Dwarkadas Shrinivas vs The Sholapur Spg. & Wvg. Co. Ltd. and Ors.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1950 Supreme(Bom) 81

IN THE HIGH COURT OF BOMBAY
Chagla, C.J. and Gajendragadkar P.B. , J.
Appellants: Dwarkadas Shrinivas
Vs.
Respondent: The Sholapur Spg. Wvg. Co. Ltd. and Ors.
O.C.J. Appeal No. 48 of 1950
Decided On: 27.08.1950
Counsels:
For Appellant/Petitioner/Plaintiff: Noshirwan P. Engineer and M.N. Javeri, Advs.
For Respondents/Defendant: M.L. Maneksha and C.K. Daphtary, Adv. General (for Nos. 1 to 8), M.C. Setalvad and G.N. Joshi, Advs. (for No. 9)

Headnote:A.Compensation - property taken away - Article 21, 31 (2) of the constitution - Ordinance - true nature of the ordinance - The Ordinance substantially interferes with the control management of the Sholapur Mills - it brings about the termination of the office of the old directors provides for the appointment of new ones, it terminates the managing agency contract of the managing agents, it places restrictions upon the free exercise of the right of vote of the share-holders - Question of compensation for transfer of property from private to government - rights of share holder have been regulated - reasonable restrictions - not violative of fundamental rights of directors or share holders - cannot be invalidated for want of compesation - Therefore, although it may seem that the powers are drastic, it is clear that these powers of depriving the subject of his property without compensating him would only arise provided the Legislature is satisfied that in public interest the property of a subject has to be destroyed or his title would have to be extinguished. ( para 9 and 10)
       B.validity of ordinance - right to property - Article 19, (1) (g), 21, 31 (2), Ordinance - contention: property taken away, compensation not provided hence ordinance is violative of fundamental rights - right to property of share holder, directors and employee considered in respect of the company - meaning of "property" - The right of dominion, the right of possession, the right of control, would all be included in the expression "property"-
       The Ordinance substantially interferes with the control management of the Sholapur Mills - rights of share holders and directos have been regulated - property not taken away - the Ordinance enacted by the Governor General was valid and the power given to the directors under Section. 4 (d) of the Ordinance to make a call was legal, intra vires valid ( para 10 and 13)
       C.Acquire - requisitioning - taking possession of - property - meaning - article 31 (2) of the Constitution - the expression "taking possession of" is not synonymous with "requisitioning", but has a wider connotation than the former expression. But even so, in our opinion, when possession is taken as contemplated by Article 31 (2), the person taking possession of the property must take possession of the whole bundle of rights that goes to constitute "property." The distinction between "acquisition" "possession" ia that whereas in the case of the former there is a transfer of ownership a transfer of title in the latter case there is no transfer of owner-ship or title. ( para 7)
       D.Right to property - Public purpose - article 31(2) of the Constitution - taking possession of Mills - If the purpose of acquisition or taking possession of is a public purpose, if by reason of that acquisition or taking possession of the public as a whole or a section of the public is going to benefit, then in our opinion the acquisition or taking possession of would be an acquisition or taking possession of for public purposes - In the production of essential commodities the public as a whole would benefit, in the doing away with unemployment a large important section of the public, viz. the labouring class, would also benefit - hence Ordinance is for public purposes as contemplated by Article 31 (2). ( para 12)
       E. Right to property - It is not merely corporeal or tangible property that is necessarily included in the expression "property" in the Constitution. ( para 11)

Judgment

Cases Referred:

Fram Nusserwanji Balsara v. State of Bombay, 52 Bom. L.R. 799, A.I.R. (38) 1951 Bom. 210, 52 Cr. L.J. 80; A.K. Gopalan v. The State of Madras, 1950 S.C.R. 88, A.I.R. (37) 1950 S.C. 27, 51 Cr. L.J. 1383; Tain Bug Taim v. Collector of Bombay, 47 Bom. L.R. 1010, A.I.R. (33) 1946 Bom. 216, 47 Cr. L.J. 594; Commissioner of Inc.-tax v. Sir Purshottamdas, 48 Bom. L.R. 141, A.I.R (33) 1946 Bom. 401; Bhundal Panda v. Pandol Pos Patil, 12 Bom. 221

Chagla C.J.

1. The Sholapur Spinning Weaving Co., Ltd., was incorporated with an authorised capital of RS. 48,00,000 divided into 1590 fully paid up ordinary shares of Rs. 1,000 each and 20 fully paid up ordinary shares of Rs, 500 each 32,000 partly paid up redeemable cumulative first preference shares of Rs. 100 each. Therefore, the present paid up capital of the company is Rs. 32,00,000, Rs. 16,00,000 being fully paid up ordinary shares Rs. 16,00,000 being partly paid up preference shares, Rs. 50 being unpaid on each of the 32,000 cumulative preference shares. On 27-7-1949, the directors of the mills gave a notice to the workers that the mills would be closed, pursuant to this notice the mills were in fact closed on 27-8 1949. On 5-10-1949, Govt. appointed a Controller under the Essential Supplies Emergency Powers Act, 1946, on 9 11-1949, the Controller asked the directors of the company to make a call of RS. 50 per share on the preference share holders, the amount remaining unpaid on each of the preference shares. The directors refused to comply with this requisition. Thereupon the Govt. of India on 9-1-1950, promulgated an Ordinance under Section 42, Govt. of India Act. This Ordinance, the particular provisions of which we shall presently consider, enabled the Central Govt. to take over the control of the mills to appoint their own directors. The Ordinance also empowered the Central Govt. to delegate all its powers to the Provincial Govt. under that power of delegation on 9-1-1950, the Central Govt. delegated all its powers to the Govt. of Bombay, under these delegated powers the Govt. of Bombay appointed certain directors who are the defts. to the suit filed by the pltf. from which this appeal arises. These newly appointed directors passed a resolution on 7-2-1950; making a call of RS. 50 on each of the preference shares payable at the times stated in the resolution, pursuant to this resolution a notice waa addressed on 22-2-1950, to the pltf; to pay the call on or before 3-4-1950. The pltf. thereupon filed this suit in a representative capacity on behalf of himself other preference share-holders challenging the validity of the Ordinance challenging the right of the directors to make the call. The suit was tried by Bhagwati J. who held that the Ordinance was valid, that the directors had the right to make the call, that the pltf. was not entitled to any of the reliefs claimed by him in the suit. He thereupon dismissed the suit. From that order of dismissal the pltf has come in appeal before us.

2. It ie open to the pltf. to challenge any provision of the Ordinance bo the extent that it affects his rights, or even challenge the Ordinance as a whole if he can satisfy us that the Ordinance is void thereby no rights "are conferred upon the directors to make any call upon him. It is necessary, therefore, to look at the provisions of the impugned legislation. The preamble of the Ordinance states that "on account of mismanagement neglect a situation has arisen in the affair of the Sholapur Mills which has prejudicially affected the production of an essential commodity has caused serious unemployment amongst a certain section of the community," and it further goes on to state that "whereas an emergency has arisen which renders it necessary to make special provision for the proper management and administration of the company, the Governor-General is pleased to promulgate an Ordinance under Section 42, Govt. of India Act." Section 2 of the Ordinanc

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