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TMI Blog1950 (12) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... der can, under the circumstances of the case and particularly when one of the respondents is the company which opposes the petition, challenge the validity of the Act on the ground that it is a piece of discriminatory legislation, creates inequality before the law and violates the principle of equal protection of the laws under article 14 of the Constitution of India. The second is whether in fact the petitioner has shown that the Act runs contrary to article 14 of the Constitution. In this case having regard to my conclusion on the second point, I do not think it is necessary to pronounce a definite opinion on the first point. I agree with the line of reasoning and the conclusion of Mr. Justice Mukherjea as regards the second point relating to the invalidity of the Act on the ground that it infringes article 14 of the Constitution and have nothing more to add. 4. In my opinion therefore this petition fails and is dismissed with costs. Saiyid Fazl Ali, J. 5. I am strongly of the opinion that this petition should be dismissed with costs. 6. The facts urged in the petition and the points raised on behalf of the petitioner before us are fully set forth in the judgments of my breth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and all that is necessary for me to say is that I adopt his conclusions, without committing myself to the acceptance of all his reasonings. 8. The only serious point, which in my opinion, arises in the case in whether article 14 of the Constitution is in any way infringed by the impugned Act. This article corresponds to the equal protection clause of the Fourteenth Amendment of the Constitution of the United States of America, which declares that "no State shall deny to any person within its jurisdiction the equal protection of the laws". Professor Willis dealing with this clause sums up the law as prevailing in the United States in regard to it in these words :- "Meaning and effect of the guaranty - The guaranty of the equal protection of the laws means the protection of equal laws. It forbids class legislation, but does not forbid classification which rests upon reasonable grounds of distinction. It does not prohibit legislation, which is limited either in the objects to which it is directed or by the territory within which it is to operate. 'It merely requires that all persons subjected to such legislation shall be treated alike under like circumstances and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting of the shareholders of the company shall be given effect to unless approved by the Central Government. (c) No proceeding for the winding up of the company or for the appointment of a receiver in respect thereof shall lie in any court unless by or with the sanction of the Central Government." 11. Prima facie, the argument appears to be a plausible one, but it requires a careful examination, and, while examining it, two principles have to be borne in mind :- (1) that a law may be constitutional even though it relates to a single individual, in those cases where on account of some special circumstances or reasons applicable to him and not applicable to others, that single individual may be treated as a class by himself; (2) that it is the accepted doctrine of the American courts, which I consider to be well-founded on principle, that the presumption is always in favour of the constitutionality of an enactment, and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. A clear enunciation of this latter doctrine is to be found in Middleton v. Texas Power and Light Company 248 U.S. 152, 157, in which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... showed that the mill had been grossly mismanaged by the Board of Directors and the managing agents. It also revealed that the persons who were responsible for the mismanagement were guilty of certain acts and omissions which brought them under the purview of the law. The Bombay Government accepted the report of the inspectors and instructed the Advocate-General of Bombay to take legal proceedings against certain persons connected with the management of the company. Thereafter, the Government of India was approached by the Provincial Government and requested to take special action in order to secure the early opening of the mill. The Government of India found that they had no power to take over the management of a particular mill, unless its working could be ensured through the existing management acting under the direction of a Controller appointed under the Essential Supplies Act, but they also found that a peculiar situation had been created in this case by the managing agents themselves being unable or unwilling to conduct the affairs of the company in a satisfactory and efficient manner. The Government of India, as a matter of precaution and lest it should be said that they we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys 13,000 workers. Per shift, it is capable of producing 25 to 30 thousand pounds of yarn, and also one lakh yards of cloth. It was working two shifts when it was closed down on the 29th August, 1949. The closure of the mill meant a loss of 25 lakhs yards of cloth and one and a half lakhs pounds of yarn per month. Prior to 1947, the highest dividend paid by the company was ₹ 525 per share and the lowest ₹ 100, and, in 1948, when the management was taken over by the managing agents who have been removed by the impugned Act, the accounts showed a loss of ₹ 30 lakhs, while other textile companies had been able to show very substantial profits during the same period. 16. Another fact which is brought out in the proceedings is that the managing agents had acquired control over the majority of the shares of the company and a large number of shareholders who were dissatisfied with the management had been rendered powerless and they could not make their voice heard. By reason of the preponderance of their strength, the managing agents made it impossible for a controller under the Essential Supplies Act to function and they also made it difficult for the company to run sm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of as existing at the time of legislation. The fact that only one person or one object or one business or one locality is affected is not proof of denial of the equal protection of the laws. For such proof it must be shown that there is no reasonable basis for the classification." [Constitutional Law by Prof. Wills (1st Edition) p. 580] 19. In this particular case, the Government initially took control of the Sholapur Company by means of an Ordinance (Ordinance No. II of 1950), of which the preamble runs as follows :- "Whereas on account of mismanagement and neglect a situation has arisen in the affairs of the Sholapur Spinning and Weaving Company, Limited, which has prejudicially affected the production of an essential commodity and has caused serious unemployment amongst a certain section of the community; And whereas an emergency has arisen which renders it necessary to make special provision for the proper management and administration of the aforesaid Company; Now, therefore............." 20. In the course of the Parliamentary debate, reference was made to the fact that the country was facing an acute cloth shortage, and one of the reasons which appare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roda Ltd., now stand registered in the Bank's name. 26. The company was doing flourishing business till disputes arose recently between the management and the employees, and in or about August, 1949, the mills were temporarily closed and the company, which was one of the largest producers of cotton textiles, ceased production. Thereupon, the Governor-General intervened by promulgating on the 9th January, 1950, an Ordinance called the Sholapur Spinning and Weaving Company (Emergency Provisions) Ordinance (No. II of 1950), which empowered the Government of India to take over the control and management of the company and its properties and effects by appointing their own Directors and to delegate all or any of their powers to the Provincial Government. In exercise of the powers thus delegated, the Government of Bombay appointed respondents 3 to 9 as Directors to take charge of the management and administration of the properties and affairs of the company. Subsequently, on 10th April, 1950, the Ordinance was repealed and was replaced by an Act of Parliament containing similar provisions, namely the Sholapur Spinning and Weaving Company (Emergency Provisions) Act (No. XXVIII of 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. They are to manage the business of the company "subject to the control of the Central Government" and shall have the power to raise funds offering such security as they think fit, to carry out necessary repairs to the machinery or other property in their custody and to employ the necessary persons and define the necessary conditions of their service. Section 12 provides for the restoration of the management to directors nominated by the shareholders when the purpose of the Government's intervention has been fulfilled. Section 13 is important and reads thus : "13. Application of the Companies Act. - (1) Notwithstanding anything contained in the Companies Act or in the memorandum or articles of association of the company (a) it shall not be lawful for the shareholders of the company or any other person to nominate or appoint any person to be a director of the company; (b) no resolution passed at any meeting of the shareholders of the company shall be given effect to unless approved by the Central Government; (c) no proceeding for the winding up of the company or for the appointment of a receiver in respect thereof shall lie in any Court unless by or with the san ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporated companies in India. Section 21 of the Act assures to the shareholders the protection of the stipulations contained in the memorandum and articles of association by constituting them a binding contract, so that neither the company nor the shareholders have the power of doing anything inconsistent therewith. The basic right of the shareholders to have their undertaking managed and conducted by the directors of their own choice is ensured by section 83B. Their right to exercise control and supervision over the management by the directors by passing resolutions at their general meeting is regulated by various provisions of the Act. The important safeguard of winding up the company in certain unfavourable circumstances either through court or by the shareholders themselves voluntarily is provided for in sections 162 and 203. All these rights and safeguards, on the faith of which the shareholders embark their money in their undertaking, are abrogated by the impugned Act in the case of the shareholders of this company alone. In fact, the Central Government is empowered to exclude, restrict or limit the operation of any of the provisions of the Companies Act in relation to this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a particular law is a matter within the discretion of the law-makers. It is not the province of the court to canvass the legislative judgment in such matters. But the issue here is not whether the impugned Act was ill-advised or not justified by the facts on which it was based, but whether it transgresses the explicit constitutional restriction on legislative power imposed by article 14. 32. It is obvious that the legislation is directed solely against a particular company and shareholders and not against any class or category of companies and no question, therefore, of reasonable legislative classification arises. If a law is made applicable to a class of persons or things and the classification is based upon differentia having a rational relation to the object sought to be attained, it can be no objection to its constitutional validity that its application is found to affect only one person or thing. For instance, a law may be passed imposing certain restrictions and burdens on joint stock companies with a share capital of, say, ₹ 10 crores and upwards, and it may be found that there is only one such company for the time being to which the law could be applied. If other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there were also other companies similarly mismanaged, for that is what, according to the respondents, he should prove in order to rebut the presumption of constitutionality. In other words, he should be called upon to establish that this company and its shareholders were arbitrarily singled out for the imposition of the statutory disabilities. How could the petitioner discharge such a burden ? Was he to ask for an investigation by the Court of the affairs of other industrial concerns in India where also there were strikes and lock outs resulting in unemployment and cessation of production of essential commodities ? Would those companies be willing to submit to such an investigation ? And even so, how is it possible to prove that the mismanagement and neglect which is said to have prompted the legislation in regard to this company was prevalent in the same degree in other companies ? In such circumstances, to cast upon the petitioner a burden of proof which it is as needless for him to assume as it is impracticable to discharge is to lose sight of the realities of the case. 34. Lastly, it was argued that the constitutionality of a statute could not be impugned under article 32 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t stand in his name but have been registered in the name of the Baroda Bank Limited with which the shares are pledged. According to the respondents, the petitioner is the registered holder of one single ordinary share in the company. 38. It appears that on July 27, 1949, the directors of the company gave a notice to the workers that the mills would be closed, and pursuant to that notice, the mills were in fact closed on the 27th of August following. On January 9, 1950, the Governor-General of India promulgated an Ordinance which purported to make special provisions for the proper management and administration of the company. It was stated in the preamble to the Ordinance that "on account of mismanagement and neglect, a situation has arisen in the affairs of the Sholapur Spinning and Weaving Company Limited which has prejudicially affected the production of an essential commodity and has caused serious unemployment amongst a certain section of the community", and it was on account of the emergency arising from this situation that the promulgation of the Ordinance was necessary. The provisions of the Ordinance, so far as they are material for our present purpose, may be su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdance with the provisions of section 15 mentioned above, the Central Government, by notification issued on the same day that the Ordinance was promulgated, delegated all its powers exercisable under the Ordinance to the Government of Bombay. On the next day, the Government of Bombay appointed respondents 3 to 7 as directors of the company in terms of section 3 of the Ordinance. On the 2nd of March, 1950, the respondent No. 9 was appointed a director and respondent No. 5 having resigned his office in the meantime, the respondent No. 8 was appointed in his place. On the 7th of April, 1950, the Ordinance was repealed and an Act was passed by the Parliament of India, known as the Sholapur Spinning and Weaving Company (Emergency Provisions) Act which re-enacted almost in identical terms all the provisions of the Ordinance and provided further that all actions taken and orders made under the Ordinance shall be deemed to have been taken or made under the corresponding provisions of the Act. The preamble to the Ordinance was not however reproduced in the Act. 41. The petitioner in his petition has challenged the constitutional validity of both the Ordinance and the Act. As the Ordinance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... address myself to the merits of this application it will be necessary to clear up two preliminary matters in respect to which arguments were advanced at some length from the Bar. The first point relates to the scope of our enquiry in the present case and raises the question as to what precisely are the matters that have to be investigated and determined on this application of the petitioner. The second point relates to the form of relief that can be prayed for and granted in a case of this description. 45. Article 32(1) of the Constitution guarantees to everybody the right to move this court, by, appropriate proceeding, for enforcement of the fundamental rights which are enumerated in Part III of the Constitution. Clause (2) of the article lays down that the Supreme Court shall have the power to issue directions or orders or writs including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari whichever may be appropriate for the enforcement of any of the rights conferred by this part. 46. Thus anybody who complains of infraction of any of the fundamental rights guaranteed by the Constitution is at liberty to move the Supreme Court for the enfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvades his fundamental rights guaranteed by the Constitution, of which he could seek enforcement by an appropriate writ or order. The rights that could be enforced under article 32 must ordinarily be the rights of the petitioner himself who complains of infraction of such rights and approaches the court for relief. This being the position, the proper subject of our investigation would be what rights, if any, of the petitioner as a shareholder of the company have been violated by the impugned legislation. A discussion of the fundamental rights of the company as such would be outside the purview of our enquiry. It is settled law that in order to redress a wrong done to the company, the action should prima facie be brought by the company itself. It cannot be said that this course is not possible in the circumstances of the present case. As the law is alleged to be unconstitutional, it is open to the old directors of the company who have been ousted from their position by reason of the enactment to maintain that they are directors still in the eye of law, and on that footing the majority of shareholders can also assert the rights of the company as such. None of them, however, have co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst contention that has been pressed before us by the learned Counsel for the petitioner is that the effect of the Sholapur Spinning and Weaving Company Limited (Emergency Provisions) Act, has been to take away from the company and its shareholders, possession of property and other interests in commercial undertaking and vest the same in certain persons who are appointed by the State, and the exercise of whose powers cannot be directed or controlled in any way by the shareholders. As the taking of possession is not for any public purpose and no provision for compensation has been made by the law which authorises it, such law, it is said, violates the fundamental rights guaranteed under article 31 of the Constitution. 50. To appreciate the contention, it would be convenient first of all to advert to the provisions of the first two clauses of article 31 of the Constitution. The first clause of article 31 lays down that "no person shall be deprived of his properly save by authority of law". The second clause provides : "No property, movable or immovable, including any interest in, or in any company owing, any commercial or industrial undertaking, shall be taken possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompensation to the displaced or expropriated holder of the property. In the context in which the word "acquisition" appears in article 31(2), it can only mean and refer to acquisition of the entire interest of the previous holder by transfer of title and I have no hesitation in holding that there is no such acquisition either as regards the property of the company or of the shareholders in the present case. The question, therefore, narrows down to this as to whether the legislation in question has authorised the taking of possession of any property or interest belonging to the petitioner. 53. It is argued by the learned Attorney-General that the taking of possession as contemplated by article 31(2) means the taking of possession of the entire bundle of rights which the previous holder had, by excluding him from every part or item thereof. If the original holder is still left to exercise his possession with regard to some of the rights which were within the folds of his title, it would not amount to taking possession of the property for purposes of article 31(2) of the Constitution. Having laid down this proposition of law, the learned Attorney-General has taken us throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y an interest in the company. His interest is represented by the share he holds and the share is movable property according to the Indian Companies Act with all the incidence of such property attached to it. Ordinarily, he is entitled to enjoy the income arising from the shares in the shape of dividends; the share like any other marketable commodity can be sold or transferred by way of mortgage or pledge. The holding of the share in his name gives him the right to vote at the election of directors and thereby take a part, though indirectly, in the management of the company's affairs. If the majority of shareholders sides with him, he can have a resolution passed which would be binding on the company, and lastly, he can institute proceedings for winding up of the company which may result in a distribution of the net assets among the shareholders. 56. It cannot be disputed that the petitioner has not been dispossessed in any sense of the term of the shares he holds. Nobody has taken the shares away from him. His legal and beneficial interest in respect to the shares he holds is left intact. If the company declares dividend, he would be entitled to the same. He can sell or otherw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther people who are exercising them in place of the displaced shareholders. 57. In the view that I have taken it is not necessary to discuss whether we can accept as sound the contention put forward by the learned Attorney-General that the word "property" as used in article 31 of the Constitution connotes the entire property, that is to say the totality of the rights which the ownership of the object connotes. According to Mr. Setalvad, if a shareholder is not deprived of the entirety of his rights which he is entitled to exercise by reason of his being the owner or holder of the share and some rights, however insignificant they might be, still remain in him, there cannot be any dispossession as contemplated by article 31(2). It is difficult, in my opinion, to accept the contention formulated in such broad terms. The test would certainly be as to whether the owner has been dispossessed substantially from the rights held by him or the loss is only with regard to some minor ingredients of the proprietary right. It is relevant to refer in this connection to an observation made by Rich J. in a Full Bench decision of the High Court of Australia, [See Minister of State for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f variable and indefinite connotation in American law can only make the task of interpretation more difficult. It is also not necessary to express any opinion as to whether clauses (1) and (2) of article 31 relate to exercise of different kinds of powers or they are to be taken as cumulative provisions in relation to the same subject-matter, namely, compulsory acquisition of property. If the word "deprived" as used in clause (1) connotes the idea of destruction or confiscation of property, obviously no such thing has happened in the present case. Again if clauses (1) and (2) of article 31 have to be read together and "deprivation" in clause (1) is given the same meaning as compulsory acquisition in clause (2), clause (1), which speaks neither of compensation nor of public purpose, would not by itself, and apart from clause (2), assist the petitioner in any way. If the two clauses are read disjunctively, the only question that may arise in connection with clause (1) is whether or not the deprivation of property is authorised by law. Mr. Chari has raised a question relating to the validity of the legislation on the ground of its not being covered by any of the ite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly an incident of ownership. The pecuniary benefit, which a shareholder derives from the shares he holds, is the dividend and there is no limitation on the petitioner's right in this respect. The petitioner undoubtedly has been precluded from exercising his right of voting at the election of directors so long as the statutory directors continue to manage the affairs of the company. He cannot pass an effective resolution in concurrence with the majority of shareholders without the consent or sanction of the Central Government and without such sanction, there is also a disability on him to institute any winding up proceedings in a court of law. 63. In my opinion, these are rights or privileges which are appurtenant to or flow from the ownership of property, but by themselves and taken independently, they cannot be reckoned as property capable of being acquired, held or disposed of as is contemplated by article 19(1)(f) of the Constitution. I do not think that there has been any restriction on the rights of a shareholder to hold, acquire or dispose of his share by reason of the impugned enactment and consequently article 19(1)(f) of the Constitution is of no assistance to the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in determining the true meaning and scope of article 14 of our Constitution. 66. I may state here that so far as the violation of the equality clause in the Constitution is concerned, the petitioner, as a shareholder of the company, has as much right to complain as the company itself, for his complaint is that apart from the discrimination made against the company, the impugned legislation has discriminated against him and the other shareholders of the company as a group vis-a-vis the shareholders of all other companies governed by the Indian Companies Act who have not been treated in a similar way. As the discriminatory treatment has been in respect to the shareholders of this company alone, any one of the shareholders, whose interests are thus vitally affected, has a right to complain and it is immaterial that there has been no discrimination inter se amongst the shareholders themselves. 67. It must be admitted that the guarantee against the denial of equal protection of the laws does not mean that identically the same rules of law should be made applicable to all persons within the territory of India in spite of differences of circumstances and conditions. As has been said by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he affairs of the company which prejudicially affected the production of an essential commodity and caused serious unemployment amongst a certain section of the community. Mr. Chari's contention in substance is that there are various textile companies in India situated in a similar manner as the Sholapur company, against which the same charges could be brought and for the control and regulation of which all the reasons that are mentioned in the preamble to the Ordinance could be applied. Yet, it is said, the legislation has been passed with regard to this one company alone. The argument seems plausible at first sight, but on a closer examination I do not think that I can accept it as sound. It must be conceded that the Legislature has a wide discretion in determining the subject matter of its laws. It is an accepted doctrine of the American Courts and which seems to me to be well founded on principle, that the presumption is in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a transgression of constitutional principles. As was said by the Supreme Court of America in Middleton v. Texas Power and Light Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the facts connected with this corporation are indeed exceptional and the discrimination that has been made can be supported on just and reasonable grounds. I purposely refrain from alluding to these facts or basing my decision thereon as we had no opportunity of investigating them properly during the course of the hearing. At matters stand, no proper materials have been placed before us by either side and as I am unable to say that the legislature cannot be supported on any reasonable ground, I think it to be extremely risky to overthrow it on mere suspicion or vague conjectures. If it is possible to imagine or think of cases of other companies where similar or identical conditions might prevail, it is also not impossible to conceive of something "peculiar" or "unusual" to this corporation which led the legislature to intervene in its affairs. As has been laid down by the Supreme Court of America, "The Legislature is free to recognise degrees of harm and it may confine its restrictions to those cases where the need is deemed to be the clearest" [Radice v. New York, 264 U.S. 294. We should bear in mind that a corporation, which is engaged in produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, (hereafter referred to as the said company). The preambles and the provisions of the Ordinance have been referred to in the judgment just delivered by Mukherjea J. and need not be recapitulated by me in detail. Suffice it to say that the net result of the Ordinance was that the managing agents of the said company were dismissed, the directors holding office at the time automatically vacated their office, the Government was authorised to nominate directors, the rights of the shareholders of this company were curtailed in that it was made unlawful for them to nominate or appoint any director, no resolution passed by them could be given effect to without the sanction of the Government and no proceeding for winding up could be taken by them without such sanction, and power was given to the Government to further modify the provisions of the India Companies Act in its application to the said company. 73. On the very day that the Ordinance was promulgated the Central Government acting under section 15 delegated all its powers to the Government of Bombay. On January 10, 1950, the Government of Bombay appointed Respondents Nos. 3 to 7 as the new directors. On March 2, 1950, Respondent N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affairs of the company under colour of or in purported exercise of any powers under the said Ordinance or Act. 75. The validity of the Ordinance and the Act has been challenged before us on the following grounds :- (i) that it was not within the legislative competence - (a) of the Governor-General to promulgate the Ordinance, or (b) of the Parliament to enact the Act, and (ii) that the Ordinance and the Act infringe the fundamental rights of the shareholders as well as those of the said company and are, therefore, void and inoperative under article 13. 76. Re : (i) - The present application has been made by the petitioner under article 32 of the Constitution. Sub-section (1) of that article guarantees the right to move this Court by appropriate proceedings for the enforcement of the rights conferred by Part III of the Constitution. Sub-section (2) empowers this Court to issue directions or orders or writs, including certain specified writs, whichever may be appropriate, for the enforcement of any of the rights conferred by that Part. It is clear, therefore, that article 32 can only be invoked for the purpose of the enforcement of the fundamental rights. Article 32 does not permit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle 31 for, if he or it has been so deprived, then the question of his or its fundamental right under article 19(1)(f) will not arise. 78. The relevant clauses of article 31 run as follows :- "31. (1) No person shall be deprived of his property save by authority of law. (2) No property, movable or immovable, including any interest in, or in any company owing, any commercial or industrial undertaking, shall be taken possession of or acquired for public purposes under any law authorising the taking of such possession or such acquisition, unless the law provides for compensation for the property taken possession of or acquired and either fixes the amount of the compensation, or specifies the principles on which, and the manner in which, the compensation is to be determined and given." 79. Article 31 protects every person, whether such person is a citizen or not, and it is wide enough to cover a natural person as well as an artificial person. Whether or not, having regard to the language used in article 5, a corporation can be called a citizen and as such entitled to the rights guaranteed under article 19, it is quite clear that the corporation is protected by article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to authorise the State to acquire or take possession, without any compensation, of almost the entire rights of the owner leaving to him only a few subsidiary rights. This result could not, in my opinion, have been intended by our Constitution. As said by Rich J. in the Minister for State for the Army v. Datziel (1943-1944) 68 C.L.R. 261, while dealing with section 31 (XXXI) of the Australian Constitution - "Property, in relation to land, is a bundle of rights exercisable with respect to the land. The tenant of an unencumbered estate in fee simple in possession has the largest possible bundle. But there is nothing in the placitum to suggest that the legislature was intended to be at liberty to free itself from the restrictive provisions of the placitum by taking care to seize something short of the whole bundle owned by the person whom it is expropriating." 81. The learned Judge then concluded as follows at p. 286 :- "It would, in my opinion, be wholly inconsistent with the language of the placitum to hold that whilst preventing the legislature from authorising the acquisition of a citizen's full title except upon just terms, it leaves it open to the legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are by themselves "property" and it is of this "property" that the shareholder is said to have been deprived by the State under a law which does not provide for payment of compensation and which is, as such, an infraction of the shareholder's fundamental right to property under article 31(2). Two questions arise on this argument. Are these rights "property" within the meaning of the two articles I have mentioned ? These rights, as already stated, are, no doubt, privileges incidental to the ownership of the share which itself is property, but it cannot, in my opinion, be said that these rights, by themselves, and apart from the share are "property" within the meaning of those articles, for those articles only regard that as "property" which can by itself be acquired, disposed of or taken possession of. The right to vote for the election of directors, the right to pass resolutions and the right to present a petition for winding up are personal rights flowing from the ownership of the share and cannot by themselves and apart from the share be acquired or disposed of or taken possession of as contemplated by those articles. The seco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot;property", such "property" has not been acquired or taken possession of by the Government. If this be the result brought about by the Ordinance and the Act, do they offend against the fundamental rights guaranteed by article 31 ? Article 31(1) formulates the fundamental right in a negative form prohibiting the deprivation of property except by authority of law. It implies that a person may be deprived of his property by authority of law. Article 31(2) prohibits the acquisition or taking possession of property for a public purpose under any law, unless such law provides for payment of compensation. It is suggested that clauses (1) and (2) of article 31 deal with the same topic, namely, compulsory acquisition or taking possession of property, clause (2) being only an elaboration of clause (1). There appear to me to be two objections to this suggestion. If that were the correct view, then clause (1) must be held to be wholly redundant and clause (2), by itself, would have been sufficient. In the next place, such a view would exclude deprivation of property otherwise than by acquisition or taking of possession. One can conceive of circumstances where the State may hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... older cannot question the constitutionality of the Ordinance or the Act on this ground. 84. As regards the company it is contended that the Ordinance and the Act by empowering the State to dismiss the managing agent, to discharge the directors elected by the shareholders and to appoint new directors have in effect authorised the State to take possession of the undertaking and assets of the company through the new directors appointed by it without paying any compensation and, therefore, such law is repugnant to article 31(2) of our Constitution. It is, however, urged by the learned Attorney-General that the mills and all other assets now in the possession and custody of the new directors who are only servants or agents of the said company are, in the eye of the law, in the possession and custody of the company and have not really been taken possession of by the State. This argument, however, overlooks the fact that in order that the possession of the servant or agent may be juridically regarded as the possession of the master or principal, the servant or agent must be obedient to, and amenable to the directions of, the master or principal. If the master or principal has no hand in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s whether an individual shareholder can complain. It is well settled in the United States that no one but those whose rights are directly affected by a law can raise the question of the constitutionality of that law. Thus is McCable v. Atchison (1), which arose out of a suit filed by five Negros against five Railway Companies to restrain them from making any distinction in service on account of race pursuant to an Oklahoma Act known as "The Separate Coach Law," in upholding the dismissal of the suit Hughes J. observed :- "It is an elementary principle that in order to justify the granting of this extraordinary relief, the complainants' need of it and the absence of an adequate remedy at law must clearly appear. The complaint cannot succeed because someone else may be hurt. Nor does it make any difference that other persons who may be injured are persons of the same race or occupation. It is the fact, clearly established, of injury to the complainant - not to others - which justifies judicial interference." 86. In that case there was no allegation that anyone of the plaintiffs had ever travelled on anyone of the rail roads or had requested any accommodatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any's rights so directly affects its shareholders as to entitled any of its shareholders to question the constitutional validity of the law infringing the company's rights. The question has been answered in the negative by the Supreme Court of the United States in Darnell v. The State of Indiana 226 U.S. 388. In that case the owner of a share in a Tennessee corporation was not allowed to complain that an Indiana law discriminated against Tennessee corporations in that it did not make any allowance, as it did in the case of Indiana corporations, where the corporation had property taxed within the State. This is in accord with the well established legal principle that a corporation is a legal entity capable of holding property and of using or being sued and the corporators are not, in contemplation of law, the owners of the assets of the corporation. In all the cases referred to above the question of constitutionality was raised in connection with the equal protection clause in the Fourteenth Amendment of the American Federal Constitution. If such be the requirements of law in connection with the equal protection clause which corresponds to our article 14, it appears to me to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a winding up petition by authority of law. Nor can he complain of an infringement of the company's right to property because he is not, in the eye of law, the owner of the property in question and accordingly not directly interested in it. In certain exceptional cases where the company's property is injured by outsiders, a shareholder may, under the English law, after making all endeavours to induce the persons in charge of the affairs of the company to take steps, file a suit on behalf of himself and other shareholders for redressing the wrong done to the company, but that principle does not apply here for this is not a suit, nor has it been shown that any attempt was made by the petitioner to induce the old directors to take steps nor do these proceedings purport to have been taken by the petitioner on behalf of himself and the other shareholders of the company. 88. The only other ground on which the Ordinance and the Act have been challenged is that they infringe the fundamental rights guaranteed by article 14 of the Constitution. "Equal protection of the laws", as observed by Day J. in Southern Railway Company v. Greene 216 U.S. 400, "means subjection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingle individual is a class by himself. In Middleton v. Texas Power and Light Company 249 U.S. 152, it was pointed out that there was a strong presumption that a legislature understood and correctly appreciated the needs of its own people, that its laws were directed to problems made manifest by experience and that the discriminations were based upon adequate grounds. It was also pointed out in that case that the burden was upon him who attacked a law for unconstitutionality. In Lindsley v. Natural Carbonic Gas Company 220 U.S. 61, it was also said that one who assailed the classification made in a law must carry the burden of showing that it did not rest upon any reasonable basis but was essentially arbitrary. If there is a classification, the Court will not hold it invalid merely because the law might have been extended to other persons who in some respects might resemble the class for which the law was made, for the legislature is the best judge of the needs of the particular classes and to estimate the degree of evil so as to adjust its legislation according to the exigency found to exist. If, however, there is, on the face of the statute, no classification at all or none on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aint is that the shareholders of this company, taken as a unit, have been discriminated vis-a-vis the shareholders of other companies. Therefore, the question as to the right of the shareholder to question the validity of a law infringing the right of the company does not arise. Here the shareholder is complaining of the infringement of his own rights and if such infringement can be established I see no reason why the shareholder cannot come within article 32 to vindicate his own rights. The fact that these proceedings have been taken by one single shareholder holding only one single fully paid up share does not appear to me to make any the least difference in principle. If this petitioner has, by the Ordinance or the Act, been discriminated against and denied equal protection of the law, his fundamental right has been infringed and his right to approach this Court for redress cannot be made dependent on the readiness or willingness of other shareholders whose rights have also been infringed to join him in these proceedings or of the company to take substantive proceedings. To take an example, if any law discriminates against a class, say the Punjabis, any Punjabi may question the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and under what circumstances this law was made and, therefore, apart from the question of their admissibility in evidence, the petitioner has had no opportunity to deal with or rebut them and the same cannot be used against him 91. The learned Attorney-General takes his stand on the presumption that the law was founded on a valid basis of classification, that its discriminations were based upon adequate grounds and that the law was passed for safeguarding the needs of the people and that, therefore, the onus was upon the petitioner to allege and prove that the classification which he challenged did not rest upon any reasonable basis but was essentially arbitrary. I have already said that if on the face of the law there is no classification at all or, at any rate, none on the basis of any apparent difference specially peculiar to the individual or class affected by the law, it is only an instance of an arbitrary selection of an individual or class for discriminating and hostile legislation and, therefore, no presumption can, in such circumstances, arise at all. Assuming, however, that even in such a case the onus is thrown on the complainant, there can be nothing to prevent him fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nemployment. I do not find it necessary to say that mismanagement and neglect in conducting the affairs of companies can never be a criterion or basis of classification for legislative purposes. I shall assume that it is permissible to make a law whereby all delinquent companies and their shareholders may be brought to book and all companies mismanaging their affairs and the shareholders of such companies may, in the interest of the general public, be deprived of their right to manage the affairs of their companies. Such a classification made by a law would bear a reasonable relation to the conduct of all delinquent companies and shareholders and may, therefore, create no inequality, for the delinquent companies and their shareholders from a separate class and cannot claim equality of treatment with good companies and their shareholders who are their betters. But a distinction cannot be made between the delinquent companies inter se or between shareholders of equally delinquent companies and one set cannot be punished for its delinquency while another set is permitted to continue, or become, in like manner, delinquent without any punishment unless there be some other apparent diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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