a public purpose was not explicitly imposed by Section 299(2).

3. Validity of Specific Provisions of the Act:

The Court examined specific provisions of the Act to determine their validity:

- Rule 19: The rule compelling the liquidation and winding up of a company whose undertaking is taken over was held to be beyond the legislative power of the Province and therefore invalid.
- Accredited Representative: The provision allowing the government to appoint an accredited representative if the shareholders fail to do so was found to be invalid as it deprived the company and its directors of their rights. The Court suggested that the government could proceed ex parte regarding compensation if the shareholders fail to appoint a representative.
- Section 15: This section terminated the managing agency agreement between the licensee and his managing agent or managing director. The Court held that this provision should be read as terminating the agreement only to the extent it relates to the undertaking covered by the license, not the entire agreement.

Conclusion:

The petitions were dismissed with costs, except for the modifications mentioned above regarding Rule 19 and the provision for appointing an accredited representative. The Act was held to be intra vires the Provincial Legislature, and the certificate by the President under Article 31(6) precluded challenges based on Section 299(2) and Article 31(2).