Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1961 Supreme(SC) 286

SUPREME COURT OF INDIA
21st August, 1961.
K.N. WANCHOO, K.C. DAS GUPTA, J.C. SHAH AND RAGHUBAR DAYAL, JJ.
Ambalal M. Shah and another, Appellants
Versus
Hathisingh Manufacturing Co. Ltd. and another, Respondents.
Civil Appeal No. 285 of 1961.
Advocates appeared
Mr. H. N. Sanyal, Additional Solicitor General of India (M/s. R. H. Dhebar and T. M. Sea, Advocates, with him), for Appellants; Mr. I. M. Nanavati, Advocate and M/s. S. N. Andley, Rameshwar Nath and P. L. Vohra, Advocates of M/s. Rajinder Narain and Co., for Respondents.

Advocates:
H.N.SANYAL, I.M.NANAVATI, P.L.VOHRA, R.H.Dhebar, RAJINDAR NARAIN, RAMESHWAR NATH ROY, S.N.ANDLEY, T.M.SEN

An investigation under S. 15 of the Industries (Development and Regulation) Act, 1951, can be initiated based on any of the opinions mentioned in S. 15(a) or S. 15(b), and a full and complete investigation would necessarily include an inquiry into the quality of management.

Headnote:
INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 - S. 18A(1)(B) - CONSTRUCTION - INVESTIGATION UNDER S. 15 - SCOPE - OPINION OF CENTRAL GOVERNMENT - NECESSITY.
Fact of the Case:

The Central Government, acting under S. 15 of the Industries (Development and Regulation) Act, 1951, appointed a committee to investigate the circumstances of a fall in production in the Hathisingh Manufacturing Company Ltd. The committee submitted a report, and the Central Government, being of the opinion that the undertaking was being managed in a manner highly detrimental to public interest, authorized the takeover of the management under S. 18A(1)(b) of the Act. The company and its proprietor challenged the takeover order in the Gujarat High Court, arguing that an investigation under S. 15 could only be initiated based on the opinion that the undertaking was being managed in a manner highly detrimental to public interest, and that no such investigation had been conducted in this case.
Finding of the Court:

The Supreme Court held that the plain words of S. 18A(1)(b), "in respect of which an investigation has been made under S. 15," cannot be cut down by the restricting phrase "based on an opinion that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest." The court found that the investigation under S. 15 had in fact been directed towards the question of management, and that the Central Government had sufficient material to form the opinion that the undertaking was being managed in a manner highly detrimental to public interest.
Issues: 1. Whether an investigation under S. 15 of the Industries (Development and Regulation) Act, 1951, could only be initiated based on the opinion that the industrial undertaking was being managed in a manner highly detrimental to public interest. 2. Whether an investigation under S. 15 had in fact been directed towards the question of management in the present case.
Ratio Decidendi: 1. The court interpreted the words "an investigation has been made under Section 15" in S. 18A(1)(b) of the Act to mean any investigation made under S. 15, irrespective of the opinion on which it was initiated. The court reasoned that the purpose of the legislation was to enable the Central Government to take suitable action to remedy undesirable states of affairs in industrial undertakings, and that a full and complete investigation would necessarily include an inquiry into the quality of management. 2. The court found that the questionnaire used by the investigating committee included questions which unmistakably showed that the quality of management was being inquired into. The court also relied on the affidavit of a member of the investigating committee, who stated that the committee had investigated the question of management and found it to be detrimental to the industry concerned and to public interest.
Final Decision: The Supreme Court allowed the appeal, set aside the order of the High Court directing the issue of the writ, and ordered that the application under Art. 226 of the Constitution be dismissed.

Judgment

DAS GUPTA, J. : This appeal by special leave raises a question of the correct interpretation of some words in S. 18A (1) (b) of the Industries (Development and Regulation) Act, 1951. The Central Government made an order under S. 15 of that Act appointing a committee of three persons for the purpose of making full and complete investigation into the circumstances of the case as it was of opinion that there had been or was likely to be a substantial fall in the volume of production in respect of cotton textile manufactured in the industrial undertaking known as Hathisingh Manufacturing Company Ltd., Ahmedabad, for which having regard to the economic conditions prevailing there was no justification. After the committee made its report the Central Government being of opinion thereupon that this industrial undertaking was being managed in a manner highly detrimental to public interest made an order under S. 18A of the Act authorising Ambalal Shah (the first appellant before us) to take over the management of the whole of the said undertaking.

2. Against this order the industrial undertaking and its proprietor-who are the two respondents before us-filed a petition in the Gujarat High Court under Art. 226 of the Constitution praying for issue of writs directing the authorised controller and the Union of India not to take over the management on the basis of the order under Section 18A. The main ground on which the application was based was that on a proper construction of S. 18A (1) (b) the Central Government has the right to make an order threreunder only where the investigation made under S. 15 was initiated on the basis of the opinion as mentioned in S. 15(b)-that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest. It was also urged that in fact the committee appointed to investigate had not directed its investigation into the question whether the industrial undertaking was being managed in the manner mentioned above. The other grounds mentioned in the petition which were however abandoned at the time of the hearing included one that the alleged opinion formed by the Government as mentioned in the order under S. 18A was in the absence of any material for the same in the report of the investigating committee and therefore was arbitrary, capricious and mala fide.

3. On behalf of the Government and the authorised controller it was urged that the question which one of the five opinions mentioned in S. 15 formed the basis of the investigation under that section was wholly immaterial. The allegation that the investigating committee had not directed its investigation into the question whether the undertaking was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest was also denied.

4. The High Court however came to the conclusion that on a correct construction of S. 18A (1) (b) it was necessary before any order could be made thereunder that the investigation should have been initiated on the basis of the opinion mentioned in S. 15(b) of the Act. It a so accepted the petitioners contenion that no investigation had in fact been held into the question, whether the undertaking was being managed in a manner highly detrimental to public interest. Accordingly it made an order "setting aside the order of the Central Government dated 28th July, 1960, and directing the respondents not to interfere with or take over the management of the undertaking of the first petitioner, namely "Hathising Mills" by virtue of or in pursuance of the said order. It is against this decision that the present appeal is directed.

5. The principal question in appeal is whether the High Court is right in its view as regards the construction of Section 18A. The relevant portion of S. 18A runs thus :

"If the Central Government is of opinion that-

(a) ...........................

(b) an industrial undertaking in, respect of which an investigatio

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