9911796707
TMI Blog1981 (1) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... s shares. In 1946, the Jaipuria family acquired substantial holding in the Company. Jaipuria family is the present management. By issue of further bonus shares in 1946, the capital of the Company was increased to Rs. 122.50 lakhs. In 1948, the paid-up capital of the Company was raised to Rs. 210 lakhs by the issue of further bonus shares. The subscribed and issued capital consisting mainly of the bonus shares has since remained constant at Rs. 210 lakhs. In the year 1946, the Company had only one undertaking, a Textile Unit at Kanpur, known as "The Swadeshi Cotton Mills, Kanpur". Between 1956 and 1973, the Company set up and/or acquired five further Textile Units in Pondicherry, Naini, Udaipur, Maunath Bhanjan and Rae Bareilly. Each of these six Units or undertakings of the Company was separately registered in accordance with the provisions of Section 10 of the Industries (Development and Regulation) Act, 1951 (hereinafter called the IDR Act). In addition to these six industrial undertakings, the Company (it is claimed) had other distinct businesses and assets. It holds inter alia 97 per cent shares in the subsidiary, Swadeshi Mining and Manufacturing Company Ltd., which owns two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nil Nil On fixed assets of Pondicherry Unit (ii) Maunath Bhanjan 11.40 5.71 Nil Nil On fixed assets of Unit. (iii) Udaipur 2.76 Nil Nil Nil On fixed assets of Udaipur Unit. (iv) Kanpur(ICICI) 13.44 9.75 5.95 2.00 On fixed asset of Kanpur Unit. (v) Kanpur Nil 150.00 150.00 150.00 On fixed assets of Kanpur, Maunath Bhanjan & Pondicherry Units for wages and Bank Dues (vi) Company 67.53 68.45 59.44 59.44 On diesel generating sets of Kanpur, Naini, Pondicherry, Maunath Bhanjan and Rae Bareilly Units. (vii) Udaipur Nil 25.00 25.00 25.00 On fixed assets of Udaipur Unit for gratuity fund. (viii) Naini Nil Nil 70.00 70.00 On fixed assets of Naini for gratuity. (ix) Kanpur, Rae Bareilly & Naini 106.20 75.31 50.67 15.97 On new machinery of Kanpur, Rae Bareilly & Naini Units under deferred payment credit. 203.73 334.22 361.06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opment and Regulation) Act, 1951 (65 of 1951), the Central Government hereby authorises the National Textile Corporation Limited (hereinafter referred to as the Authorised person) to take over the management of the whole of the said industrial undertakings, subject to the following terms and conditions, namely:- (i) The authorised person shall comply with all the directions issued from time to time by the Central Government; (ii) the authorised person shall hold office for a period of five years from the date of publication of this order in the Official Gazette; (iii)the Central Government may terminate the appointment of the authorised person earlier if it considers necessary to do so. This order shall have effect for a period of five years commencing from the date of its publication in the Official Gazette. Sd/- R. Ramakrishna Joint Secretary to the Govt. of India (Seal)." On April 19, 1978, three petitioners, namely, the Company through its Joint Secretary, Shri Bhim Singh Gupta, its Managing Director, Dr. Rajaram Jaipuria, and its subsidiary company, named Swadeshi Mining and Manufacturing Company, through its Directors and Shareholders filed a writ petition under Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equent hearing does not arise." H. L. Anand and N. N. Goswamy, JJ, however dissented. In the opinion of the minority, in compliance with the principles of natural justice, a prior hearing to the owner of the undertaking was required to be given before passing an order under Section 18AA, that the second question did not arise as the denial of a prior hearing would not cure the vice by the grant of subsequent hearing, but it would be open to the Court to moderate the relief in such a way that the order is kept alive to the extent necessary until the making of the fresh order to subserve public interest, and to make appropriate directions to ensure that the subsequent hearing would be a full and complete review of the circumstances of the take-over and for the preservation and maintenance of the property during the interregnum. After the decision of the reference, the case was reheard on merits by a Bench of three learned Judges (consisting of Deshpande, C.J., Anand and M. L. Jain, JJ.) who by their judgment, dated May 1, 1979, disposed of the writ-petition. The operative part of the judgment reads as under: "In the result, the writ-petition succeeds in part, the challenge to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re issuing a notified order, or enforcing a decision of its take-over under Section 18AA. Shri Nariman contends that there is nothing in the language, scheme or object of the provisions in Section 18AA and/or Section 18F which expressly or by inevitable implication, excludes the application of the principles of natural justice or the giving a pre-decisional hearing, adapted to the situation, to the owner of the undertaking. It is submitted that mere use of the word "immediate" in sub-clause (a) of Section 18AA (1) does not show a legislative intent to exclude the application of audi alterm partem rule, altogether. It is maintained that according to the decision of this Court in Keshav Mills Company Ltd. v. Union of India, even after a full investigation has been made under Section of the I.D.R. Act, the Government has to observe the rules of natural justice and fairplay, which in the facts of a particular case, may include the giving of an opportunity to the affected owner to explain the adverse findings against him in the investigation report. In support of his contention, that the use of the word "immediate" in Section 18AA(1)(a) does not exclude natural justice, learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clauses Act, (Kamla Prasad Khetan v. Union of India, referred to.) Therefore, the illusory right given by Section 18F to the aggrieved owner of the undertaking, to make an application for cancellation of the order, is not a full right of appeal on merits. The language of the Section impliedly prohibits an enquiry into circumstances that led to the passing of the order of "take-over", and under it, the aggrieved person is not entitled to show that on merits, the order was void ab initio. As held by a Bench (consisting of Bhagwati and Vakil JJ.) of the Gujarat High Court, in Dosabhai Ratanshah Keravale v. State of Gujarat, a power to rescind or cancel an order, analogous to that under Section 21, General Clauses Act, has to be construed as a power of prospective cancellation, and not of retroactive obliteration. It is only the existence of a full right of appeal on the merits or the existence of a provision which unequivocally confers a power to reconsider, cancel and obliterate completely the original order, just as in appeal, which may be construed to exclude natural justice or a pre-decisional hearing in an emergent situation. (Reference on this point has been made to Wade's Admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1978, only after it had filed the writ petition in the High Court to challenge the impugned order. It is emphasised that if the Survey Report was assumed to contain something adverse to the appellants, there was time enough-about six weeks between the submission of the Survey Report and the passing of the impugned order for giving a short, reasonable opportunity to the appellants to explain the adverse findings against them. It is urged that even if there was immediacy, situational modifications could be made to meet the requirement of fairness, by reducing the period of notice; that even the manner and form of such notice could be simplified to eliminate delay, that telephonic notice or short opportunity for furnishing their explanation to the Company might have satisfied the requirements of natural justice. Such an opportunity of hearing could have been given after the passing of a conditional tentative order and before its enforcement under Section 18AA. For the interregnum suitable interim action such as freezing the assets of the Company or restraining the Company from creating further encumbrances, etc. could be taken under Section 16. Reference in this connection has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read into the statute only "in so far as conformance to such canons can reasonably and realistically be required of it", by the provision for a remedial hearing at a subsequent stage. Shri Sorabji further submits that since Section 18F does not specify any period of time within which the aggrieved party can seek the relief thereunder, the opportunity of full, effective and post-decisional hearing has to be given within a reasonable time. It is stressed that under Section 18F, the Central Government exercises curial functions, and that Section confers on the aggrieved owner a right to apply to the Government to cancel the order of take-over. On a true construction this Section casts an obligation on the Central Government to deal with and dispose of an application filed thereunder with reasonable expedition. Shri Sorabji further concedes that on the well- settled principle of implied and ancillary powers, the right of hearing afforded by Section 18F carries with it the right to have inspection and copies of all the relevant books, documents, papers etc. and the Section obligates the Central Government to take all steps which are necessary for the effective hearing and disposal of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient world. Seneca, the philosopher, is said to have referred in Medea that it is unjust to reach a decision without a full hearing. In Maneka Gandhi's case, Bhagwati, J. emphasised that audi alteram partem is a highly effective rule devised by the Courts to ensure that a statutory authority arrives at a just decision and it is calculated to act as a healthy check on the abuse or misuse of power. Hence its reach should not be narrowed and its applicability circumscribed. During the last two decades, the concept of natural justice has made great strides in the realm of administrative law. Before the epoch-making decision of the House of Lords in Ridge v. Baldwin, it was generally thought that the rules of natural justice apply only to judicial or quasi-judicial proceedings; and for that purpose, whenever a breach of the rule of natural justice was alleged, Courts in England used to ascertain whether the impugned action was taken by the statutory authority or tribunal in the exercise of its administrative or quasi-judicial power. In India also, this was the position before the decision, dated February 7, 1967, of this Court in Dr. Bina Pani Dei's case (ibid); wherein it was held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislature. Whether or not the application of the principles of natural justice in a given case has been excluded, wholly or in part, in the exercise of statutory power, depends upon the language and basic scheme of the provision conferring the power, the nature of the power, the purpose for which it is conferred and the effect of the exercise of that power. (See Union of India v. Col. J. N. Sinha, ibid.) The maxim audi alteram partem has many facets. Two of them are: (a) notice of the case to be met; and (b) opportunity to explain. This rule is universally respected and duty to afford a fair hearing in Lord Loreburn's oft- quoted language, is "a duty lying upon every one who decides something", in the exercise of legal power. The rule cannot be sacrificed at the altar of administrative convenience or celerity; for, "convenience and justice"-as Lord Atkin felicitously put it- "are often not on speaking terms". The next general aspect to be considered is: Are there any exceptions to the application of the principles of natural justice, particularly the audi alteram partem rule ? We have already noticed that the statute conferring the power, can by express language exclude its appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents to the Commission. The appellant met the Chief Election Commissioner and requested him to declare the result. Eventually, the Chief Election Commissioner issued a notification which stated that taking all circumstances into consideration the Commission was satisfied that the poll had been vitiated, and therefore in exercise of the powers under Article 324 of the Constitution, the poll already held was cancelled and a repoll was being ordered in the constituency. The appellant contended that before making the impugned order, the Election Commission had not given him a full and fair hearing and all that he had was a vacuous meeting where nothing was disclosed. The Election Commission contended that a prior hearing has, in fact, been given to the appellant. In addition, on the question of application of the principles of natural justice, it was urged by the respondents that the tardy process of notice and hearing would thwart the conducting of elections with speed, that unless civil consequences ensued, hearing was not necessary and that the right accrues to a candidate only when he is declared elected. This contention, which had found favour with the High Court, was negatived by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt promotes not freezes Life's processes, if we may mix metaphors."............. The Court further emphasised the necessity of striking pragmatic balance between competing requirements of acting urgently and fairly, thus:- "Should the cardinal principle of "hearing' as condition for decision-making be martyred for the cause of administrative, immediacy? We think not. The full panoply may not be there but a manageable minimum may make-do." "In Wiseman v. Borneman there was a hint of the competitive claims of hurry and hearing. Lord Reid said: 'Even where the decision has to be reached by a body acting judicially, there must be a balance between the need for expedition and the need to give full opportunity to the defendant to see material against him (emphasis added). We agree that the elaborate and sophisticated methodology of a formalised hearing may be injurious to promptitude so essential in an election under way. Even so, natural justice is pragmatically flexible and is amenable to capsulation under the compulsive pressure of circumstances. To burke it altogether may not be a stroke of fairness except in very exceptional circumstances." The Court further pointed out that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h by short measures. In Heatley v. Tasmanian Racing & Gaming Commission, ibid, the same High Court held that without the use of unmistakable language in a statute, one would not attribute to Parliament an intention to authorize the Commission to order a person not to deal in shares or attend a stock exchange without observing natural justice. In circumstances of likely immediate detriment to the public, it may be appropriate for the Commission to issue a warning-off notice without notice or stated grounds but limited to a particular meeting, coupled with a notice that the Commission proposed to make a long-term order on stated grounds and to give an earliest practicable opportunity to the person affected to appear before the Commission and show why the proposed long term order be not made. As pointed out in Mohinder Singh Gill v. Chief Election Commissioner and in Maneka Gandhi v. Union of India ibid, such cases where owing to the compulsion of the fact situation or the necessity of taking speedy action, no pre- decisional hearing is given but the action is followed soon by a full post decisional hearing to the person affected, do not, in reality, constitute an 'exception' to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merits against that decision is provided, courts will be extremely reluctant to construe such a statute as excluding the duty of affording even a minimal hearing, shown of all its formal trappings and dilatory features at the pre-decisional stage, unless, viewed pragmatically, it would paralyse the administrative process or frustrate the need or utmost promptitude. In short, this rule of fairplay "must not be jettisoned save in very exceptional circumstances where compulsive necessity so demands". The court must make every effort to salvage this cardinal rule to the maximum extent possible, with situational modifications. But, to recall the words of Bhagvati, J., the core of it must, however, remain, namely, that the person affected must have reasonable opportunity of being heard and the hearing must be a genuine hearing and not an empty public relations exercise. Keeping the general principles stated above, let us now examine the scheme content, object and legislative history of the relevant provisions of the I.D.R. Act. The I.D.R. Act (Act 65 of 1951) came into force on May 8,1952 The Statement of Objects and Reasons published in the Gazette of India, dated March 26, 1949, say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest. the Central Government may make or cause to be made a full and complete investigation into the circumstances of the case by such person or body of persons as it may appoint for the purpose." Section 16 empowers the Central Government to issue appropriate directions to the industrial undertaking concerned on completion of investigation under Section 15. Such directions may be for all or any of the following purposes: "(a) regulating the production of any article or class of articles by the industrial undertaking or undertakings and fixing the standards of production; (b) requiring the industrial undertaking or undertakings to take such steps as the Central Government may consider necessary, to stimulate the development of the industry to which the undertaking or undertakings relates or relate; (c) prohibiting the industrial undertaking or undertakings from resorting to any act or practice which might reduce its or their production, capacity or economic value; (d) controlling the prices, or regulating the distribution of any article or class of articles which have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notified order shall be deemed to have been terminated; (c) the managing agent, if any, appointed under Section 18A shall be deemed to have been duly appointed as the managing agent in pursuance of the Indian Companies Act, 1913 (7 of 1913), and the memorandum and articles of association of the industrial undertaking, and the provisions of the said Act and of the memorandum and articles shall, subject to the other provisions contained in this Act, apply accordingly, but no such managing agent shall be removed from office except with the previous consent of the Central Government; (d) the person or body of persons authorized under Section 18A to take over the management shall take all such steps as may be necessary to take into his or their custody or control all the property, effects and actionable claims to which the industrial undertaking is or appears to be entitled, and all the property and effects of the industrial undertaking, shall be deemed to be in the custody of the person or, as the case may be, the body of persons as from the date of the notified order; and (e) the persons, if any, authorised under Section 18A to take over the management of an industrial undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... litation, so that production and employment may not suffer." Textile Industry is also among the industries, included in the First Schedule to the I.D.R. Act. The Amendment Act 72 of 1971 inserted Section 18AA in the original I.D.R. Act. The material part of the Statement of Objects and Reasons for introducing this Bill of 1971 published in the Gazette of India Extraordinary, is as follows: "The industries included in the First Schedule .. not only substantially contribute to the Gross National produce of the country, but also afford gainful employment to millions of people. For diverse reasons a number of industrial undertakings engaged in these industries have had to close down and the continuing economic operation of many others is beset with serious difficulties affecting industrial production and employment. . . During the period of take over Government has to invest public funds in such undertakings and it must be able to do so with a measure of confidence about the continued efficient management of the undertaking at the end of the period of take over. In order to ensure that at the end of the period of take over by Government, the industrial undertaking is not returned to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing up of the company owning the industrial undertaking or for any other reason) and such closure is prejudicial to the concerned scheduled industry and that the financial condition of the company owning the industrial undertaking and the condition of the plant and machinery of such undertaking are such that it is possible to re-start the undertaking and such re- starting is necessary in the interests of the general public, it may, by a notified order, authorise any person (hereinafter referred to as the 'authorised person') to take over the management of the whole or any part of the industrial undertaking or to exercise in respect of the whole or any part of the undertaking such functions of control as may be specified in the order. (2) The provisions of sub-section (2) of Section 18A shall, as far as may be, apply to a notified order made under sub-section (1) as they apply to a notified order made under sub-section (1) of Section 18A. (3) Nothing contained in sub-section (1) and sub- section (2) shall apply to an industrial undertaking owned by a company which is being wound up by or under the supervision of the Court. (4) Where any notified order has been made under sub-sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered wrong with the manner of running the industry by the management. In contrast with it, action under Section 18AA(1) (a) can be taken only if the Central Government is satisfied with regard to the existence of the twin conditions specifically mentioned therein, on the basis of evidence in its possession. From an analysis of Section 18AA(1) (a), it will be clear that as a necessary preliminary to the exercise of the power thereunder, the Central Government must be satisfied "from documentary or other evidence in its possession" in regard to the co-existence of two circumstances: (i) that the persons in charge of the industrial undertaking have by committing any of these acts, namely, reckless investments, or creation of incumbrances on the assets of industrial undertaking, or by diversion of funds, brought about a situation, which is likely to affect the production of the article manufactured or produced in the industrial undertaking, and (ii) that immediate action is necessary to prevent such a situation. Speaking for the High Court (majority), the learned Chief Justice (Deshpande, C.J.) has observed that only with regard to the fulfilment of condition (i) the satisfaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not open to judicial review at all. It is emphasised that the very language of the provision shows that the necessity for taking immediate action is a question of fact, which should be apparent from the relevant evidence in the possession of the Government. We find merit in this contention. It cannot be laid down as a general proposition that whenever a statute confers a power on an administrative authority and makes the exercise of that power conditional on the formation of an opinion by that authority in regard to the existence of an immediacy, its opinion in regard to that preliminary fact is not open to judicial scrutiny at all. While it may be conceded that an element of subjectivity is always involved in the formation of such an opinion, but as was pointed out by this Court in Bariam Chemicals (ibid), the existence of circumstances from which the inferences constituting the opinion, as the sine qua non for action are to be drawn, must be demonstrable, and the existence of such "circumstances", if questioned, must be proved at least prima facie. Section 18AA(1)(a), in terms, requires that the satisfaction of the Government in regard to the existence of the circumstances or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no reasonable man could reasonably reach that conclusion, the Court is entitled to examine the validity of the formation of that opinion by the Government in the context and to the extent of that issue. In Narayan Govind Gavate v. State of Maharashtra & Ors. this Court held that while exercising the power under Section 17(4) of the Land Acquisition Act, the mind of the officer or authority concerned has to be applied to the question whether there is an urgency of such a nature that even the summary proceedings under Section 5A of the Act should be eliminated. It is not just the existence of an urgency but the need to dispense with an inquiry under Section 5A of the Act which has to be considered. If the circumstances on the basis of which the Government formed its opinion with regard to the existence of the urgency and the other conditions precedent, recited in the notification, are deficient or defective, the Court may look beyond it. At that stage, Section 106, Evidence Act can be invoked by the party assailing the notification and if the Government or the authority concerned does not disclose such facts or circumstances especially within its knowledge, without even disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nswer to this question must be in the negative. Firstly, as rightly pointed out by Shri Nariman, the expression "immediate action" in the said phrase, is to be construed in the light of the marginal heading of the Section, its context and the Objects and Reason for enacting this provision. Thus construed, the expression only means "without prior investigation" under Section 15. Dispensing with the requirement of such prior investigation does not necessarily indicate an intention to exclude the application of the fundamental principles of natural justice or the duty to act fairly by affording to the owner of the undertaking likely to be affected, at the pre-decisional stage, wherever practicable, a short-measure fair hearing adjusted, attuned and tailored to the exigency of the situation. At this stage, it is necessary to examine two decisions of this Court, viz., Ambalal M. Shah v. Hathi Singh Manufacturing Co Ltd.; and Keshav Mills Co. Ltd. v. Union of India (ibid), because according to the High Court (as per Deshpande, C.J., who wrote the leading opinion) these two decisions-which are binding on the High Court-conclusively show that:- "The only prior hearing consisted of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o take over the management of the Company for a period of five years. The Company challenged the order of 'take-over' by a writ-petition in the High Court of Delhi. The High Court dismissed the petition. The main contention of the Company before the High Court was that the Government was not competent to proceed under Section 18A against the Company without supplying before hand, a copy of the report of the Investigating Committee to the Company. It was further contended that the Government should also have given a hearing to the Company before finally deciding upon take- over under Section 18A. This contention was pressed on behalf of the Company 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. On the contentions raised by the Company and resisted by the respondent, in that case, the Court formulated the following questions: (1) Is it necessary to observe the rules of natural justice before enforcing a decision under Section 18A of the Act? (2) What are the rules of natural justice in such a case? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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." (After noticing the object, purpose and content of the relevant provisions, the judgment proceeded): "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 12th 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 Section 18A of the Act in respect of the appellants undertaking. In that letter a detailed account of the facts and circumstances under which the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been observed. First on their own showing they were perfectly aware of the grounds on which Government had passed the order under Section 18A of the Act. Secondly, they are not in a position to deny (a) that the Company has 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e owner is never entitled on grounds of natural justice, to a copy of the investigation report and to an opportunity of making a representation about the action that the Government proposes to take on the basis of that report. On the contrary, it was clearly said that this rule of natural justice will apply at that stage in 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." It was held that the application or non-application of this rule depends on the facts and circumstances of the particular case. In the facts of that case, it was found that the non-disclosure of the investigation report had not caused any prejudice whatever because the Company were "aware all along that as a result of the report of the Investigating Committee the Company's undertaking was going to be taken (over) by Government", and had full opportunities, to make all possible representations before the Government against the proposed take-over of the Mill. Shri Sorabji submitted that the observations made by this Court in Keshav Mills case, to the effect, that in certain ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hly detrimental to public interest. On appeal by special leave, this Court reversed the decision of the High Court, and held that the words used by the Legislature in Section 18A (1) (b) "in respect of which an investigation has been made under Section 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"; that Section 18A (1) (b) empowers the Central Government to authorise a person to take over the management of an industrial undertaking if the one condition of an investigation made under Section 15 had been fulfilled irrespective of on what opinion that investigation was initiated and the further condition is fulfilled that the Central Government was of opinion that such undertaking was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest. In this Court, it was urged on behalf of the Company that absurd results would follow if the words "investigation has been made under Section 15" are held to include investigation based on any of the opinions mentioned in Section 15(a). A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o what extent and in what measure) this rule of fair hearing will apply at the pre-decisional stage will depend upon the degree of urgency, if any, evident from the facts and circumstances of the particular case. In the instant case, so far as Kanpur Unit is concerned, it was lying closed for more than three months before the passing of the impugned order. There was no `immediacy' in relation to that unit, which could absolve the Government from the obligation of complying fully with the audi alteram partem rule at the pre-decisional or pre-takeover stage. As regards the other five units of the Company, the question whether on the basis of the evidential matter before the Government at the time of making the impugned order, any reasonable person could reasonably form an opinion about a likelihood of fall in production and the urgency of taking immediate action, will be discussed later. For the purpose of the question under consideration we shall assume that there was a likelihood of fall in production. Even so, the undisputed facts and figures of production of 2 or 3 years preceding the take-over, relating to these units, show that on the average, production in these units has rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 18F will be construed as a reference to Section 18AA, also. The power of cancellation under Section 18F can be exercised only on any of these grounds : (i) "that the purpose of the order made under Section 18A has been fulfilled", or (ii) "that for any other reason it is not necessary that the order should remain in force". These `grounds' and the language in which they are couched is clear enough to show that the cancellation contemplated thereunder cannot have the effect of annulling, rescinding or obliterating the order of take-over with retro-active force; it can have only a prospective effect. Section 18F embodies a principle analogous to that in Section 21 of the General Clauses Act. The first `ground' in Section 18F for the exercise of the power, obviously does not cover a review of the merits or circumstances preceding and existing at the date of passing the order of `take-over' under Section 18AA(1). The words "for any other reason" if read in isolation, no doubt, appear to be of wide amplitude. But their ambit has been greatly cut down and circumscribed by the contextual phrase "no longer necessary that it should remain in force". Construed in this context, the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Watch Committee could not have made any difference; that on the undeniable facts of that case, no reasonable body of men could have reinstated the appellant. This contention was rejected by the House of Lords for the reason that if the Watch Committee had given the police officer a prior hearing they would not have acted wrongly or unreasonably if they had in the exercise of their discretion decided to take a more lenient course than the one they had adopted. A similar argument was advanced in S. L. Kapoor v. Jagmohan & Ors to which decision two of us (Sarkaria and Chinnappa Reddy, JJ.) were parties. In negativing this argument, this Court, inter alia, quoted with approval the classic passage, reproduced below, from the judgment of Megarry, J. in John v. Rees & Ors. "As everybody who has anything to do with the law well knows, the path of the law is strewn with examples of open and shut cases which, somehow, were not; of unanswerable charges which, in the event, were completely answered; of inexplicable conduct which was fully explained; of fixed and unalterable determinations that, by discussion, suffered a change. Nor are those with any knowledge of human nature who paus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage, regardless of the facts and circumstances of the particular case. In the circumstances of the instant case, in order to ensure fairplay in action it was imperative for the Government to comply substantially with this fundamental rule of prior hearing before passing the impugned order. We therefore, accept the two-fold proposition posed and propounded by Shri Nariman. The further question to be considered is : What is the effect of the non-observance of this fundamental principle of fairplay? Does the non-observance of the audi alteram partem rule, which in the quest of justice under the rule of law, has been considered universally and most spontaneously acceptable principle, render an administrative decision having civil consequences, void or voidable ? In England, the outfall from the watershed decision, Ridge v. Baldwin brought with it a rash of conflicting opinion on this point. The majority of the House of Lords in Ridge v. Baldwin held that the non-observance of this principle, had rendered the dismissal of the Chief Constable void. The rationale of the majority view is that where there is a duty to act fairly, just like the duty to act reasonably, it has to be enforce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision, and/or such remedial action as may be necessary, just, proper and in accordance with law. In view of the above decision, no separate order is necessary in Civil Appeals 1857 and 2087 of 1979. All the three appeals are disposed of accordingly with no order as to costs. Since the appeals have been disposed of on the first and foremost point canvassed before us, in the manner indicated above, it is not necessary to burden this judgment with a discussion of the other points argued by the counsel for the parties. CHINNAPPA REDDY, J. I have the misfortune to be unable to agree with the erudite opinion of my learned brother Sarkaria on the question of the applicability of the principles of natural justice. I do so with diffidence and regret. The first of the submissions of Shri F. S. Nariman, learned counsel for the appellant company was that there was a violation of the principles of natural justice. He submitted that the provisions of the Industries (Development and Regulation) Act did not rule out natural justice and that there were several occasions in the march of events that led to the passing of the order under Sec. 18AA when an opportunity could have been given to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of Sec. 18F, so, to exclude a fair post-decisional hearing at the instance of the party affected and consequently, to imply pre-decisional natural justice. Both the learned counsel invited our attention to considerable case-law. I do not propose to discuss the case law as my brother Sarkaria has referred to all the cases in great detail. Before I consider the submissions of the learned counsel as to the applicability of the principles of natural justice, a few prefatory remarks, however, require to be made. Natural justice, like Ultra Vires and Public Policy, is a branch of the Public Law and is a formidable weapon which can be wielded to secure justice to the citizen. It is productive of great good as well as much mischief. While it may be used to protect certain fundamental liberties, civil and political rights, it may be used, as indeed it is used more often than not, to protect vested interests and to obstruct the path of progressive change. In the context of modern welfare legislation, the time has perhaps come to make an appropriate distinction between natural justice in its application to fundamental liberties, civil and political rights and natural justice in its ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t uncommon where it is essential that Governmental needs be immediately satisfied. For the protection of public health, a state may order the summary destruction of property by administrative authorities without antecedent notice or hearing. Because of the public necessity the property of citizens may be summarily seized in war time. And at any time, the United States may acquire property by eminent domain, without paying, or determining the amount of the compensation before the taking." The principles of natural justice have taken deep root in the judicial conscience of our people, nurtured by Binapani, Kraipak, Mohinder Singh Gill, Maneka Gandhi etc. etc. They are now considered so fundamental as to be "implicit in the concept of ordered liberty" and, therefore, implicit in every decision making function, call it judicial, quasi judicial or administrative. Where authority functions under a statute and the statute provides for the observance of the principles of natural justice in a particular manner, natural justice will have to be observed in that manner and in no other. No wider right than that provided by statute can be claimed nor can the right be narrowed. Where the statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "in relation to an industrial undertaking" as "the person who, or the authority which, has the ultimate control over the affairs of the undertaking, and, where the said affairs are entrusted to a manager, managing director or managing agents, such manager, managing director or managing agent shall be deemed to be the owner of the undertaking". Sec. 3(j) provides that words and expressions not defined in the Act but defined in the Companies Act shall have the meaning assigned to them in that Act. Sec. 10 obliges the owner of an industrial undertaking to register the undertaking in the prescribed manner. Sec. 10A authorises the revocation of registration after giving an opportunity to the owner of the undertaking in certain circumstances. Sec. 11 provides for the licensing of the new industrial undertaking and Sec. 11A provides for the licensing of the production and manufacture of the new articles. Sec. 13 provides, among other things, that, except under, and in accordance with, a licence issued in that behalf by the Central Government, no owner of an industrial undertaking shall effect any substantial expansion or change the location of the whole or any part of an industrial undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied order, authorise any person or body of persons to take over the management of the whole or any part of an industrial undertaking or to exercise in respect of the whole or any part of the undertaking such functions of control as may be specified in the order, if the Central Government is of opinion that : (a) an industrial undertaking to which directions have been issued in pursuance of Sec. 16 has failed to comply with such directions, or (b) an industrial undertaking in respect of which an investigation has been made under section 15 is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest. Sec. 18-AA refers to "Power to take over industrial undertakings without investigation under certain circumstances". It enables the Central Government by a notified order to authorise any person or body of persons to take over the management of the whole or any part of an industrial undertaking or to exercise in respect of whole or any part of the undertaking such functions of control as may be specified in the order, if, without prejudice to any other provisions of the Act, from the documentary or othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to an undertaking taken over under Sec. 18-AA. The question for consideration is whether Sec. 18-AA excludes natural justice by necessary implication. The development and regulation of certain key industries was apparently considered so basic and vital to the economy of our country that Parliament, in its wisdom, thought fit to enact the Industries Development & Regulation Act, after making the declaration required by Entry 52 of List I of the Seventh Schedule to the Constitution that it was expedient, in the public interest, that the Union should take under its control the industries specified in the schedule to the Act, as earlier mentioned by us. Apart from making provision for the establishment of a Central Advisory Council and other Development Councils, and the licensing of scheduled industries, the Act empowers the Central Government to cause a full and complete investigation to be made where there is a substantial fall in the volume of production for which there is no justification having regard to the prevailing economic conditions or there is marked deterioration in the quality of the goods produced or the price of the goods produced is rising unjustifiably or where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a). It is true that the marginal note refers to the power to take over without investigation but there is no sufficient reason to suppose that the word `immediate' is used only to contra-distinguish it from the investigation contemplated by Sec. 15 of the Act, though, of course a consequence of immediate action under Sec. 18-AA may be to dispense with the enquiry under Sec. 15. In fact, facts which come to light during the course of an investigation under Sec. 15 may form the basis of action under Sec. 18-AA(1)(a). Where in the course of an investigation under Sec. 15 it is discovered that the management have, by reckless investments or creation of encumbrances on the assets of the industrial undertaking or by diversion of funds brought about a situation which is likely to affect the production of the articles manufactured or produced in the industrial undertaking, if the Government is satisfied that immediate action is necessary to prevent such a situation, there is no reason why the Central Government may not straight away take action under Sec. 18-AA(1)(a) without waiting for completion of investigation under Sec. 15. Parliament apparently contemplated a situation where immedia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... practicable and desirable to observe pre-decisional natural justice and whether a post decisional review or reconsideration provided by the statute itself is not a sufficient substitute. The likelihood of production being jeopardized or the stoppage of production in a key industrial undertaking is a matter of grave concern affecting the public interest. Parliament has taken so serious a view of the matter that it has authorised the Central Government to take over the management of the industrial undertaking if immediate action may prevent jeopardy to production or restore production where it has already stopped. The necessity for immediate action by the Central Government, contemplated by Parliament, is definitely indicative of the exclusion of natural justice. It is not as if the owner of the industrial undertaking is left with no remedy. He may move the Central Government under Sec. 18-F to cancel the order made under Sec. 18-AA. True some mischief affecting the management and top executives may have already been done. On the other hand, greater mischief affecting the public economy and the lives of many a thousand worker may have been averted. While on the one hand mere propert ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
