9911796707
TMI Blog1951 (6) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... e would hear them on the 26th of February, 1951, in his office in New Delhi, and unless satisfactory cause was shown he would make a report to respondent No. 2 for the appointment of an Administrator to manage the affairs of the companies. Grounds for action under Section 52A of the Act were stated in the notices issued to the companies. 3. On the 17th of February, 1951, the Controller informed the companies that the hearing On the 26th of February, 1951, would be at Bombay instead at New Delhi. 4. On the 19th of February, 1951, the companies applied to the Controller for the postponement of the date of hearing to March, 1951. On the 20th of February, 1951 the Controller refused postponement of the date of hearing. On the 21st of February, 1951, the companies again asked the Controller to postpone the date of hearing and furnish them with particulars of the charge that they were acting in a manner likely to be prejudicial to the interests of holders of life insurances policies, but the Controller refused. 5. On the 26th of February, 1951, the companies appeared before the Controller in Bombay and applied in writing for the postponement of the date of hearing by at least fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in Civil Miscellaneous (Writs) Nos. 17 and 18 of 1951 this Court has no jurisdiction to make an order under Article 226 of the Constitution of India for the order passed by the Controller has to take effect outside the territories in relation to which this Court exercises jurisdiction and the acts sought to be restrained under Article 226 of the Constitution of India are to be done by the Controller outside the territorial jurisdiction of this Court. In support of the argument raised counsel cite 'Ryots of Garabandho v. Zamindar of Parlakimedi 70 IA 129 'Hamid Hasan v. Banwari Lal' ILR (1948) Cal 230 and 'Shree Menakshi Mills v. Provincial Textile Commissioner. 11. For the reasons given by me in 'Ebrahim. Aboobakar v. Achhru Ram', Civil Misc. (Writ) No. 15 of 1951, I have no doubt that the argument raised has no substance, but considering the importance of the point, I would like to add a few observations to supplement what I have said in that case. 12. Article 226(1) provides: 226(1) Notwithstanding anything in Article 32, every High Court shall have power, throughout the territories in relation to which it exercises Jurisdiction, to issue t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this provision'. In ILR (1948) Cal 230', Sir John Beaumount observed: Their Lordships feel no doubt on the construction of Section 9 of the High Courts Act, 1861, and the Letters Patent of 1865, that the Original Civil Jurisdiction which the Supreme Court of Calcutta possessed over certain classes of persons outside the territorial limits of that jurisdiction has not been inherited by the High Court, that the power to grant an information in the nature of 'quo warranto' arises in the exercise of the Ordinary Original Civil Jurisdiction of the High Court, that such jurisdiction is confined to the town of Calcutta and that, as the appellant does not reside, and the office which he is alleged to have usurped is not situate, within those limits, the Court had no power to grant the information in this case. Clearly the judgment in I L R (1948) Cal 230', proceeds upon Section 9 of the High Courts Act, 1861, and the Letters Patent of 1865. 15. In, Sir Madhavan Nair said: 'The scope of the provisions of Section 45 restricts the jurisdiction of the High Court of Madras to make an order 'requiring any specific act to be done or foreborne within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the person or authority to whom orders, directions and writs are issued is within the territories in relation to which the High Court exercises jurisdiction and I am not prepared to read in Article 226 the conditions mentioned in Section 45 of the Specific Relief Act, 1877, or the charters establishing the Supreme Courts at Madras and Calcutta. 18. Mr. Chaudhri then argues that having regard to the provisions of Section 52A of the Act no writ is available in law in these proceedings. In argument it is said that the order complained of is a ministerial or administrative order which does not involve the exercise of any judicial or 'quasi'-judicial function and to a purely administrative order no writ of 'certiorari' lies. 19. Mr. P.R. Das on the other hand maintains that the provisions of the Act dealing with the management of the business of an insurer by an Administrator take away or abridge the rights conferred by Articles 19 and 31 of the Constitution of India and are void. 20. Before discussing the issues involved, it is necessary to examine the provisions of the impugned legislation to see in what manner that legislation abridges the rights conferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the original sum insured with the addition of bonuses that attach to the policies or for reduced amounts); (c) the winding up of the insurer; or (d) such other course as he deems advisable. 2. On the filing of the report with the Controller, the Controller may take such action as he thinks fit for promoting the interests of the holders of life insurance policies in general. 3. Any order passed by the Controller under Sub-section (2) shall be binding, on all persons concerned, and shall have effect notwithstanding anything in the memorandum or articles of association of the insurer if a company. (52C) Cancellation of contracts and agreements.- The Administrator may, at any time during the continuance of his appointment with respect to an insurer and after giving an opportunity to the persons concerned to be heard, cancel Or vary (either unconditionally or subject to such conditions as he thinks fit to impose) any contract or agreement (other than a policy) between the insurer and any other person which the Administrator is satisfied is prejudicial to the interests of holders of life insurance policies. (52D) Termination of appointment of Administrator.- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned provisions of the Act. Indeed, entries Nos. 43, 44 and 47 of the Union List set out in the Seventh Schedule to the Constitution of India clearly support the impugned legislation so far as the question of legislative competency is concerned. The question is whether the impugned legislation takes away or abridges the rights conferred by Articles 19 and 31 of the Constitution of India. The relevant clauses of Articles 19 and 31 are: 19(1) All citizens shall have the right: (f) to acquire, hold and dispose of property; and (g) to practise any profession, or to carry on any occupation, trade or business. * * * 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 owning, 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the impugned legislation is to make the Administrator, the sole arbiter of the destinies of the insurer to the total exclusion of managers, directors and the shareholders. The Administrator is put in full control and management of the Company and the Board of Directors and other persons in charge become 'functus officio'. The Administrator is not governed or controlled by the Articles of Association of the insurer, if a Company. He can revise or cancel contracts entered into by the insurer without providing for compensation. On the appointment of the Administrator, the share-holders have absolutely no control over the conduct of the insurer and the Administrator is even entitled to apply for the winding-up of the insurer without consulting the share-holders. That being the position under the impugned legislation, it is said that the impugned legislation abridges the rights conferred by Articles 19 and 31, Constitution, of India. 30. In order to bring the case within Article 31, Constitution of India, the following conditions must be satisfied : (a) the impugned legislation must authorise the taking possession of or the acquisition of property; (b) the propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 31(2), Constitution of India. 35. Now, the term property possesses a singular variety of different applications having different degrees of generality. In its widest sense property includes all a person's legal rights, of whatever description. A man's property is all that is his in law. This usage, however, is obsolete at the present day, though it is common enough in the older books. In a second or narrower sense, property includes not all a person's rights, but only his proprietary as opposed to his personal rights. The former constitute his estate or property, while the latter constitute his status or personal condition. In this sense a man's land, chattels , shares, and the debts due to him are his property; but not his life or liberty or reputation . In a third application, the term includes not even all proprietary rights, but only those which are both proprietary and 'in rem'. The law of property is the law of proprietary 'in rem', the law of proprietary rights 'in personam' being distinguished from it as the law of obligations. According to this usage a free-holder or leasehold estate in land, or a patent or copyright ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings for winding-up of the Company which may result in a distribution of the net assets among the share-holders. 39. Under the impugned legislation, the share-holder continues to hold the shares and his legal and beneficial interest in the shares he holds is left intact. In case the Administrator declares dividend, he would be entitled to the same. He can sell or otherwise dispose of the shares at any time at his option. The impugned legislation has affected him in this way that his right of voting at the election of Directors has been kept in abeyance so long as the management by the Administrator continues; and as a result of that, his right to participate in the management of the Company has been abridged to that extent. Notwithstanding all that it cannot be said that the impugned legislation seeks to dispossess the share-holder from the property owned by him. 40. Basing himself on Mr. P.R. Das urges that the impugned legislation seeks to take possession of the property of the Company. In this connection Mr. Das maintains that the term property in Article 31(2) means any of the indicia or attributes of property, while Mr. Chaudhri maintains that the word property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That being so, without noticing herein other authorities which were cited at the hearing, I proceed to apply that test to the cases before us. 46. Applying then the test laid down in AIR (38) 1951 SC 41 to these cases, we have to see whether the Companies have been dispossessed substantially from the rights held by them or the loss is with regard to some minor ingredients of the proprietary right. Undoubtedly, under the impugned legislation the rights of the Companies have been restricted and may not be capable of being exercised to the fullest extent as long as the management of the Administrator continues, but I apprehend, that the restrictions imposed by the impugned legislation do not amount to the taking possession of the property of the Companies. Indeed, the right of management of the business of the insurer, being a right incidental to the ownership of property of the insurer, the right of management cannot by itself be property within Article 31(2). Under Section 52A(5) of the Act, on and after the date of appointment of the Administrator, persons vested with the management of the business of the insurer shall be divested of that management, but notwithstanding all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises for decision is whether a 'corporation' is a 'citizen' within Article 19. 50. Mr. P.R. Das points out that in order to sustain the proposition that a corporation is a citizen within Article 5 of the Constitution, of India, three conditions have to be satisfied: (i) that the corporation is a person; (ii) that the corporation had its domicile in the territory of India at the commencement of the Constitution; and (iii) that the corporation had been ordinarily resident in the territory of India for not less than five years immediately preceding such commencement. 51. Article 367 of the Constitution of India provides that the General Clauses Act, 1897, shall apply for the interpretation of the Constitution unless the context otherwise requires. Section 3(39) of the General Clauses Act, 1897, reads : 'Person' shall include any Company or association or body of individuals, whether incorporated or not. Clearly, corporation is a person within Section 3(39) of the General Clauses Act, 1897. 52. In the case of corporations the rule is that the domicile of a corporation is the country in which it is registered and if it is not required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who have migrated to India from Pakistan and the rights of citizenship of persons of Indian origin residing outside India, have likewise no application to corporations. Article 19(1) (a) to (e) cannot possibly apply to corporations. In Article 39(a) the expression citizen means men and women . 56. For the foregoing reasons, I think that a corporation is not a citizen within Article 19, Constitution of India. That being so, the Companies cannot raise the question that the impugned legislation takes away or abridges the rights conferred by Article 19(1) (f) and (g), Constitution of India. 57. But an insurer may be a natural person and I may be wrong in the opinion expressed in the preceding paragraph. That an insurer may be a natural person is plain from Section 2(9) of the Act. The question that then arises for decision is whether the restrictions imposed by the impugned legislation are saved lay Clauses (5) and (6) of Article 19. The impugned legislation imposes restrictions on the right of management of the business of an insurer for a limited period for the benefit of the general body of policy-holders. Clearly, the restrictions are reasonable and in the interests of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Controller to give opportunity to the Companies to be heard on the charge that the Companies are acting in a manner likely to be prejudicial to the interests of the holders of life insurance policies. Now, the distinction between mandamus and certiorari is that mandamus issues to compel the performance of an unperformed official duty while certiorari reviews a performed judicial or 'quasi'-judicial duty. In other words, the writ of 'certiorari' is intended to bring into the High Court the decision of an inferior Court or Tribunal, in order that the High Court may be satisfied whether the decision is within the jurisdiction of the inferior Court or. Tribunal. 62. In these proceedings the respondents object that the Court has no jurisdiction to issue writs of 'certiorari' and prohibition on the short ground that under Section 52A the Controller does not exercise judicial or 'quasi'-judicial functions. To the issuance of the writ of 'mandamus' the objection raised is that under Section 52A of the Act, the companies have no right to compel the Controller to give them an opportunity of being heard, for there is no such duty imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst part of Section 52A(1) of the Act. In other words this Court has no authority to issue a writ of 'certiorari' to the Controller to bring up. in order to be quashed, the proceedings initiated by him within the first part of Section 52A(1) of the Act. On this point the dictum of Lord Halsbury in 'Mayor of Westminster v. L. N. W. Rly. Co.', (1905) AC 426, may be seen. In that case Lord Halsbury said: Where the Legislature has confided the power to a particular body with a discretion how it is to be used, it is beyond the power Of any Court to contest that discretion. Of course this assumes that the thing done is the thing which the Legislature has authorized. 66. Indeed, in arguing the point Mr. P.R. Das conceded that if the impugned legislation is not void, the initiation of proceedings within the first part of Section 52A(1) is not open to challenge. 67. But it is said that within the second part of Section 52A(1) of the Act, the Controller exercises 'quasi'-judicial functions. The argument raised is that within the second part of Section 52A(1) of the Act, the Controller has to give opportunity to the insurer to be heard on the objection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses the power to make an enquiry under Section 52A(1) of the Act. In my judgment, there is no justification for the issuance of writs of prohibition in these proceedings. 70. Having regard to my conclusion that on the facts and circumstances of these cases a writ of prohibition is not the appropriate remedy, it is not necessary to discuss whether the Controller exercises 'quasi'-judicial' functions within the second part of Section 52A(2) of the Act. The 'sole' question that calls for decision is whether the conditions for the issuance of a writ of 'mandamus' are satisfied. 71. In order to appreciate the objection raised, it is necessary to set out at this stage the grounds for action given in the notices. In the case of Jupiter General Insurance Company, Limited, Bombay, the notice stated: (i) The above-named insurer has misapplied or is mis-applying his funds; (ii) The above-named insurer has invested or is investing his funds in a manner likely to be prejudicial to the interests of holders of life insurance policies; and (iii) The management of the above-named insurer has been changing in a manner detrimental to the interests of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writs of 'mandamus' on the ground that the Controller did not give sufficient time to the Companies to show cause on the point arising under Section 52A(1) of the Act. 76. I now pass on to examine the objection that the Companies should have been informed with certainty and accuracy the exact nature of the charge brought against them. 77. Section 52A(1) of the Act provides that the Controller may, after giving such opportunity to the insurer to be heard as he thinks fit, make a report to the Central Government. Under Section 52A(1) of the Act, if the Controller thinks that the insurer carrying on life Insurance business is acting in a 'manner' likely to be prejudicial to the interests of the holders of life insurance policies, he may call upon the insurer to show cause why an Administrator for the management of the business of that insurer should not be appointed. In the notices it is stated that the Controller objects 'inter alia' to the mode of investments and mis-application of funds. 78. In Civil Miscellaneous (Writ) No. 17 of 1951, ground No. (iii) is definite and precise, while grounds Nos. (i) and (ii) state that the Controller objects to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as failed to give opportunity to the Companies to be heard on the points arising under Section 52A(1) of the Act. Notices given to the Companies indicate the manner carrying on life insurance business which the Controller has reason to believe to be prejudicial to the interests of holders of life insurance policies. In response to the notice the Company concerned may place before the Controller information rebutting the objections as to the 'manner' of carrying on life insurance business and I have no doubt that if at any stage of the proceedings it becomes necessary to examine specific items of misapplication of funds or abuse of investments the Controller will give particulars of such items to the Company concerned before he makes a report thereon to the Central Government. But lest there may be confusion I herein mention that I do not decide in these proceedings that action can be taken under Section 52A(1) of the Act on proof of items of misapplication of funds or abuse of investments. The point has not been canvassed in these proceedings and it is open to argument that Section 52A(1) of the Act deals with the 'manner' of the carrying on of the business as oppos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tunity to the Companies to be heard on the points arising under Section 52A(1) of the Act. 84. On the findings summarised in the preceding paragraph, Civil Miscellaneous (Writs) Nos. 17, 18 and 19 of 1951 fail and are dismissed with costs. S.S. Sodhi, J. 85. There are three applications made by (1) the Jupiter General Insurance Co., Ltd., Bombay, (2) the Empire of India Life Assurance Co., Ltd., Bombay, and (3) the Tropical Insurance Co., Ltd., New Delhi, against Mr. Raja Gopalan, Controller of Insurance, and the Union of India, in which the prayer is that certain orders and directions should be issued to the respondents. These applications came up for a preliminary hearing before our learned brother Mr. Justice J.L. Kapur who on 2-3-1951, passed an 'ad interim' order of prohibition prohibiting Mr. Raja Gopalan to do certain things. The case came up for hearing on 14-3-1951, when on certain undertakings being given by the three petitioners, it was adjourned by consent of counsel to 3-4-1951. 86. We have heard Mr. Chaudhari for the respondents in the Jupiter General Insurance Company's case. His arguments have been adopted by Mr. Inder Dev Dua who has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceed further and make a report to the Government of India as stated in his notice. The petitioners beyond making their written sub-mission through counsel on 26-2-1951, did not do anything or partake further in the proceedings on that day. They put in the present applications three days later in this Court on the 1st of March and, as already stated, an 'ad interim' order of prohibition was obtained from Mr. Jusitice Kapur on 2-3-1951. 88. In these applications preliminary objections have been taken both by the petitioners and by the respondents. On behalf of the Controller and the Union it is stated as a preliminary objection that this Court has no jurisdiction to proceed with the hearing of these applications as whatever the Controller was going to do was to be done in Bombay, which is outside the limits of this Court's territorial jurisdiction. The petitioners have alleged that Section 52A is 'ultra vires' of the Constitution and that the Controller cannot possibly take any action relying on that section. The other preliminary objections are that even if this section be 'intra vires', the proceedings before the Controller under that section are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment of Madras in November 1927, directed the Special Revenue Officer of the district to settle a fair and equitable rent in respect of lands in the said villages. After memoranda had been submitted by the contesting parties and after elaborate investigation on the spot, the Special Revenue Officer in 1925 made an order doubling the previous rents. On the ryots' appeal to the Board of Revenue, a member of that Board sitting alone reversed this decision and allowed an increase of rent of only 12 1/2 per cent. The Zamindar appealed by way of revision to the Collective Board of Revenue from the decision of the single member. The Collective Board on 9-10-1936. increased the rent to 37 1/2 per cent. On 9-2-1937, the appellants petitioned the Madras High Court for a writ of 'certiorari' to quash the order of the Collective Board of Revenue. On 5-11-1937 the Madras High Court dismissed the application for the writ. Before their Lordships of the Privy Council the question raised was whether the Madras High Court had any jurisdiction to issue the writ, the contention of the appellants being that it had. Their Lordships held that the High Court of Madras had no power to issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Privy Council have given repeated rulings on this subject. One of them was given in the case of an application for a writ of quo warranto to be issued to a person resident within the original jurisdiction of the Calcutta High Court regarding the usurpation of an office by him without that jurisdiction. That is 'Nomani's case' reported in ILR (1948) Cal 230 : 74 IA 120'. Another is a case under Section 45 of the Special Relief Act regarding a 'mandamus' to be issued to the Textile Commissioner whose office was at Madras within the limits of the original jurisdiction of the Madras High Court regarding an act with reference to which the relief asked for was to take place beyond those limits. That is the case of Meenakshi Mills reported in:'76 Ind App 191 In both these cases their Lordships held as they did in the Parlakimedi case that the High Courts had no jurisdiction. It is, however, urged that whatever may have been the state of law before the promulgation of the Constitution the law which has now to be enforced is what is laid down by the framers of the Constitution. Under Article 226 of the Constitution the only necessary condition for the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to do so, may appoint an Administrator to manage the affairs of the insurer under the direction and control of the Controller. (3) The Administrator shall receive such remuneration as the Central Government may direct and the Central Government) may at any time cancel the appointment and appoint some other person as Administrator. (4) The management of the business of the insurer shall as on and after the date of appointment of the Administrator vest in such Administrator, but except with the leave of the Controller the Administrator shall not issue any further policies. (5) As on and after the date of appointment of the Administrator any person vested with any such management immediately prior to that date shall be divested of that management. (6) The Controller may issue such directions to the Administrator as to his powers and duties as he deems desirable in the circumstances of the case, and the Administrator may apply to the Controller at any time for instructions as to the manner in which he shall conduct the management of the business of the insurer or in relation to any matter arising in the course of such management. 95. Section 52A was added alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Article 31. Sub-clause (f) and (g) of Article 19(1) read as follows: All citizens shall have the right...... (f) to acquire, hold and dispose of property; and (g) to practise any profession, or to carry on any occupation, trade or business. Sub-clause (f) and (g) are, however, subject to Clauses (5) and (6) of this Article. 102. Clause (5) of this Article reads as follows : (5) Nothing in Sub-clauses (d), (e) and (f) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing reasonable restrictions on the exercise of any of the rights conferred by the said sub-clause either in the interests of the general public or for the protection of the interests of any Scheduled Tribe. 103. Clause (6) of this Article reads as follows : (6) Nothing in Sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes or prevents the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 107. It is not urged that this clause applies. What is urged is that it is the second clause which makes Section 52A 'ultra vires'. That clause reads as follows: (2) No property, movable or immovable, including any interest in, or in any Company owning, any commercial or industrial undertaking shall be taken possession of or acquired for public purposes under any law authorizing 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 compensation is to be determined and given. 108. It was urged that under Section 52A the Central Government takes possession of the property of the Company and no compensation is paid to the Company for Government taking possession, It was not argued that the Government was acquiring this property but it was argued that possession of this property was taken and that Clause (2) of Article 31 hits Government's taking possession as much as Government's acquisition of the property unless compensation is paid or the terms of the claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a trustee. When it appears to the Government that the purpose for the appointment of the Administrator has been fulfilled or that for any reason it is undesirable that the order of appointment should remain in force the Central Government cancels the order of the appointment of the Administrator. On this cancellation what happens? Section 52D provides that the Administration shall be divested of the management of the insurance business and, unless otherwise directed by the Central Government, the management again vests in the person in whom it was vested immediately prior to the date of appointment of the Administrator. The Insurance Act is passed under the provisions in entries Nos. 43, 44 and 47 of List 1 of the Seventh Schedule to the Constitution. Under Article 246 of the Constitution, Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I. Entry 43 reads as follows: Incorporation, regulation and winding up of trading corporations, including banking, insurance and financial corporations but not including co-operative societies. In my opinion the taking over of the management of the life insurance business of an Insurance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall affect the provisions of any law which the State may hereafter make for the prevention of danger to property. This clause is not confined to cases, where, for instance, a building may have to be sacrificed in order to prevent a conflagration destroying a row of buildings. The clause is couched in general terms. Under Section 52A of the Insurance Act, steps are taken to prevent the insurer from acting in a manner prejudicial to the interests of holders of life insurance policies, that is to say to prevent danger to the property of the policy-holders. 112. Entry 43 of List I of the Seventh Schedule to the Constitution allows the Union Parliament to make laws regulating trading or insurance corporations. With regard to this entry, Mr. Justice Das in the ruling cited already observed at p. 62, column 2 : There was, therefore, nothing to prevent Parliament from amending the Companies Act or from passing a new law regulating the management of the Company by providing that the Directors, instead of being elected by the share-holders, should be appointed by Government. In my opinion, the objection that Section 52A of the Insurance Act is 'ultra vires' of the Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e general and pervading than any other. It embraces all the operations of society and government; all the constitutional provisions presuppose its existence, and none of them preclude its legitimate exercise. It is impliedly reserved in every public grant. Chartered rights and privileges are therefore like other property, held in subordination to the authority of the government, which may be so exercised as to preclude the use of doing of the very thing which the company was constituted or authorized to manufacture or perform. The legislature cannot be presumed to have intended to tie its hands in this regard in the absence of express words; but if such a purpose were declared, it would fail, as an attempt to part with an attribute of sovereignty which is essential to the welfare of the community. 115. Willis on Constitutional Law at p. 727 quotes from Cooley's Constitutional Limitations, page 1223, as follows : The police of a state, in a comprehensive sense, embraces its whole system of internal regulation, by which the state seeks not only to preserve the public order and to prevent offences against the state, but also to establish for the intercourse of citizens w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commonwealth v. Alger1851 7 Cust 53 : 61 Mass 53the case already mentioned, and other cases at page 225, and states : Eminent domain differs from the police power in that the police power is not a taking of any rights, whether of property or a person, from people, but a limitation on the exercise of such rights by people, although the police power may also result in making people lose their property. 118. Willoughby at page 1781 quotes the case of 'Mugler v. State of Kansas (1887) 123 US 623. In that case the Court said : As already stated the present case must be governed by principles that do not involve the power of eminent domain, in the exercise of which property may not be taken for public use without compensation. A prohibition simply upon the use of property of purposes that are declared, by valid legislation to be injurious to the health, morals or safety of the community cannot, in any just sense be deemed a taking or an appropriation of property for the public benefit. Such legislation does not disturb the owner in the control or use of his property for lawful purposes, nor restrict his right to dispose of it, but is only a declaration by the State tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty and that the Controller owes a duty to the insurer and his proceedings must, therefore, be judicial. On behalf of the Controller it is urged that he is merely a reporting officer of Government, that he himself decides nothing, that it is his report which is put up before the Central Government and the authority which issues the orders against the Company is the Central Government, and not the Controller, that functions of the Controller are purely ministerial and executive and no judicial element enters into his proceedings. In these circumstances it is necessary to consider what exactly are the functions of the Controller. I may say at the outset that the mere fact that a person does not pass the final order does not necessarily mean that his functions are purely ministerial or executive. It has been held in a number of cases that the final authority may be vested in somebody else but the person conducting an inquiry which might result in the final order may still be performing his duties judicially. See for example, the case of 'The Kink v. Electricity Commissioners (1924) 1 KB 171, where it is stated at page 207: I know of no authority which compels me to hold th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... livered - the judgment of their Lordships of the Privy Council, said: Their Lordships therefore treat the words in regulation 62, 'where the Controller has reasonable grounds to believe that any dealer is unfit to be allowed to continue as a dealer' as imposing a condition that there must in fact exist such reasonable grounds, known to the Controller, before he can validly exercise the power of cancellation. But it does not seem to follow necessarily from this that the Controller must be acting judicially in exercising the power. Can one not act reasonably without acting judicially? It is not difficult to think of circumstances in which the Controller might, in any ordinary sense of the words, have reasonable grounds of belief without having ever confronted the license holder with the information which is the source of his belief. It is a long step in the argument to say that because a man is enjoined that he must not take action unless he has reasonable ground for believing something he can only arrive at that belief by a course of conduct analogous to the judicial process. And yet, unless that proposition is valid, there is really no ground for holding that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not enough that it should have legal authority to determine questions affecting the rights of subjects; there must be super-added to that characteristic the further characteristic that the body has the duty to act judicially. Lord Redcliffe then goes on to say : It is that characteristic that the Controller lacks in acting under regulation 62. In truth, when he cancels a license he is not determining a question: he is taking executive action to withdraw a privilege because he believes, and has reasonable grounds to believe, that the holder is unfit to retain it. But, that apart, no procedure is laid down by the regulation for securing that the license holder is to have notice of the Controller's intention to revoke the license, or that there must be any inquiry, public or private, before the Controller acts. The license holder has no right to appeal to the Controller or from the Controller. In brief, the power conferred on the Controller by regulation 62 stands by itself on the bare words of the regulation and, if the mere requirement that the Controller must have reasonable grounds of belief is insufficient to oblige him to act judicially, there is nothing else in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such proclaimed district be charged with the cost of such additional constabulary or police. A District Commissioner within whose District any portion of a proclaimed District is shall, after inquiry, if necessary, assess the proportion in which such cost is to be paid by the said inhabitants according to his judgment of their respective means............... 123. Regarding this section, their Lordships said at pages 348 and 349 of the report: Apart from the difficulty of ascertaining exactly what persons were 'inhabiting' the proclaimed District at the time when the additional police were stationed there, and of assessing persons who might have left the District shortly afterwards, it is difficult to see how the District Commissioner could conduct a judicial inquiry into the respective means of the inhabitants without having any power of compelling parties to attend and disclose their means. Moreover, the words of Section 9, and in particular the phrases 'after inquiry, if necessary' and 'according to his judgment of their respective means' are, in their Lordships' opinion, quite inconsistent with the view that the District Commissioner was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son was acting judicially. The main case that was relied on was the case which is referred to by Lord Radcliffe in the case already cited, the case of 'Rex v. Electricity Commissioners', (1924) 1 KB 171and to the observations of Atkin L. J. therein. It would serve no useful purpose to examine those various cases as each case had to be decided on what had happened in that case and what was the provision of law that had to be construed. In this connection I would refer to Advani's case reported as 'The Province of Bombay v. Khushaldas',. Kama, C. J. noticed the remarks of May, C. J., in' 'Regina (John M' Evoy) v. Dublin Corporation 1878) 2 LR. 371 at p. 376, of Atkin L. J. in 'The King v. The Electricity Commissioners1924) 1 KB 171 and of Scrutton and Slesser L. JJ. in 'The King v. London County Council', (1931) 2 KB 215, and said at pages 225 and 226 of the report in Advanis' case as follows: Learned counsel for the respondent referred to several cases but in none of them the dicta of Atkin, L. J. or the four conditions analysed by Slesser L. J. have been suggested, much less stated, to be not the correct tests. The respondent' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to be read along with the facts thereof and the emphasis in the cases on these different aspects is not necessarily the complete or exhaustive statements of the requirements to make a decision 'quasi'-judicial' or otherwise. It seems to me that the true position is that when the law under which the authority is making a decision itself requires a judicial approach, the decision will be 'quasi'-judicial'. Prescribed forms of procedure are not necessary to make an inquiry judicial provided in coming to the decision the well-recognised principles of approach are required to be followed. 126. The result of the cases has been well given by Lord Redcliffe in the quotation already cited by me when he said that the Courts have been readier to issue the writ of 'certiorari' to established bodies whose function is primarily judicial, even in respect of acts that approximate to what is purely administrative, than to ministers or officials whose function is primarily administrative even in respect of acts that have some analogy to the judicial. In the present case, in my opinion, the Controller when exercising the functions under Section 52A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioning Companies want him to do. In this connection we must examine what are the facts, what notices the Controller has issued and what attitude the Companies have adopted regarding them and him. The issue of a writ is discretionary. It will be issued only if the facts clearly justify it. It must be consonant to right and justice to issue it in the circumstances. 129. In the case of the Jupiter Insurance Company, Ltd., Bombay, the notice which the Controller of Insurance gave to the Company on the 17th February, 1951, in which he asked them to appear before him in New Delhi on the 26th of February, 1951, stated: The grounds for the proposed action are amongst others, as follows: (i) The above-named insurer has misapplied or is misapplying his funds; (ii) The above-named insurer has invested or is investing his funds in a manner likely to be prejudicial to the interests of the holders of life insurance policies; and (iii) The management of the above-named insurer has been changing in a manner detrimental to the interests of the policy-holders. 130. He allowed the insurer to be represented at the hearing by an agent, Director or other officer duly aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fear, a kind of interference with the course of justice on a matter which is 'sub judice'. 132. In paras. 9 and 10 of the representation they stated that the Controller had the power of an autocrat but expected his autocracy to be benevolent in fact. They also went into questions of law in that representation. In the eleventh (the last) para, of that representation they requested the Controller not to proceed with the inquiry on that date but give them sufficient time and sufficient details by formulating his accusations in a clear and specific manner. In case the Controller failed to do so, they stated that they would ask for a permanent injunction from a competent Court and they requested the inquiry to be adjourned by at least fifteen days. 133. An affidavit dated the 14th March 1951 has been put in by the Controller before this Court in which he stated in para. 7: With reference to paras. 9 and 10 of the said petition, I say that at all material times I had and I still have reason to believe that the petitioner was and is acting in a manner likely to be prejudicial to the interests of holders of life insurance policies. I gave the petitioner such opportunit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 3rd April, it was pointed out to this Court that the Jupiter General Insurance Company had not carried out its undertakings and had committed contempt of Court and therefore could not be heard. We, however, allowed arguments to proceed as they were common to the cases of the other two Companies, giving the Jupiter General Insurance Company time to reply to the allegation regarding contempt of Court. Arguments were concluded on the 6th of April, 1951 and the case was adjourned to the 10th of April, 1951. On the 10th of April, 1951, counter affidavits were filed by Mr. Shankar Lal, Managing Director of the Company, and Mr. P.N. Kaul, another Director, and it was alleged that the Company had complied with the undertakings so far as it lay in its power. It was, however, suggested that day that Auditors of the Company should examine the position and send a certificate to this Court showing whether the orders of this Court had been complied with or not and the hearing was adjourned to the 20th of April, 1951 for the production of the certificate of the Auditors. There being no opposition whatsoever to this suggestion it was adopted by this Court. On the 20th April, 1951 the Auditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Jupiter General Insurance Company on that day, In this case also the Tropical Insurance Company has no grievance. 139. In the case of the Empire of India Life Assurance Co., Ltd., Bombay, the grounds given by the Controller for his action were: (i) The above-named insurer misapplied or is misapplying his funds; (ii) The above-named insurer has invested or is investing his funds in a manner likely to be prejudicial to the interests of the holders of life insurance policies; (iii) The life insurance fund of the above-named insurer has been or is being wrongfully diminished; (iv) The expenses of management of the above-named insurer have been or are excessive; (v) The above-named insurer has failed to elect policy-holders' Directors; and (vi) The management of the above-named insurer has been changing in a manner detrimental to the interests of the policy-holders. 140. The Company appeared before the Controller on the 26th February, 1951, and made a written representation in which they stated that the grounds were extremely vague and that particulars should be supplied to them and wanted the date of hearing to be changed and reasonable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board of Directors had been called by some Director for the 8th of March, 1951. It appears from counter-affidavits that a further meeting of the Directors in which four Directors were present was held on the 12th of March, 1951. In that meeting it was resolved that all the resolutions passed in the Board meeting held on 3rd March be rescinded. It was also resolved that the Court proceedings in this Court be pursued, and Mr. V.V. Subhedar be nominated to pursue and represent the Company in the present proceedings. In that meeting it was also resolved to remove Mr. Damodar Swarup Seth from the Chairmanship of the Board of Directors, and from the managing Directorship of the Company and all powers hitherto given to him were withdrawn. On the 27th March another meeting of the Board of Directors was held in which the following resolutions were passed: Resolved that the action of Mr. V.V. Subhedar in filing a suit in the High Court, Simla, against the Controller of Insurance is approved and ratified. Further resolved that Dewan Bahadur N.V. Sayana is authorised to pursue the High Court proceedings at Simla along with Mr. V.V. Subhedar. Further resolved that in view of the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y may have been able to satisfy the Controller that there was no cause for any apprehension on his part. It is a grave thing for a Managing Director of a Company to state that the funds of the Company are being taken away and the confidence of the public in the management of the Company has been shaken. In his letter of 21st February 1951 to Mr. V.V. Subhedar, Mr. Damodar Swarup Seth told him that he had informed the Delhi police about the Secretary of the Company Mr. Bhagwan Swarup transferring money from Bombay to the Punjab National Bank, Delhi, and withdrawing a sum of Rupees seven lacs therefrom. It may no doubt be urged that he is being won over by the Controller, but that does not in any way change the position so far as the Controller's apprehensions and enquiries are concerned. It does not change the legal aspect of the matter. As I said already, the Controller is a Vigilance Officer of the Government and has been given powers by the statute to conduct his inquiries in such manner as he thinks fit. It would be hardly possible for this Court to tell him how he should proceed in the details of his inquiry. 145. The grounds stated by the Controller in the case of the E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The functions of the judiciary and the police are complementary not overlapping and the combination of individual liberty with a due observance of law and order is only to be obtained by leaving each to exercise its own functions always of course subject to the right of the Court to intervene in an appropriate case when moved under Section 491 of the Criminal P. C. to give directions in the nature of 'habeas corpus'. 147. In my opinion no ground has been made out by any of the three Companies for Interference by this Court by a mandate or order under Article 226 of the Constitution with the proceedings of the Controller at this stage. In the circumstances disclosed here, it would not be consonant to right and justice to do so. It is impossible to ask him to withdraw his notice. It is impossible to ask him not to make his report. It cannot be anticipated what his report would be or whether he would make a recommendation that an Administrator be appointed. It is impossible to ask the Central Government not to consider that report or to ask it not to make an order on that report as no report has yet been made. Whatever may be said regarding the case against the Controlle ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
