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TMI Blog1957 (5) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... td., Lakshmiganj, Deoria, subject to certain conditions. The order as originally passed and published was to have effect for a period of one year only, commencing on the date of its publication in the official gazette. On November 7, 1956, there was an amendment of that order. The amendment was published in notification No. 338-A of even date and stated in effect that in stead and place of the words 'one year' occurring in the order, the words 1 two years' shall be substituted. Petitioner No. 1 before us is one Kamlaprasad. Khetan, who states that lie is a Director and shareholder of the second petitioner, which is the Ishwari Khetan Sugar Mills Ltd. The Union of India was and is the only respondent. By an order dated October 1, 1956, this Court permitted the said authorised Controller to intervene, with the result that both the Union of India and the authorised Controller have been heard in opposition to the petition. The substantial case of the petitioners is that the order referred to above dated November 8, 1955, and the amending order dated November 7, 1956, are invalid in law and bad on certain other grounds to be stated presently, and it is not open to the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that Onkarmal Khetan had surreptitiously withdrawn large sums of money from the accounts of the various businesses in which the members of the Khetan family were interested as Managing Agents, and this led to certain suits being instituted against Onkarmal Khetan. The latter, in his turn, retaliated by bringing suits for the appointment of a Receiver, or for restraining the holding of a general meeting of one of the mills, and instituting certain other preceedings stated to be of an obstructive nature and calculated to create an impasse in the working of the mills. The petitioners on the contrary alleged that when the balance sheet of the Ishwari Khetan Sugar Mills Ltd., for the financial year 1950-51 was published in June 1952, it was discovered that some of the Directors including the authorised Controller had utilised the funds of the Company for their personal gain and had committed breaches of certain provisions of the Indian Companies Act. This led to Suit No. 4 of 1952 brought by the petitioners against some of the Directors, including the authorised Controller, for an order of permanent injunction restraining the said Directors from exercising any powers as Directors o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the parties, was going on in the arena of the Courts of law, certain other events happened to which a reference must now be made. The petitioners allege that the authorised Controller, finding that the majority of the shareholders and Directors were not in favour of his managing the Ishwari Khetan ,Sugar Mills Ltd. moved the Ministry of Food, through his grandson Durga Prasad Khetan and another gentle man. related to him, for passing orders under ss. 15 and 17 of the Act. On November 8, 1952, a communication was received from the Ministry of Food and Agriculture, Government of India, wherein was stated:- The Government of India consider that if on account of the failure of the parties concerned to compose their differences and inability to take timely and proper steps to arrange for normal working of the mills, the mills are not able to start work in time during the 1952-53 season, or are unable to work at all, it will result in a substantial fall in the production of sugar without due justification. Such a result will lead to the conclusion that the mills are being managed in a manner likely to damage the interests of a substantial body of consumers besides cane growers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4] S.C.R. 674. That decision pronounced oil Art. 31(2) of the Constitution with reference to the validity of the Sholapur Spinning and Weaving Company (Emergency Provisions) Ordinance 11 of 1950 and Act XXVIII of 1950. As a result, presumably, of that decision, on May 21, 1954, the Central Government cancelled all appointments of authorised Controllers under the provisions of the Act, and on such cancellation the management of the industrial undertaking vested again in the owner of the undertaking. The case of the petitioners is that in spite of the cancellation the authorised Controller continued to remain in possession of the undertaking in, question. On July 16, 1954, the Central Government again passed an order under sub-s. (4) of s. 3 of the Essential Supplies (Temporary Powers) Act, 1946, thereby again giving the authorised Controller certain functions of control in respect of the Ishwari Khetan Sugar Mills Ltd. On September 19, 1954, there was another investigation under s. 15 of the Act by a panel of officers and it is stated that they recommended that the Central Government should take over the management of the Mills for a period of three years. On January 31, 1955, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat learned counsel for the petitioners has not challenged the validity of s. 18A of the Act under which the impugned orders were made. We have already stated that Chapter IIIA of the Act was inserted by the Amending Act 26 of 1953. Article 31B of the Constitution was enacted by the Constitution (First Amendment Act, 1951, which states, inter alia, that none of the Acts and Regulations specified in the Ninth Schedule nor any of the provisions thereof shall be deemed to be void, or ever to have become void, on the ground that such Act, Regulation or provision is inconsistent with, or takes away or abridges any of the rights conferred by, any provisions of this Part (meaning Part III) of the Constitution. The Ninth Schedule was added to by the Constitution (Fourth Amendment) Act, 1955. Item No. 19 of the Ninth Schedule is now Chapter IIIA of the Act as inserted by the Industries (Development and Regulation) Amendment Act, 1953. Learned Counsel for the petitioners has frankly conceded that in view of these amending provisions, he is not now in a position to challenge the validity of s. 18A of the Act. Therefore, the principal question for our consideration is the validity of the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liament. The argument before us is that for the application of cl. (b) of sub-s. (1) of s. 18A, the two essential requirements are-(1) an investigation under s. 15 of the Act and (ii) the opinion of the Central Government that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or lo public interest. Learned counsel for the petitioners has conceded that before the order dated November 8, 1955, was made, there was an investigation under s. 15 of the Act in respect of the industrial undertaking in question, and the first requirement was thus fulfilled. Learned counsel has, however, very strongly submitted that the second requirement was not fulfilled in the present case, because the authorised Controller himself was in charge of the undertaking from December 18, 1952, till November 8, 1955 (when the impugned order was made) with a small break of less than two months only between the two dates, May 21, 1954, when all appointments under the Act were cancelled and July 16, 1954, when a fresh order under the Essential Supplies (Temporary Powers) Act, 1946 was made, and even during this short period the case of the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 18B of the Act states the effect of a notified order under s. 18A; in sub-s. (1), cls. (a) to (e), is stated the effect of taking over the management, and in sub. s. (3) is stated the effect of merely giving functions of control a distinction which is clearly drawn in the section itself. It is not difficult to conceive that in a particular industrial undertaking the mere giving of some functions of control may not be enough to meet the situation which has arisen and it may be necessary for the Central Government to pass an order taking over the management of the whole of the undertaking. In the case under our consideration, in December, 1952, certain functions of control were vested in the authorised Controller, but the management of the whole undertaking was,not taken over. This continued till an investigation was ordered under s. 15 of the Acton July 30, 1953. Then, on November 14, 1953, the authorised Controller was directed to take over the management of the whole of the industrial undertaking. This order was however cancelled on May 21, 1954, and under s. 18F of the Act, the effect of the cancellation was to vest the management of the undertaking again in its owner the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or arriving at the opinion that the industrial undertaking was being managed in a manner highly detrimental to public interest. The Central Government might reasonably have felt that the order dated July 16, 1954, which vested certain functions of control only, was not enough to meet the situation and a more drastic step was necessary. It is worthy of note that in the affidavit filed on behalf of the Central Government it is stated that the affairs of the industrial undertaking were investigated a second time under s. 15 of the Act in September 1954, and the panel of officers who held that investigation recommended that Government should take over the management of the industrial undertaking for a period a of three years. It is on that recommendation that the Central Government passed the impugned order on November 8, 1955. We are unable to accept the argument of learned counsel for the petitioners that one of the essential requirements of cl. (b) of sub-s. (1) of s. 18A of the Act was not fulfilled before the order dated November 8, 1955, was made. Learned counsel for the petitioners has drawn our attention to those statements in the affidavit filed on behalf of the Central Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, by any Central Act or Regulation, a power to issue notifications, orders, rules, or bye-laws is conferred, then that power includes a power, exercisable in the like manner and subject to the like sanction and conditions (if any), to add to, amend, vary or rescind any notifications, orders, rules or bye-laws so issued. The argument of learned counsel for the petitioners is that neither s. 18A of the Act nor s. 21 of the General Clauses Act save the amending order of November 7, 1956. There has been some argument before us with regard to the proviso to sub-s. (2) of s. 18A of the Act, which we have quoted in extensor in an earlier part of this judgment. That proviso, it is contended by learned counsel for the petitioners, refers only to an order which is initially made for a period of five years, or, alternatively, which comes to an end on the expiry of a period of five years. According to him, the proviso empowers the Central Government to continue the order after the expiry of a period of five years for such further period as may be specified in the direction given by the Central Government, and the only safeguard is that a copy of the direction is to be laid before both Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application of s. 21 of the General Clauses Act. Now, the first condition in cl. (b) of sub-s. (1) of s. 18A of the Act is that the industrial undertaking must be one in respect of which an investigation has been made under s. 15 of the Act. Section 15 is in these terms: Where the Central Government is of the opinion that- (a) in respect of any scheduled industry or industrial undertaking or undertakings- (i) there has been, or is likely to be, a substantial fall in the volume of production in respect of any article or class of articles relatable to that industry or manufactured or produced in the industrial undertaking or undertakings, as the case may be, for which, having regard to the economic conditions prevailing, there is no justification; or (ii) there has been, or is likely to be, a marked deterioration in the quality of any article or class of articles relatable to that industry or manufactured or produced in the industrial undertaking or undertakings, as the case may be, which could have been or can be avoided; or (iii) there has been or is likely to be a rise in the price of any article or class of articles relatable to that industry or manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation being made, the Central Government may issue directions under s. 16; those directions may or may not improve the situation. If they do not improve the situation, or if the mere giving of directions under s. 16 is not considered sufficient to meet the situation, the Central Government may pass an order under s. 18A; but one of the requisite conditions is that the Central Government must he of opinion that the industrial undertaking is still being managed in a. manner highly detrimental to the scheduled industry concerned or to public interest. If these ss. 15, 16 and 18A, are read together, as they must be read, then it becomes at once clear that the condition as to the management of the industrial undertaking in a manner highly detrimental to the scheduled industry concerned or to public interest relates in its true scope and effect to a period when the management of the industrial undertaking is in the hands of its owner; that is, to a period before the management of the whole or any part of the undertaking is taken over. Similarly, with regard to the exercise of functions of control, which also is contemplated by s. 18A of the Act, the condition again relates to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pears to be what we have stated earlier, namely the two conditions, one as to an investigation under s. 15 and the other as to mismanagement, relate to a period when the management of the industrial undertaking is legally vested in its owner, and s. 18A must be read, with reference to the two conditions stated in el. (b) of sub-s. (1), as though the words 'while the undertaking is vested in its owner' are present in the clause. If, as in this case, the management is once taken over by an order under s. 18A but the order is later cancelled and the management again vests in the owner, the two conditions must be fulfilled again before an order under el. (b) of sub-s. (1) of s. 18A of the Act can be made. That is what happened in the present case. The management was taken over on November 14, 1953, but the order was cancelled on May 21, 1954, and the management vested in the owner. An investigation under s. 15 of the Act was again made in September, 1954, and the Central Government, being satisfied that the industrial undertaking was being mismanaged in spite of the order under the Essential Supplies (Temporary Powers) Act made on July 16, 1954, passed the impugned order on Nov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y whatever to extend the time and the adjudicator became functus officio on the expiry of the time fixed in the original order of reference and the award was, therefore, one made without jurisdiction and a nullity. It was further held that s. 14 of the U. P. General Clauses Act did not in terms or by necessary implication give any such power of extension of time to the State Government. It was argued on behalf of the State Government in that case that the order of April 26, 1950, could be supported with reference to s. 21 of the U. P. General Clauses Act. But this Court rejected the argument and held that the power of amendment and modification conferred by s. 21 of the U. P. General Clauses Act could not be exercised so as to have retrospective operation. We do not think that the principle of that decision has any application in the present case. But as already stated by us, the provision in s. 21 of, the General Clauses Act embodies a rule of construction, and the implied power of amendment therein embodied must be determined with reference to the context and subject-matter of the provisions of the principal statute. In the present case, that rule of construction applies, but it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Central Government to another and independent test of propriety and suitability, for the Court has really no materials for such a test. The test to be applied is whether the appointment was made for some ulterior purpose, some purpose other than the object for which the law, under which the impugned order is made, was enacted. In our view, the petitioners have completely failed to satisfy that test in the present case. For the reasons given above, we hold that the order made on November 8, 1955, and the amending order dated November 7, 1956, are both valid in law, and the petitioners have not made out any case of a violation of their fundamental right. In conclusion, it may be stated that on behalf of the authorised Controller a preliminary objection was also taken that petitioner No. 1 was not legally competent to represent petitioner No. 2. Having regard to our decision on merits, it is unnecessary to say anything more about this preliminary objection. It was stated at the Bar that this preliminary objection has also been taken in Suit No. 4 of 1952. As that suit is still pending, we have thought it fit to refrain from expressing any opinion on the preliminary objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, rules or bye-laws so (issued). Under this section a Notification or an Order once issued can be amended only in the like manner and subject to the like sanction and conditions (if any) . This means that the power of amendment can be exercised only in the same manner and subject to the same sanction and conditions, if any were imposed, in which the power to make the order could be exercised under the main Act. Was the order of November 7, 1956, then made in the same manner and subject to the same sanction and conditions under which an order under s. 18A of the main Act could be made ? Under s. 18A the power to authorise a person to take over the management of an undertaking can be exercised only by a notified order, that is to say an order notified in the Official Gazette. This is the manner of the exercise of the power. The amending Order had been made in the same manner. This requirement of s. 21 of the General Clauses Act, therefore, was fulfilled in this case. Section 18A does not provide for any sanction being obtained before the exercise of the power conferred by it. The amending Order, therefore, did not need any sanction, and no question of satisfying any requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those conditions upon the fulfillment of which the right to issue the order arises under the main Act. If this were so, the power of amendment conferred by s. 21 would have been wholly redundant and unnecessary. If the conditions upon the fulfillment of which the right to exercise the power arose under the main Act existed, then the Government could have instead of amending the order made a fresh order under s. 14 of the General Clauses Act, if necessary, rescinding the earlier order. Therefore, it seems to me that the provision in s. 21 of the General Clauses Act that the power of amendment shall be exercisable subject to like conditions does not refer to conditions upon the existence of Which the right to exercise the power arises under the main Act. In my view the conditions referred to in s. 21 are the conditions to which the order issued under the main Act must be made subject. Thus, in this case sub-s. 2 of s. 18A provides that any notified order issued under sub-section (1) shall have effect for such period not exceeding five years as may be specified in the order . The effect of this sub-section is that the order made under s. 18A must be subject to the condition that it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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