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TMI Blog1958 (3) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... ants in Civil Appeal No. 457 of 1957). By those Miscellaneous Applications the petitioners therein prayed for an appropriate direction or order under Art. 226 for quashing and ,setting aside notification No. S. R. 0. 2993 dated ]December 11, 1956, issued by the Union of India in exercise of powers conferred on it by s. 3 of the Commissions of Enquiry Act (LX of 1952) and for other reliefs. Rules were issued and the Union of India appeared and showed cause. By the aforesaid judgment and order the High Court discharged the rules and dismissed the applications and ordered that the said notification was legal and valid except as to the last part of cl. (10) thereof from the words and the action to the words in future cases and directed the Commission not to proceed with the inquiry to the extent that it related to the aforesaid last part of cl. (10) of -the said notification. The Union of India has filed three several appeals, namely, Nos. 656, 657 and 658 of 1957, in the said three Miscellaneous Applications complaining against that part of the said judgment and order of the Bombay High Court which adjudged the last part of el. (10) to be invalid. The Commissions of Inquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriate Government may under s. 7 issue a notification declaring that the Commission shall cease to exist from such date as may be specified therein. By s. 8 the Commission is empowered, subject to any rules that may be made, to regulate its own procedure including the time and place of its sittings and may act notwithstanding the temporary absence of any member or the existence of any vacancy among its members. Section 9 provides for indemnity to the appropriate Government, the members of the Commission or other persons acting under their directions in respect of anything which is done or intended to be done in good faith in pursuance of the Act. The rest of the sections aye not material for the purpose of these appeals. In exercise of the powers conferred on it by s. 3 of the Act the Central Government published in the Gazette of India dated December 11, 1956, a notification in the following terms: MINISTRY OF FINANCE (Department of Economic Affairs) ORDER New Delhi, the 11th December, 1956 S. R. O. 2993-Whereas it has been made to appear to the Central Government that: (1) a large number of companies and some firms were promoted and/or controlled by Sarva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid Sarvashri Ram Krishna Dalmia, Jaidayal Dalmia, Shanti Prasad Jain, Sriyans Prasad Jain, their relatives, employees and persons connected with them; (4)The total amount of the subscription obtained from the investing public -and the amount subscribed by the aforesaid persons and the extent to which the funds and assets thus obtained or acquired were misused, misapplied or misappropriated; (5) The extent and nature of the investments by and/or loans to and/or the use of the funds or assets by and transfer of funds between the companies aforesaid; (6)The consequences or results of such investments, loans transfers and/or use of funds and assets ; (7)The reasons or motives of such investments, loans transfers and use and whether there was any justification for the same and whether the same were made bona fide, in the interests of the companies concerned ; (8) The extent of the losses suffered by the investing public, how far the losses were avoidable and what steps were taken by those in control and/or management to avoid the losses; (9) The nature and extent, of the personal gains made by any person or persons or any group or groups of persons whether herei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r for quashing the same. It will be convenient to advert to a few minor objections urged before us on behalf of the petitioners in support of their appeals before we come to deal with their principal and major contentions. The first objection is that the notification has gone beyond the Act. It is pointed out that the Act, by s. 3, empowers the appropriate Government in certain eventualities to appoint a Commission of Inquiry for the purpose of making an inquiry into any definite matter of public importance and for no other purpose. The contention is that the conduct of an individual person or company cannot possibly be a matter of public importance and far less a definite matter of that kind. We are unable to accept this argument as correct. Widespread floods, famine and pestilence may quite easily be a definite matter of public importance urgently calling for an inquiry so as to enable the Government to take appropriate steps to prevent their recurrence in future. The conduct of villagers in cutting the bunds for taking water to their fields during the dry season may cause floods during the rainy season and we can see no reason why such unsocial conduct of villagers of certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a wide sweep of powers. It is pointed out that Parliament enacted the Act in exercise of the legislative powers conferred on it by Art. 246 of the Constitution read with entry 94 in List I and entry 45 in List III of the Seventh Schedule to the Constitution. The matters enumerated in entry 94 in List 1, omitting the words not necessary for our purpose, are inquiries......... for the purpose of any of the matters in this List , and those enumerated in entry 45 in List III, again omitting the unnecessary words, are inquiries............ for the purposes of any of the matters specified in List II or List 111. Confining himself to the entries in so far as they relate to inquiries , learned counsel for the petitioners urges that Parliament may make a law with respect to inquiries but cannot under these entries make a law conferring any power to perform any function other than the power to hold an inquiry. He concedes that, according to the well recognised rule of construction of the provisions of a Constitution, the legislative heads should be construed very liberally and that it must be assumed that the Constitution intended to give to the appropriate legislature not only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect to any of the matters enumerated in List 11. Therefore, when Parliament makes a law under Art. 246 read with., entry 45 in List III with respect to an inquiry for the purposes of any of the matters in List 11, such law can never be one for inquiry for the purpose of future legislation by Parliament with respect to any of those matters in List 11. Clearly Parliament can make a law for inquiry for the purpose of any of the matters in List 11 and none the less so though Parliament cannot legislate with respect to such matters and though none of the State Legislatures wants to Legislate on such matters. In our opinion, therefore, the law to be made by the appropriate legislature with respect to the two legislative entries referred to above may cover inquiries into any aspect of the matters enumerated in any of the lists mentioned therein and is not confined to those matters as mere heads of legislative topic. Quite conceivably the law with respect to inquiries for the purpose of any of the matters in the lists may also be for administrative purposes and the scope of the inquiry under such a law will cover all matters which may properly be regarded as ancillary to such inquiries. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent to require the Commission to hold any inquiry or make any report with regard to the matters covered by that portion of cl. (10), for such inquiry or. report amounts to a usurpation of the judicial powers of the Union or the State as the case may be. While we find ourselves in partial agreement with the actual conclusion of the High Court on this point, we are, with great respect, unable to accept the line of reasoning advanced by learned counsel for the petitioners, which has been accepted by the High Court for more reasons than one. In the first place neither Parliament nor the Government has itself undertaken any inquiry at all. Parliament has made a law with respect to inquiry and has left it to the appropriate Government to set up a Commission of Inquiry under certain circumstances referred to in s. 3 of the Act. The Central Government, in its turn, has, in exercise of the powers conferred on it by the Act, set up this Commission. It is, therefore, not correct to say that Parliament or the Government itself has undertaken to hold any inquiry. In the second place the conclusion that the last portion of cl. (10) is bad because it signifies that Parliament or the Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel appearing for the petitioners, who are appellants in Civil Appeals Nos. 456 and 457 of 1957, goes as far as to say that while the Commission may find facts on which the Government may take action, legislative or executive, although he does not concede the latter kind of action to be contemplated, the Commission cannot be asked to suggest any measure, legislative or executive, to be taken by the appropriate Government. We are unable to accept the proposition so widely enunciated. An inquiry necessarily involves investigation into facts and necessitates the collection of material facts from the evidence adduced before or brought to the notice of the person or body conducting the inquiry and the recording of its findings on those facts in its report cannot but be regarded as ancillary to the inquiry itself, for the inquiry becomes useless unless the findings of the inquiring body are made available to the Government which set up the inquiry. It is, in our judgment, equally ancillary that the person or body conducting the inquiry should express its own view on the facts found by it for the consideration of the appropriate Government in order to enable it to take such measure as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two legislative entries and should, therefore, be deleted. So deleted the latter portion of cl. (10) would read and the action which in the opinion of the Commission should be taken to act as a preventive in future cases . Deletion of the words mentioned above from cl. (10) raises the question of severability. We find ourselves in substantial agreement with the reasons given by the High Court on this point and we hold that the efficacy of the notification is in no way affected by the deletion of the offending words mentioned above and there is no reason to think that the Government would not have issued the notification without those words. Those words do not appear to us to be inextricably wound up with the texture of the entire notification. The principal ground urged in support of the contention as to the invalidity of the Act and/or the notification is founded on Art. 14 of the Constitution. In Budhan Choudhry v. The State of Bihar ([1955] 1 S.C.R. 1045) a Constitution Bench of seven Judges of this Court at pages 1048-49 explained the true meaning and scope of Art. 14 as follows: The provisions of Article 14 of the Constitution have come up for discussion before this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by experience and that its discriminations are based on adequate grounds; (d) that the legislature is free to recognise degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest ; (e) that in order to sustain the presumption of constitutionality the court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation; and (f)that while good faith and knowledge of the existing conditions on the part of a legislature are to be presumed, if there is nothing on the face of the law or the surrounding circumstances brought to the notice of the court on which the classification may reasonably be regarded as based, the presumption of constitutionality cannot be carried to the extent of always holding that there must be some undisclosed and unknown reasons for subjecting certain individuals or corporations to hostile or discriminating legislation. The above principles will have to be constantly borne in mind by the court when it is called upon to adjudge the constitutionality of any particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd classify persons or things to whom its provisions are to apply. In determining the question of the validity or otherwise of such a statute the court will not strike down the law out of hand only because no Classification appears on its face or because a discretion is given to the Government to make the selection or classification but will go on to examine and ascertain if the statute has laid down any principle or policy for the guidance of the exercise of discretion by the Government in the matter of the selection or classification. After such scrutiny the court will strike down the statute if it does not lay down any principle or policy for guiding the exercise of discretion by the Government in the matter of selection or classification, on the ground that the statute provides for the delegation of arbitrary and uncontrolled power to the Government so as to enable it to discriminate between persons or things similarly situate and that, therefore, the discrimination is inherent in the statute itself. In such a case the court will strike down both the law as well as the executive action taken under such law, as it did in State of West Bengal v. Anwar, Ali Sarkar ([1952] S.C.R. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such inquiry. That being the position, as we conceive it to be, the question arises as to the scope and ambit of the power which is conferred by it on the appropriate Government. The answer is furnished by the statute itself, for s. 3 indicates that the appropriate Government .can appoint a Commission of Inquiry only for the purpose of making an inquiry into any definite matter of public importance and into no other matter. In other words the subject matter of the inquiry can only be a definite matter of public importance. The appropriate Government, it follows, is not authorised by this section to appoint a Commission for the purpose of holding an inquiry into any other matter. Learned Solicitor-General, in the premises, submits that the section itself on the face of it, makes. a classification so that this statute falls within the first category mentioned above and contends that this classification of things is based on an intelligible differentia which has a reasonable relation to the object sought to be achieved by it, for a definite matter of public importance may well call for an inquiry by a Commission. In the alternative the learned Solicitor-General urges that in any case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t if the Act is good in the sense that has declared its policy and laid down some principle for the guidance of the Government in the exercise of the power conferred on it, the appropriate Government has failed to exercise its discretion property on the basis of a, reasonable classification. Article 14 protects all persons from discrimination by the legislative as well as by the executive organ of the State. State is defined in Art. 12 as including the Government and law is defined in Art. 13 as including any notification or order It has to be conceded, therefore, that it is open to the petitioners also to question the constitutionality of the notification. The attack against, the notification is that the Government has not properly implemented the policy or followed the principle laid down in the Act and has consequently transgressed the bounds of the authority delegated to it. It is pointed out that in March, 1946, one Shri Tricumdas Dwarkadas, a solicitor of Bombay, had been appointed an officer on Special Duty to indicate the lines on which the Indian Companies Act was to be revised. He made a report which was, however, incomplete in certain particulars. Thereupon the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the existence of some definite matter of public importance. If there be no such definite matter of public importance in existence then no question of necessity for appointing a Commission can arise. Reference is then made to the first preamble to the notification and it is pointed out that all the matters alleged to have been made to appear to the Central Government relate to some supposed act or conduct of the petitioners. The contention is repeated that the act and conduct of individual persons can never be regarded as definite matters of public importance. We are unable to accept this argument as sound, for as we have already stated, the act or conduct of individuals may assume such dangerous proportions as may well affect the public wellbeing and thus become a definite matter of public importance. We do not, therefore, agree that the notification should be struck down for the absence of a definite matter of public importance calling for an inquiry. The point which is next urged in support of these appeals and which has given us considerable anxiety is that the petitioners and their companies have been arbitrarily singled out for the purpose of hostile and discriminatory tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etionary power has been conferred on the Government and, indeed, the contemplation that such wide powers in the hands of the executive may in some cases be misused or abused and turned into an engine of oppression has caused considerable anxiety in our mind. Nevertheless, the bare possibility that the powers may be misused or abused cannot per se induce the court to deny the existence of the powers. It cannot be overlooked that Parliament has confided this discretion, not to any petty official but to the appropriate Government itself to take action in conformity with the policy and principle laid down in the Act. As this Court has said in Matajog Dobey v. H. C. Bhari ([1955] S.C.R. 925, 932.), a discretionary power is not necessarily a discriminatory power and that abuse of power is not to be easily assumed where the discretion is vested in the Government and not in a minor official. We feel sure, however, that if this law is administered by the Government with an evil eye and an unequal hand or for an oblique or unworthy purpose the arms of this Court will be long enough to reach it and to strike down such abuse with a heavy hand. What, then, we inquire, are the salient f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had not discharged the onus that was on him. The dissenting Judges, after pointing out that the petition and the affidavit did not give any indication as to the differentia on the basis of which the company had been singled out, went on to say that the statute also did not on the face of it indicate any basis of classification. This was included in cl. (2) of the summary set out in the judgment in F. N. Balsara s case ([1951] S.C.R. 682.). Those observations cannot, therefore, be read as meaning that the classification must always appear on the face of the law itself and that reference cannot be made to any extraneous materials. In fact in Chiranjitlal Chowdhury s case ([1950] S.C.R. 869.) parliamentary proceedings, in so far as they depicted the surrounding circumstances and furnished the background, were referred to. In Kathi Raning Rawat s case ([1952] S.C.R. 435.) the hearing was adjourned in order to enable the respondent to put in an affidavit setting forth the material circumstances. In Kedarnath Bajoria s case ([1954] S.C. R. 30. ) the situation brought about by the war conditions was taken notice of The same may be said of the cases of A. Thanyal Kunju Musaliar v. V. Venk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir companies than in the case of any other person or company. What is the gist and substance of the allegations against the petitioners and their companies ? They are that a small group of persons had from before 1946 acquired control over a number of companies including a blanking company and an insurance company ; that some of these companies were private companies and the others were public companies in which the public had invested considerable moneys by buying, shares; that the financial years of some of these companies were different from those of the others; that the funds of the limited companies were utilised in purchasing shares in other companies having large reserve funds with a view to get control over them and to utilise those funds for acquiring shares in other companies or otherwise utilise those funds for the personal benefit of these individuals; that the shares were acquired on blank transfer deeds and were not registered in the names of the companies with whose funds they were purchased so as to permit the same shares to be shown in the balance sheets of the different companies having different financial years; that after 1951 several of these companies were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conceivably be grouped as a class by themselves. In our judgment the plea of the infraction of the equal protection, clause of our Constitution cannot be sustained. The next contention is that the notification is bad, because the action of the Government in issuing it was mala fide and amounted to an abuse of power. Learned counsel appearing for the petitioner, who is the appellant in Civil Appeal No. 455 of 1957, makes it clear that no personal motive or illwill against the petitioners is imputed to any one, but he points out that the Bhaba Committee had been set up and the Companies Act has been remodelled and, therefore, the present Commission was not set up for any legitimate purpose. The main idea, according to learned counsel, was to obtain information which the Government could not get by following the ordinary procedure under the Code of Criminal Procedure and this ulterior motive clearly makes the governmental action mala fide. This point has been further emphasised by learned counsel appearing for the petitioners, who are appellants in Civil Appeals Nos. 456 and 457 of 1957. He has drawn our attention to the affidavits filed by his clients and contends that it was well ..... X X X X Extracts X X X X X X X X Extracts X X X X
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