The Indore Malwa United Mills Ltd. & Ors. Petitioners v. Union Of India And Others S

Rajinder Sachar, J.:— The Judgment will also dispose of C.W 463/72.

This petition challenges the constitutional validity of the Sick Textile Undertaking (taking over of Management) Act, 1972 (hereinafter called the impugned Act) and the impugned Order, under Section 18A of the Industrial (Development and Regulation) Act, 1951 (hereinafter called the Act).

Petitioner No. 1 is a company registered under the Companies Act and the other petitioners are the directors and the share-holders of the first petitioner. Respondent No. 1 is the Union of India through Secretary, Ministry of Foreign Trade and respondent No. 2 is a National Textile Corporation Ltd. a Government of India undertaking and respondent No. 3 is Madhya Pradesh State Textile Corporation Limited, an undertaking controlled by and belonging to the State of Madhya Pradesh. The first petitioner was incorporated in 1907 and owns and runs an industrial undertaking at Indore and manufactures therein textile cloth.

By an order dated 27th May, 1971 the Minister of Industrial Development, in International Trade (Department of Industrial Development), New Delhi appointed a committee under section 15 of the industries (development & Regulation) Act, 1951 (65 of 1951) for making full and complete investigation into the affairs of undertaking. It appears that the committee by its report dated 29-3-1972 recommended to the Government to arrange for taking over the mill undertaking under the Act of 1951.

The petitioners on coming to know of this filed the writ petition (CW 463/72) which was admitted in this court on 19-5-1972, in which the relief sought was to restrain the respondents from acting in pursuance of the report of the committee of investigation made on 29-3-1972. This court though moved did not give any interim stay against the Central Government. Ultimately, the Central Government passed an order dated 31-10-1972 under Section 18 (1) (b) of the Act of 1951 taking over the said undertaking of the said petitioners upon the terms and conditions and in the manner mentioned therein. Petitioners accordingly amended the writ petition and have questioned the validity and legality of the impugned order dated 31-10-1972.

On 31-10-1972 the President of India promulgated an Ordinance captioned Sick Textile Undertakings (taking over of Management) Ordinance of 1972, (hereinafter called the impugned Ordinance) which came into force at once. By virtue of and under the provision of section 4 (i) of the said Ordinance from the appointed day the management of the Sick Textile Undertaking specified in the first schedule to the said ordinance was vested in the Central Government. In the first schedule of the said ordinance at item No. 15 thereof the first petitioners' said undertaking viz. Indore Malwa United Mills, Indore was listed as sick textile undertaking. As a result of the said listing and or the provisions of the impugned ordinance relating thereto the management of the said undertaking was taken over and vested in the Central Government. This led the petitioner to file another C.W namely 1051/72 challenging the constitutional validity of the impugned Ordinance.

During the pendency of the said petition the impugned ordinance was repealed and re-enacted by the Sick Textile Undertaking (Taking over of Management) Act, 1972, being Act No. 72/72. The impugned Act was published in the Official Gazette on 23-12-1972, but by virtue of Section 1 (2) it shall be deemed to have come into force on 31-10-1972. The provisions of the impugned Act are in pari materia with the provisions of the impugned ordinance. The petitioners accordingly amended the C.W 1051/72 to challenge the constitutional validity of the impugned Act also. As ordinance 9 of 1972 has been repealed by the impugned Act and as the petitioner's said undertaking has been included in the impugned Act by virtue of Section 4 (1) read with first schedule, it is the validity of the impugned Act that was canvassed before us. This judgment will dispose of both the writ petitions, namely C.W 463/72 questioning the validity of order under section 18a of the industries (development & Regulation) Act, 1951, and C.W 1051/72 challenging the constitutional validity of the impugned Act.

Another C.W 1068/72 in which Mr. Ved Vyas appeared for the petitioners was also heard along with these two petitions, which also challenges the constitutionality of the impugned Act and the action of the Central Government under the Act of 1951. Mr. Ved Vyas adopted the argument of Mr. Sen who appeared in these two petitions and in so far as they raised common points and this judgment will cover those points in that petition also. That petition (namely C.W 1068/72) in so far as, it raised separate points is also being disposed of by us today by a separate judgment.

Sub-clause (i) of clause (a) (omitting to notice sub-clause (ii), (iii) and (iv) as not being necessary) of section 15 of the Act of 1951 provided that where the Central Government is of the opinion that: —

(a) in respect of any schedule industry or industrial undertaking or undertakings: —

(i) there has been, or is likely to be, as substantial fall in the volume of production respect of any article or class of articles relatable to that industry or manufactured or produced in the industrial undertaking or undertakings, as the case may be, for which, having regard to the economic conditions prevailing, there is no justification, the Central Government may make or cause to be made a full and complete investigation into the circumstances of the case by such person or body of person as it may appoint for the purpose. Section 18A reads as under: —

If the Central Government is of opinion that:

(a) an industrial undertaking to which directions have been issued in pursuance of section 16 has failed to comply with such direction, or

(b) an industrial undertaking in respect of which an investigation has been made under section 15 (whether or not any directions have been issued to the undertaking in pursuance of section 16, is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest, the Central Government may by notified order, authorise any person or body of persons to take over the management of the whole or any part of the undertaking or to exercise in respect of the whole or any part of the undertaking such functions of control as may be specified in the order.

M/s. Indore Malwa United Mills was established in 1907. In the year 1934, its installed capacity was 51,128, spindles, 1393 looms, a waste plant, 2182 mule spindles and 30 blanket looms. In 1963 the mill company obtained a licence for expansion of the spindleage by 20,000 out of which only 13056 spindles had been installed and the licence for the balance 5,584 spindles has been revoked. It started its business in 1907 with an authorised capital of Rs. 15 lakhs which was raised to 20 lakhs. In 1948 the ordinary shares of Rs. 30 lakhs were issued as bonus shares out of the Reserve Fund.

Thus it has an interesting spectacle that out of total authorised capital of 50 lakhs only 20 lakhs have been issued for payment in cash while as much as 30 lakhs were issued as bonus shares thus depleting the reserves.

The petitioners claim that during the period between 1934 and 1962 the undertaking of the petitioners was making profits and thus it made a net profit of Rs. 197.62 lakhs after providing for depreciation of an amount of Rs. 125.78 lakhs. According to the petitioner the Textile Industry enjoyed prosperous economic position till 1964 but started being on the decline since 1965 due to various reasons, amongst others being rise in the wages, rise in the price of cotton and the rigid cost structure. It is stated in the petition that the period between 1964-70 was characterised by decline in the productivity of the entire Textile Industry. The petitioners do not claim that the undertaking was doing well in the period from 1965 onwards. The fact of the Textile Industry doing well upto 1964 is not denied in the counter affidavit of the respondents but it is strongly maintained that since 1965 the petitioners company has been suffering losses and the accumulated loss carried forward in the balance sheet for 1971 is said to run to Rs. 137.28 lakhs which completely wiped off paid up capital and reserve. The loss estimated by the company for the year 1971 is reported to be 62 lakhs, thus increasing the accumulated loss to 2 crores.

By an order dated 27-5-1971 the Ministry of Industrial Development and Internal Trade (Department of Industrial Development), New Delhi, appointed a committee under section 15 of the Act of 1951 for making full and complete investigation into the Affairs of the petitioner undertaking.

The order reads as follows: —

‘Whereas the Central Government is of the opinion that there has been or is likely to be substantial fall in the volume of production in respect of cotton textiles manufactured in the Industrial undertaking known as Indore Malwa United Mills Ltd. Indore, for which having regard to the economic conditions prevailing there is no justification. Now, therefore in exercise of the powers conferred by Section 15 of the Industries (Development and Regulation) Act, 1951 (65 of 1951) the Central Government hereby appoints for the purpose of making full and complete investigation into the circumstances of the case a body of persons consting of. . .’

In forwarding the order, the Ministry of Foreign Trade, New Delhi by its letter dated 28-5-1971 required that the investigation should also be directed to the following specific points:

(a) Reasons for the present state of affairs,

(b) Deficiencies, if any in the existing machinery,

(c) Immediate requirements under separate heads of accounts of working capital, if any,

(d) Requirement of long-term capital for modernisation/rehabilitation,

(e) Financial results of: —

(i) immediate working without further investment on capital account,

(ii) Working after further investment on capital account,

(f) Suggestions regarding source of funds required under (c) and (d) and security available for their repayment.

A copy of this letter was also endorsed to the first petitioner.

Consequent upon the appointment of the said committee the survey wing of the Textile Commissioner visited the undertaking of the first petitioner in August, 1971. The petitioners on their own showing were associated with it and placed all the material before the committee. A hearing was also given to the first petitioner by the Committee at Indore on 15-12-1971. Another hearing was also given to the first petitioner on 28-3-1972. The petitioner also gave a memorandum to the investigation committee on the same date. The petitioner also claims to have given a memorandum earlier on 15-12-1971 (which, however, is disputed by the respondents). In due course the Central Government passed an order dated 31-10-72 under section 18A of the Act of 1951 taking over the management of the petitioner undertaking. The order was published in the Gazette on the same date and reads as under: —

“Whereas the Central Government is of the opinion that Indore Malwa United Mills Limited, Indore, an industrial undertaking in respect of which an investigation has been made under Section 15 of the Industries (Development and Regulation) Act, 1951 (65 of 1951) is being managed in a manner highly detrimental to public interest.

Now therefore, in exercise of the powers conferred by Section 18A of the said Act, the Central Government hereby authorises the M.P State Textile Corporation (hereinafter referred to as Authorised Controller to take over the management of the whole of the said undertaking, namely Indore Malwa United Mills Limited, Indore, subject to the following terms and condition, namely: —

(i) The Authorised Controller shall comply with all directions issued from time to time by the Central Government.

(ii) The Authorised Controller shall hold office for five years from the date of publication in the official gazette of this notified order.

(iii) The Central Government may terminate the appointment of the Authorised Controller earlier, if it considers it necessary to do so.

2. This order shall have effect for a period of five years commencing from the date of its publication in the official gazette.”

Counsel for the petitioners Mr. Sen contended that before exercising the powers vested in it under Section 18 (1) (b) it is incumbent upon the Central Government to have initiated or directed an enquiry pursuant to its opinion that the Industrial Undertaking in question was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest as provided in section 15 (b) of the Act of 1951 and as in the present case the enquiry by the Central Government was not initiated on the basis of opinion mentioned under section 15 (b) that the industry is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest — it was not open to the Central Government to pass the impugned order under section 18a (1) (b) of the Act of 1951.

This contention is without any merit and stands concluded against the petitioners by a decision of the Supreme Court in Ambalal M. Shah and another v. Hathisingh Manufacturing Co. Ltd. and another, (AIR 1962 SC 588) (1) where it was observed “it appears to us that where the investigation, has been initiated, in respect of an industrial undertaking, on an opinion that there has been or is likely to be a fall in the volume or production for which having regard to the economic conditions there is no justification . . .' the investigation in order to be complete must also consider the quality of the management of the undertaking just as it would so consider the quality of the management where the investigation is initiated on an opinion that the industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest. .. Indeed we find it difficult to understand how an investigator having embarked on an investigation ordered by the Government in respect of an industrial undertaking on the basis of one or more of the opinions mentioned in S. 15 (a) can avoid an inquiry into the quality of the management of the industrial undertaking.

The next grievance was that even if it was open to the Central Government to pass an order under section 18a (1) (b) on an investigation by a Committee appointed under section 15 (a) (i) the investigation committee as a matter of fact did not make any enquiry into the question whether the undertaking was being managed in a manner highly detrimental to the textile industry or to the public interest. No doubt it was admitted that the petitioners had two meetings with the committee on 15-12-1971 and 28-3-1972, but it was maintained that no question regarding the quality of management or the manner in which the undertaking was being managed was either posed or considered by the said committee. It was also urged that the petitioner bona fide believed that the said committee did not make any finding of adverse nature against the first petitioner either with regard to the quality of the management or with regard to the manner in which the said undertaking of the first petitioner was being managed, not to stay anything of the same being detrimental to the textile industry or to the public interest. This assertion was sought to be reinforced by pointing out that because the Government of M.P has two of its nominees on the Board of Directors and also there was nominee of the M.P Finance Corporation in connection with the loan of Rs. 10 lakhs given by the Corporation, and also further as the Government Director carried power of veto since 1966 the petitioners assumed that there would be no investigation in this regard, nor was it possible for the investigation committee to have given any finding regarding the quality of the management of the petitioner undertaking. This contention can be best answered in the words of the Supreme Court in Ambalal M. Shah's case wherein it was state: —

“It was also urged that it would be unfair to expect the management, where the investigation has been initiated on the formation of an opinion as mentioned in clause 15 (a) to lead any evidence as regards the quality of its management and so there is risk of the investigator being misled. We can see no reason however for any management to have any doubt on the question that investigation would be directed among other things to the question of quality of management. We believe that one of the first things that any management would do when an investigation is initiated on the basis of any such opinion would be to try to show how efficient it was and how inspite of the high quality of its management the misdeeds of labour or the unsympathetic attitude of Government or the difficulties of transport or some other cause beyond their control was responsible for the undesirable state of things into which the investigation was being held.”

The view of the law has been re-iterated in the latest Supreme Court case The Kesava Mills Co. Ltd. and other v. Union of India and other (AIR 1973 SC 389) (1a).

A reference to the copy of letter sent to the petitioners forwarding the order under Section 15 in dealing with the scope of investigation clearly shows that the Government was deeply concerned in finding about the financial position and the resources of the undertaking. It is futile therefore for the petitioner to contend that even after knowing about the terms of reference the petitioners did not know that the committee would enquire into the quality of the management. In the counter affidavit it is asserted that the petitioners all the time knew about the nature of the enquiry and the grievance therefore that they did not know that the quality of management would be gone into by the investigating committee is incorrect. During the course of hearing respondent No. 1 was permitted by us to file an additional affidavit by Mr. K.K Dhar Chairman, National Textile Corporation who was one of the members of the investigation committee appointed under Section 15 to enquire into the petitioner mill. In this affidavit it was stated that to the best of his knowledge the committee did consider whether there was or likely to be a short-fall in the production of the textile manufactured by the petitioner undertaking, and the effect of the economic condition prevailing in the undertaking on the production of textiles aforesaid and whether the said undertaking was being managed in a manner detrimental to the industry concerned or to public interest. The committee to the best of his knowledge did consider the role of management of the petitioner undertaking in this context. The petitioner had raised objection that this affidavit was at best secondary evidence and the best evidence was the report of the committee itself. Therefore, the counsel for the respondents placed on record a copy of the report of the investigation committee appointed under Section 15 (a copy of the report was also made available to the counsel for the petitioner). A reference to the report shows that the committee went into various factors about the figures for production, capital and finance, technical performance of the undertaking and the capacity of the petitioners to raise additional finance and funds and it was thereafter that it recommended the take over under the Act of 1951. We must therefore reject the argument that the investigating committee did not advert to the question of the quality of the management or that its report was not made after applying its mind to this aspect. This contention therefore fails.

The next question that was canvassed was that the principles of natural justice had been violated by the investigation committee inasmuch it did not give reasonable opportunity to the petitioner to have their full say before it and therefore the opinion formed by the Government under Section 18A on the basis of this illegal enquiry also suffered from the same infirmity and therefore the whole proceedings are vitiated. The second part of the argument was that even assuming that the exercise of the power under Section 18A is in the nature of an administrative function exercisable upon the subjective satisfaction of the Central Government, the same is subject to the overriding statutory condition of the existence of the said circumstances, and as according to the petitioners, there were no relevant circumstances on the basis of which opinion could have been formed by the Central Government/impugned order under Section 18A of the Act of 1951 is liable to be struck down on this ground also.

Now, even if the order under Section 18A is administrative it cannot be contended with any seriousness that the principles of natural justice will not be applicable to such an order or proceedings; vide “The Kesaya Mill Co. Ltd.'s”. As a matter of fact under the rule making power conferred by section 30 of the Act the Government of India has already made a rule viz. Rule 5 which provides for such an opportunity. Rule 5 runs as follows: —

“5. Opportunity for hearing:— The Investigator shall, before completion of his investigation, give the Management and the employees of the Undertakings in respect of which the investigation is ordered, reasonable opportunity of being heard including opportunity to adduce any evidence.”

Now it is on record that subsequent to the appointment of the investigation Committee the Survey Wing of the Textile Commission visited the company at Indore in 1971 and conducted a survey there. It is the petitioner's own case that it was associated with the Survey Committee and gave to it the material and explanation on various matter. Subsequently investigation committee visited Indore on 15-12-1971 and a hearing was given to the first petitioner, and according to him he submitted a memorandum dated the same day to the committee (the receipt of which by the respondents, however, is denied.) In any case in view of the admitted fact that hearing took place on 15-12-1971, the facts mentioned in the memorandum must have been placed before the investigating committee. Another hearing was also given to the petitioner by the Investigating Committee on 28-3-1972 and an other memorandum of the same date was admittedly handed over to the investigating committee. A reference to these memos show that the first petitioner pointed out the difficulties which were being faced by the Textile Industry and sought to point out that it was a helpless victim of the unkind circumstances. It was, however, conceded that from October, 1964 onward the undertaking was incurring losses and also there was a fall in production, and credit squeeze. As a matter of fact the confidence of the public was so much shaken in the petitioner undertaking that this resulted in the withdrawal of public deposits of 30 lakhs lying with the company. It is pointed out that the petitioner mill would have improved upon its working results on getting a loan of Rs. 35 lakhs in the year 1968, it however, could not procure the same so far and the continued losses dried up its financial liquidity and resources and created acute difficulties in normal working of the Mills. All this resulted in the accumulation of losses to the tune of 137 lakhs in the year ending 1970. The position continued to get worse in 1971 and the losses piled up. The petitioners maintained that the unit is well balanced and viable, but ‘unfortunately due to non-availability of funds, the regular maintenance and overhauling which could not be attended earlier now needs immediate attention.’ The petitioner proposed the modernisation scheme and rehabilitation scheme, the latter being of immediate urgency. According to the petitioner it needed immediately 52 lakhs for working capital and 40 lakhs for rehabilitation scheme which if made available would result in the undertaking yielding some profits. For providing funds towards working capital the management felt that on valuable recommendations by the Investigation Committee the State Bank of India should expedite the disbursement of a new term loan of Rs. 35 lakhs in lieu of State Government guarantee and should be prepared to grant further loan of Rs. 52 lakhs and should also agree to the petitioners, for arrangements to be made to cover up rehabilitation by deferred payment terms to the extent of Rs. 40 lakhs. The only security which the management was able to offer was the book value of its assets which stood at 96.49 lakhs (on 30-12-1970) though according to the valuer's report it stood as Rs. 401.22 lakhs. The petitioner accordingly requested the investigation committee that it should make a recommendation for granting them necessary help, particularly the loans mentioned above and also to assist them in finalising a plan to reduce all accumulated liabilities. In the further memorandum which was submitted on 28-3-1972 the petitioner reiterated the earlier points and pointed out that they had in the meanwhile made some efforts and gave a report about their progress. But it transpires that the State Bank of India was only agreeable to grant them further loan of Rs. 35 lakhs towards the working capital provided the statutory authorities like the Provident Fund and E.S.I did not object to the State Government giving further guarantee over and above 35 lakhs which the Bank might give. It was suggested that though the State Bank of India had a first charge the petitioners were hoping to pay up the said amount from the proceeds of the sale of the unproductive assets like land, house etc. after the permission had been obtained from the State Bank. No assurance had however yet come from the statutory authorities regarding the liabilities of the petitioners in respect of Provident Fund and E.S.T liabilities and it was frankly admitted that all the efforts towards arranging the funds for rehabilitation shall only materialise if there is favourable recommendation of the investigation committee and also with all kind of sympathy from the State Bank and only then they may be in a position to obtain financial assistance from the Financial Institutions on some deferred payment terms and some other suitable terms. Some of the proposals suggested for the reduction of liabilities included the sale of land worth about Rs. 6 lakhs and also to pursuade the State Bank to purchase the petitioners building which was on rent with it for Rs. 2.50 lakhs and also a permission to sell the residential bungalow which it was claimed might bring 10 lakhs after taking permission from the State Government towards adjustment of medium term loan of 50 lakhs taken previously from State Bank of India. It was also indicated that the M.P Finance Corporation and the Regional Provident Fund Commissioner had agreed to some kind of rescheduling and deferment of their liabilities. About the electricity dues it was suggested that they should be frozen and the petitioners should be allowed to pay arrears in instalment and also further that it should be exempted from payment of surcharge.

In the return it has been denied that there was such an acute crisis or gloom in the market and it is maintained that in spite of such unfavourable conditions many mills made profits including the mills which have been taken under the Government management earlier. It is also maintained that proper hearings were given to the petitioners and receipt of memorandum on 28th of March 1972 was also admitted. The optimism of the petitioner that if allowed to manage the undertaking he would be able to do well, was strongly repudiated. Reference is invited to a latter dated 15th of March, 1972 written by State Bank of India to the Government of M.P (Copy had been supplied by the petitioner himself.) A reference to this letter shows that the bank did not accept the analysis furnished by the petitioner company and was of the view that the company had not identified the main reasons for their unsatisfactory performance. It is specifically stated that in terms of the bank's analysis the additional advance of Rs. 35 lakhs would not really assist the company in making the mill viable. But as the State Government was prepared to offer the guarantee the bank would have no objection to releasing the additional advance subject to the condition that the advance would be initially for a period of six months during which it would be necessary for the company to arrange for a consultant study of the undertaking to analyse the reason for poor performance. And if the consultant study was not available or was not favourable to the company the said amount of Rs. 35 lakhs would be deemed to be repayable immediately. In case the consultant's report establishes the need for large scale modernisation the State Government will have to undertake to ensure that the company would be granted necessary financial assistance either by the State Government or by other financial institutions for financing the costs of modernisation.

A reference to the Investigation Committee's report will show that the company had taken medium term loan of Rs. 50 lakhs in 1963 from State Bank of India Indore on the fixed assets of the company. The amount of loan was to be paid in five annual instalments of Rs. 10 lakhs each beginning from 1964. The petitioner company had defaulted in the payment and the amount outstanding at the time of investigation was about Rs. 35 lakhs. Another loan of Rs. 10 lakhs was taken from M.P Financial Corporation against second charge on the fixed assets of the company. This loan which was also guaranteed by the M.P State Government was repayable in 20 annual instalments of Rs. 50 thousand beginning from 30th June, 1967. No instalments was paid up to 30th June, 1971 and the interest alone had amounted to Rs. 4.85 lakhs. The total thus was Rs. 14.85 lakhs for which the corporation had to reschedule the payment of interest and loan. There were also outstanding liabilities on account of cash credit loan from the State Bank of India Indore of Rs. 13 lakhs and another secured loan from the State Bank of Indore to the extent of Rs. 46 lakhs. Thus liabilities on account of secured loans totalled to Rs. 110.07 lakhs. There was also unsecured loan to the extent of Rs. 2.33 lakhs. A sum of Rs. 166.74 lakhs was due on account of the statutory liabilities and amongst others it included Rs. 26 lakhs due on account of employees state insurance contribution; Rs. 77 lakhs on account of employees provident fund arrears; Rs. 43 lakhs on account of M.P Electricity dues. The total liability of the undertaking thus came to Rs. 280.86 lakhs and it was apparent that the company was facing sever financial difficulties. The idle capacity in the mill in the year 1971 was as high as 23 per cent.

It is pertinent to note that in 1969, the carry over losses of the undertaking was Rs. 43.08 lakhs and the government dues were about Rs. 55.52 lakhs. But now the statutory dues had shot up to Rs. 166 lakhs and the carry over losses to about Rs. 2 crores. It is manifest that during a short interval the conditions of petitioner undertaking had deteriorated very rapidly and the management had not been able to provide either the necessary finances or the guidance to prevent the downward march of the undertaking. The modernisation cost of the mill is expected to be Rs. 125.20 lakhs out of which Rs. 52.80 lakhs worth of machinery would be available on deferred payment bais thus requiring Rs. 72.42 lakhs to be met immediately from the government resources. Immediate requirement of funds for working this undertaking require another Rs. 101.01 lakhs (total Rs. 173.41 lakhs).

We were referred to the various letters written by the petitioners during the pendency of these petitions to various Ministers of the Central Government in which it was urged that at least one year's time be given to them to satisfy the government and to show the results both in regard to the productivity and the profitability of the undertaking. In one of the letters dated 7th July, 1972 to the Secretary Minister of Foreign Trade the Petitioners offered government participation in management and agreed to allow the amount of loan to be converted into equity capital of the company. In one of the letters, dated August 11, 1972 to the Ministry of Industrial Development the petitioners pointed out that they had started paying current liabilities under the provident fund and employees state insurance scheme. Our attention was also drawn to the withdrawal of the prosecution which had been lodged against the petitioner in criminal case 1491/68 which was allowed to be compounded by the City & District Magistrate of Indore by his order of 14th December, 1970. Reference was invited to this order apparently for the purpose of showing that the State government had agreed to the scheme for payment of the arrears of the provident fund and employees state insurance in instalments.

We, therefore, feel that the reasons which may have persuaded the compounding of criminal prosecution in 1970 have no relevancy to the investigation made in 1972.

It is, however, pertinent to note that the petitioner had when proposing a scheme in 1970 for the payment of the arrears on account of employees provident fund and the employees state insurance arrears proceeded on the assumption of getting Rs. 35 lakhs as further loan from the State Bank of India, on the guarantee of the State Government. But this optimism turned out to be without any basis as is clear from subsequent developments as evidenced by the bank's letter of March, 1972.

We thus find that the petitioner had two hearings before the investigation committee. He had submitted detailed memorandum dealing with various aspects of the matter giving his version. The report of the Investigation committee has taken into account those admitted facts which were referred to by the petitioners themselves. We do not understand the cause of the complaint that the petitioners were denied reasonable opportunity of hearing before the investigation committee. It is not their case that they wanted to place before it certain facts and had been denied an opportunity of doing so. On the contrary there is nothing on the record to show that any further hearing was asked for to place any new material or facts and the same was denied.

The counsel for the petitioners had urged that at the time petitioners had been making representations during the meeting with the investigation committee, they had only been concerned with showing how funds could be raised and at no time any hearing had been concerned with the question whether the undertaking was being managed in a manner highly detrimental to the schedule industry or to public interest. We find this argument unacceptable and facile. There could be no doubt that when an investigation was ordered under section 15 and discussion took place and the petitioners gave memorandum the whole point of giving an opportunity to the petitioners was to enable them to show that the present state of the undertaking was not due to their bad management and that they were in a position to get the undertaking out of its present difficulties. The memorandum and the statements made by the petitioners, however, clearly show that they were aware of this question and were giving their explanation to persuade the committee against holding that the undertaking was being managed in a manner highly detrimental to the public interest. In fact all their efforts were to paint themselves as having managed the undertaking properly. It is a different matter that this explanation did not find favour with the committee. But that has no relevance to the question of opportunity to the petitioners.

Grievance was also made that in spite of the petitioner asking for the copy of the investigation report by his letter dated 26th May, 1972 the same was not supplied to him and this amounted to violation of principles of natural justice. We do not agree. There is no statutory rule providing that a copy of the report has in every case to be furnished to the undertaking before the order under Section 18A is passed nor is it an inflexible principles of natural justice that the mere fact that a report is not furnished will necessarily vitiate the whole proceedings. Whether the non-furnishing of the report will vitiate the investigation committee's proceedings will depend on the facts of each case, see The Kesaya Mills Co. Ltd., case.

Grievance was also sought to be made that the petitioners should have been given a show cause by the Central Government before passing the impugned order under Section 18A. There is no requirement of statute. The petitioners had made all the representations and had placed all the material before the Central Government against the proposed take over. In such a case it was not necessary that the government should give them a formal show cause notice before the passing the impugned order under Section 18A vide The Kesava Mills Co. Ltd.

In the present case we find that the petitioners had been given full opportunity by the investigation committee. They had said all that they had to. There is nothing in the report to which objection can be taken by the petitioner in the sense that some hidden material was utilised by the committee without putting it first to the petitioner. The report of the committee is based on material given by the petitioners and also known to them. All these circumstances leave no manner of doubt that the petitioners had full opportunity of hearing and it was only thereafter that the Central Government passed the ispompugned order under Section 18A of the Act of 1951.

The next attack was that the order under Section 18A had been passed on no material and on irrelevant circumstances and was thus liable to be quashed. In this connection we were referred to Rohtas Industries Ltd. v. S.D Agarwal and another etc. (AIR 1969 SC 707) (2) and to the following observations in Barium Chemicals Ltd. and another v. Company Law Board and others (AIR 1967 SC 295) (3).

‘Though an order passed in exercise of powers under a statute cannot be challenged on the ground of propriety or sufficiency, it is liable to be quashed on the ground of mala fides, dishonesty or corrupt purpose. Even if it is passed in good faith and with the best of intention to further the purpose of the legislation which confers the powers, since the Authority has to act in accordance with and within the limits of that legislation, its order can also be challenged if it is beyond those limits or is passed on grounds extraneous to the legislation or if there are no grounds at all for passing it or if the grounds are such that no one can reasonably arrive at the opinion or satisfaction requisite under the legislation. In any one of these situations it can well be said that the authority did not honestly form its opinion or that in forming it, did not apply its mind to the relevant facts’.

We do not think that these cases in any way help the petitioners. All that was held in those cases was that if an opinion is formed on irrelevant circumstances the same may be challenged in a court of law. But the circumstances here are totally different. Here the undisputed facts before the investigation committee were that:

(a) the petitioner undertaking had accumulated losses upto two crores in the last few years which had completely wiped off paid up capital and reserves.

(b) its total outstanding liabilities were to the tune of Rs. 280.86 lakhs.

(c) it required immediately a sum of Rs. 173.41 lakhs for working and modernising the mill and

(d) that inspite of their best efforts the management was in no position to raise the necessary funds so as to be able to continue the functioning of the mill in a proper, rational and economic manner.

The emphasis of the petitioner all the time was that the investigation committee should recommend to the State Government that it should further guarantee additional loan to be raised from the State Bank of India; and also it wanted the State Government's assistance for raising further loans from other financial institutions.

Not only that the petitioner wanted moratorium on the realisation of the dues running into crores of rupees on account of employees provident fund contribution and the Employees State Insurance contribution and the electricity dues to the State Government. A situation had thus developed where the petitioner undertaking on its own admission was not able to manage the undertaking without a solid and substantial support from the State Government. The State Bank of India had categorically refused to advance any further loan unless a guarantee was given by the Government of Madhya Pradesh. It is no doubt true that the mill had not yet been closed and according to the petitioners it made a few lakhs of profit in the months of August and September, 1972. This, however, cannot detract from the position that to effectively function and to prevent the closure of the mill immediate funds to the extent of about two crores of rupees were necessary. This is apart from the settlement of liabilities of over two crores of rupees. It was obvious that the private management was totally incapable of running the mill on its own and the only manner in which the mill could continue to function would be if the extensive support was given by the State Government. Thus a situation had developed where the very rationale for the existence of private management had failed. The much vaunted claim of the private entrepreneur that its existence is necessary to raise untapped resources in the market by his initiative and risk beating capacity for the purposes of rapid and efficient industrialisation was sadly found wanting in so far as the said undertaking was concerned. If the only manner in which the private management could be kept above water was by relying on the prestige and full guarantee of the State and Central Government there would seem to be no reason why the Central Government should not directly take over the management under Section 18A of the Act of 1951.

The counsel for the petitioner sought to show by comparison of figures that the management of those undertakings which had been taken over by the government previously were not making profits. This was, however, disputed by the respondents who maintained that those undertakings had shown better results. No doubt it is true that the take over by the Central Government is expected to result in a better management and it would be a sad commentary if the undertaking after it had been taken over under the Act of 1951 continues to remain in an unsatisfactory state of affairs as before. This is because the requirements of profitability, economy and efficiency as well as accountability which is applicable to privately run undertakings equally apply to public run undertakings. It may be readily conceded that the yard stick must be the same in both cases i.e whether the management is in private hands or in the hands of the government. But as we are not concerned with those undertakings this argument is outside the scope of this case and need not detain us. We are only concerned with the question whether the impugned order under Section 18A of the Act of 1951 had been passed against the petitioner in compliance with law and natural justice. We feel that if a private entrepreneur has lost his credit in the market and cannot raise necessary funds and finance on the basis of his own liquidity and resourcefulness then it is only logical to say that the management should be in the hands of those who are to provide the necessary wherewithal. The public interest certainly is not served by providing public funds for the benefit of private interests. If therefore, as a cumulative result of all these factors the central government formed the opinion that the undertaking was being managed in a manner highly detrimental to the public interest it cannot be said that it has acted without any material nor can it be said that no reasonable person could have formed such an opinion.

We thus find that the impugned order under Section 18A of the Act of 1951 is valid and legal and no infirmity attaches to it.

Re: Constitutional challenge

We shall now consider the challenge made to the constitutionality of the impugned Act on the ground that it violates Articles 14, 19, 31 and 301 of the Constitution of India. This Court while exercising jurisdiction under Article 226 of the Constitution has a solemn duty imposed on it to adjudicate on the constitutional validity with a view to make sure that no legislation has transgressed permissible constitutional limits. In this connection it will be appropriate to refer to the observations of Patanjali Sastri C.J in State of Madras v. V.C Row (1952 (3) Supreme Court Reports 597 at 605) (4): —

‘Before proceeding to consider this question, we think it right to point out, what is sometimes over looked that our Constitution contains express provisions for judicial review of legislation as to its conformity with the Constitution, unlike as in America where the Supreme Court has assumed extensive powers of reviewing legislative acts under cover of the widely interpreted ‘due process’ clause in the Fifth and Fourteenth Amendments. If, then, the courts in this country face up to such important and none too easy task, it is not out of any desire to tilt at legislative authority in a crusader's spirit, but in discharge of a duty plainly laid upon them by the Constitution. This is especially true as regards the ‘Fundamental rights’, as to which this court has been assigned the role of a sentinal on the qui vive. While the court naturally attaches great weight to the legislative judgment, it cannot desert its own duty to determine finally the constitutionality of an impugned statue. We have ventured on these obvious remarks because it appears to have been suggested in some quarters that the courts in the new set up are out to seek clashes with the legislatures in the country.'

Parliament enacted the Act of 1951 to provide for the development and regulation of certain industries. The statement of objects and reasons for the Act of 1951 states that the Central Government with the means of implementing their industrial policy which was announced in their Resolution dated 6th of April 1948 had brought forward the Act which brings under central control the development, regulation of a number of important industries, the activities of which affect the country as a whole and the development of which must be governed by economic factors of all-India import. The Act of 1951 conferred on Government powers to make rules for the registration of existing undertakings for regulating the production and development of the industries mentioned in the schedule. Section 2 of the Act of 1951 declared that it was expedient in the public interest that the Central Government should take in its control the industries specified in the first schedule, textile being included therein. Section 6 of the Act of 1951 provided about the establishment and constitution of development councils and their functions. Section 15 of the Act of 1951 gives power to the Central Government to cause investigation to be made into scheduled industries or industrial undertakings. Section 16 further enables the Central Government on completion of investigation under section 15 to give directions to the industrial undertaking as may be appropriate in the circumstances for all or any of the purposes mentioned therein. Section 17 provided for special provision for direct control by Central Government in certain cases. The Act of 1951 came into force on 8th of May, 1952. In the course of working of the Act of 1951 certain practical difficulties came to light and the parliament accordingly with a view to removing the difficulties amended the Act by an Amending Act 26 of 1953. One of the difficulties which the Government had felt was that it could not take over the management of any industrial undertaking even in a situation calling for emergent action without first issuing directions to it and waiting to see whether or not they are obeyed. With a view to removing this lacuna section 17 of the Act of 65 of 1951 was amended and a new chapter IIIA was added by the Amending Act 26 of 1953. By this section 18A was incorporated which empowered the Central Government to assume management or control of industrial undertakings if the Central Government was of the opinion that industrial undertaking to which directions have been issued in pursuance of section 16 has failed to comply with such directions or that an industrial undertaking in respect of which an investigation has been made under section 15 (whether or not directions have been issued to undertaking in pursuance of section 16), is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest. sub-section (2) of section 18a provided that any notified order issued under sub-section (1) shall have effect for such period not exceeding five years as may be specified in the order. As under the old proviso the extension by the Central Government could be given only once, it was amended by Act 6 of the 1965, and it now provides that if Central Government is of the opinion that it is expedient in the public interest that any such notified order should continue to have effect after the expiry of period of five years aforesaid, it may from time to time issue directions for such continuance for such period, not exceeding two years at a time, as may be specified in the direction, so, however, that the total period of such continuance (after the expiry of the said period of five years) does not exceed ten years. Some further amendments were made in the Act of 1951 by the Amendment Act No. 72 of 1971 which was deemed to have come into force from the 1st of November 1971.

The amending Act of 1971 amended the Act of 1951, amongst others adding Section 15A giving power to Central Government to investigate into the affairs of the Company in liquidation. It also added section 18A empowering the Central Government to take over the industrial undertaking without investigation under certain circumstances. The Act of 1951 by which the Union has taken under its control the industries specified in the first schedule listed 38 industries, including at serial No. 23 ‘textiles’. The history of the Act of 1951 shows that it has been subjected to amendments at various points of time to deal with the different situations as they arose keeping in view the public interest involved. Orders under Section 18A have been passed with a view to prevent the closing of the various industries mentioned in the schedule so that there may not be loss of production and also to meet unemployment problem. No doubt the health of every industry is very important for the development of the economy of the country. But the cotton textile industry happens to be a most important and essential industry in the country. As a matter of fact India occupies third position amongst all the countries of the world in its capacity for yarn and cloth based on mechanical equipment and ranks second on the basis of cotton consumption in the cotton industries. Approximately eight million workers are employed in the textile industry and it has also provided employment to about ten million handloom weavers. According to the figures available for January, 1970 the total number of mills in the country was 656 and a number of spindles installed 17.67 million, of looms — 2,08,288. The paid up capital was estimated to be about 270 crores and the annual value of the output amounted to about Rs. 1200 crores. It will thus be apparent that the textile industry occupies a very crucial position in the economy of the country and it is of utmost importance that it continues to expand because its failure and closure will result in loss of employment and decline in essential commodity like cloth. The only power that the Central Government possessed when it found that any textile undertaking was being managed in a manner highly detrimental to it or to public interest was to take action under section 18a of act of 1951. But experience was showing that this remedy was not enough to meet the problem and that some radical measures were necessary to meet the problem. It was in these circumstances that at first the impugned ordinance was promulgated and which has been substituted by the impugned Act.

The impugned Act which was published in the Gazette on 23rd of December, 1972 was deemed to have come into force with effect from 31st day of October 1972, that is, the day on which the impugned ordinance was issued.

The Statement of Object and Reasons for introducing the Bill (which became the impugned Act) recites that the Sick Textile Undertakings (Taking over of Management) Ordinance, 1972, was promulgated on 31-10-1972 whereby the management of 46 textile undertakings, pending their nationalisation, was taken over by the Central Government. The principal reason underlying, the issue of the Ordinance was that in Government's view, the long term rehabilitation of the undertakings in question, in order to maintain production and employment and further to ensure maximization of production and distribution at fair prices of cheaper varieties of cloth could not be undertaken under any of the existing statutory provisions. As large quantum of public funds have to be invested in the operation of these undertakings for their modernisation, the possibility of taking over the management of the undertakings only for a limited period under the Industries (Development and Regulation) Act, 1951 was ruled out and it was decided that the management of sick textile undertakings should be taken over pending nationalisation of such undertakings. Once the basic decision of nationalisation was taken, a genuine apprehension arose in Government's mind that unless the management of the concerned undertakings was taken over on immediate basis, there might be large-scale frittering away of assets which would be detrimental to the public interest. As the Parliament was not in session at that time and every day's delay could have had serious repercussions, the Ordinance in question was promulgated.

The long title of the Act recites that it is an Act to provide for the taking over, in the public interest of the management of the sick textile undertakings, pending nationalisation of such undertakings, for the expeditious rehabilitation of such undertakings so that such rehabilitation may subserve the interests of the general public by the augmentation of the production and distribution at fair prices, of cheaper varieties of cloth and for matters connected therewith or incidental thereto.

Section 2A defines the ‘appointed day’ to mean the 31st day of October, 1972. section 2 (d) defines ‘sick textile undertaking’ and reads as under:

“sick textile undertaking” means the textile undertaking which falls within one or more of the following categories, namely;

(i) which is owned by a textile company which is being wound up, whether voluntarily or by or under the supervision of any Court, or in respect of which a provisional liquidator has been appointed by a court,

(ii) which had remained closed for a period of not less than three months immediately before the appointed day and the closure of which is prejudicial to the textile industry and the condition of the undertaking is such that it may, with reasonable inputs, be re-started in the interests of the general public,

(iii) which has been leased to Government or any other person or the management of which has been taken over by Government or any other person under any leave or licence granted by any Receiver or Liquidator by or under the orders of, or with the approval of, any Court,

(iv) the management of which was authorised by the Central Government, by a notified order made under Section 18A or in pursuance of an order made by the High Court under Section 18FA of the Industries (Development and Regulation) Act, 1951 to be taken over by a person or body of persons, but such management could not be taken over by such person or body of persons, before the appointed day,

(v) the management of which ought to be (according to the report made after investigation by any person or body of persons appointed after the 1st day of January, 1970 under section 15 or Section 15A of the Industries (Development and Regulation) Act 1951) taken over under section 18a of that act, but in relation to which no notified order authorising any person or body of persons to take over the management of such undertaking was made before the appointed day,

(vi) in respect of which an investigation was caused to be made, before the appointed day, the Central Government under Section 15 or Section 15A of the Industries (Development and Regulation) Act, 1951 and the report of such investigation was not received by the Central Government before the appointed day, and includes any textile undertaking which is deemed, under sub-section (2) of Section 4 to be a sick textile undertaking;

Section 2 (f) defines ‘textile company’ to mean a company specified in the third column of the First Schedule as owning the textile undertaking specified in the corresponding entry in the second column of that schedule.

Section 2 (g) defines ‘textile undertaking’ means an undertaking engaged in the manufacture of textiles and to which the provisions of the Factories Act, 1948, apply.

Section 4 (i) of the impugned Act provides that on and from the appointed date the management of all the sick textile undertakings specified in the First schedule shall vest in the Central Government. The first schedule contains at item 15 petitioner No. 1 undertaking and at item 24 the Lord Krishna Mill (the petitioner in the connected writ i.e C.W 1068 of 1972).

sub-section (2) of Section 4 further provides that if after the commencement of this Act, any investigation is ordered under Section 15 of the Act of 1951, in relation to any textile undertaking, and it is reported after such investigation that the management of such textile taking ought to be taken over under section 18A of the Act of 1951, the Central Government may, if it is satisfied after consideration of such report and other relevant matters that such undertaking ought to be declared to be a sick textile undertaking, make a declaration to that effect and further declare that the management of such textile undertaking ought to be taken over by it under the impugned Act and on and from the date of such declaration textile undertaking specified in such declaration shall be deemed to be a sick textile undertaking and the management of such textile undertaking shall be deemed, for the purposes of the impugned Act to vest in the Central Government.

Re: Article 14

We shall now deal with the contention that the impugned Act violates Article 14.

A reference to Section 4 (1) of the impugned Act shows that on and from the appointed date the management of all the sick textile undertakings specified in the first schedule shall vest in the Central Government. The first schedule contains a item No. 15 the name of the petitioners. The first question that arises is whether Section 4 (1) read with first schedule is to be read as a legislative declaration that all the mills by the fact that they are included in the First schedule are to be deemed to be sick textile undertakings and therefore they are covered by the impugned Act or whether independent adjudication by a court that the mills included in the First schedule satisfy the definition in section 2 (d), is necessary before the undertakings can be held to be covered by the impugned Act. The contention by the counsel for the petitioners is that the classification of the Act is to be found in section 2 (d) and that the First schedule is to be taken along with the classification. According to this argument, the mere fact of the inclusion of the petitioners' undertaking in the First schedule is not enough to attract the provisions of the impugned Act to them unless it is further shown that the petitioners' undertaking is a sick textile undertaking as defined in clause (d) of section 2 of the impugned act. The further corollary of this argument was that it was not only enough that the Government was able to show the factual passing of an order under Section 18 (A) of Act of 1951 as provided in clause (iv) sub-section (d) of section 2 of the impugned act or the factual investigation under clause (v) of sub-section (d) of section 2, because such a classification would be per se bad. The Government must further show that an order under Section 18 (A) of Act of 1951 within clause (iv) or an investigation under clause (v) was a valid one with the result that if the petitioners were able to show that there was no valid order or investigation, it must inevitably result in the deletion of the petitioners' undertaking from the First schedule of the impugned Act, in spite of the fact that the First schedule will continue to show the petitioners' at item No. 15. It was also contended that if an undertaking had been included in the First schedule without valid order or investigation, the mere inclusion would amount to legislative discrimination not based on any rational classification. We do not agree.

section 2 (d) gives definition of sick textile undertaking, so that charge may not be made against the legislature that it has by the impugned Act included arbitrarily certain mills while leaving out others. The impugned Act thus on its face gives the basis of classification. Section 4 (i) by including the mills is indicating the reasons for inclusion in the First schedule and also giving a legislative declaration that those mills are covered by the impugned Act. The definition is also a basis for classification laid down by the Parliament for the guidance of the executive when it proceeds under Section 4 (2) of the impugned Act to make a declaration in future that certain undertakings ought to be declared a sick textile undertaking.

Question arises whether in these circumstances it is open to the court to investigate whether the petitioner undertaking have been included validly in the first schedule by purporting to test it with the definition given in section 2 (d) of the impugned Act. If this argument was to be accepted then it must follow that the court after finding that a particular textile undertaking specified in the first schedule does not comply with the definition of section 2 (d) must go further and order the delisting of that textile undertaking from the first schedule.

No doubt the law may be declared invalid by the Courts in India if the legislature has no power to enact the law or that the law violates any of the Fundamental Rights guaranteed in Part III of the Constitution or it is inconsistent with any constitutional provision, but that does not entitle the Court in striking it down on the ground of vagueness vide Municipal Committee, Amritsar and another, etc. v. The State of Punjab and others (AIR 1969 SC 1100), (5).

But this particular argument of the petitioners, however, is independent of the vires of the impugned Act.

This argument proceeds on the basis that once the Court finds that the definition of clause 2 (d) cannot apply to any particular undertaking, it would mean that the Parliament had committed a mistake in including the undertaking in the first schedule and the Court should thereupon correct that mistake. We find this argument untenable.

It must always be borne in mind, as said by Lord Halsbury in Commissioner for Special Purposes of Income Tax v. Pemsel (6); that it is not competent to any Court to proceed upon the assumption that the Legislator has made a mistake. The Court must proceed on the footing that the legislature intended what it has said. Even if there is some defect in the phraseology used by the Legislature the Court cannot, as pointed out in Crawford v. Spooner (7) aid the Legislature's defective phrasing of an Act or add and amend or, by construction, make up deficiencies which are left in the Act. Even where there is a causes omissus, it is said by Lord Russel of Killowen in Hansraj Gupta v. Official Liquidator of Dehra Dun Mussoorie Electric Tramway Com., Ltd. (8) for others than the courts to remedy the defect; vide Nalinakhya Bysack v. Shyam Sunder Haldar and others [1953 (4) Supreme Court Report 533] (9).

If an Act of Parliament has been obtained improperly, it is for the legislature to correct it by repealing it; but so long as it exists as law, the courts are bound to obey it vide Lee and another v. The Bude and Torrington Junction Railway Company [L.R Vol. 6 (1870-71) C.P 570], (10).

The first schedule to the impugned Act is really a legislative device declaring that the undertakings mentioned therein are covered by the impugned Act.

If the argument of the counsel for the petitioners was to be accepted that the validity of the first schedule is dependent on a finding by the court that the investigation under Section 15 or an order under section 18A of the Act of 1951 had been validly made, then the whole purpose of the schedule would be lost and it would become otiose and superfluous, an intention which cannot possibly be attributed to the Parliament.

Mr. Sen referred us to Sanwaldas Gobindram v. The State of Bombay (LV Bombay Law Reporter 478), (11). The court was there considering the vires of the Bombay Refugees Act, 1948. The definition of refugees embraced within the scope persons coming from another province into Bombay. This interpretation was challenged on behalf of respondent who contended that the definition included a person coming from outside India. He referred that in the first schedule to the Act there was a form of registration and in that form entry VIII refers to the property left by the refugee in the country from which migrated. This way of interpretation, however, has repelled by the Court by observing that the meaning of a word defined in a statute cannot be limited by reference to some items in the schedule to the stature. This authority has no relevancy because the definition in the impugned Act is not sought to be cut by the first schedule but what is pointed out by the respondents is that the first schedule on its own includes the petitioners undertaking in the impugned Act.

We were also referred to the observation in Muneshwara Nand v. State (AIR 1961 Allahabad 24) (12) that if the enacting part and the schedule cannot be made to correspond, the latter must yield to the former. These observations were made when pointing out that whereas the Schedule II to the Code of Criminal Procedure makes defamation of the class which can form the subject matter of a complaint under Section 198B (I) compoundable only with the permission of the court, Section 345 (1) empowers the person defamed to compound even such an offence without reference to the court, and it is the section that must override the schedule. It will be seen that in that case there was a conflict between the main part of the Act and the schedule. Here section 2 (d) defines the sick textile undertaking while section 4 (i) read with the first schedule declares and particularises the specified undertakings whose management shall vest in the Central Government. There is no conflict between the main enactment and the first schedule.

We, therefore, must reject the argument that even on the assumption that the impugned Act was intra vires and in spite of the petitioners names being included in the First schedule, it would be still open to them to contend that they are not covered by the impugned Act by asking the court to go on merits into the question of validity of order or investigation under Section 15 or Section 18A of the Act of 1951. Once the petitioners are included in the First schedule they cannot avoid the impugned Act by resort to such collateral device.

We may, however, state that as we are holding in favour of the validity of investigation and the order under section 18 (A) of the Act of 1951, in both the cases, therefore, even if the argument was to be accepted that before undertaking could be included within the impugned Act, there has to be a valid order or a valid investigation within the meaning of section 2 (d) (iv) (v), the requirement will be satisfied in both these cases.

Mr. Sen however in this connection raised another objection and urged that the petitioners' in CW 1051 of 1972 undertaking was not covered within the meaning of section 2 (d) (iv) because apart from the validity of the order another condition precedent, as per definition clause is that there should be a notified order made under section 18 (A), of Act of 1951, and that is missing in this case. Now notified order is defined by the Act of 1951 to mean an order notified in the official gazette. We have on record the Government of India Extraordinary Gazette Part II Section 3 sub-section 2 dated 31st of October, 1972 which contains order under section 18 (a) issued by the Central Government. Mr. Sen, however, sought to urge that though this notification bears the date 31st of October, 1972 but in point of tact the gazette was published much later and therefore there was on 31st of October, 1972 no notified order with the result that the petitioners' undertaking will not fall within the impugned Act. He referred us in this connection to the correspondence which is marked as ‘C’ collectively in C.W 463 of 1972 which are the letters written to the Manager, Kitab Mahal by the petitioners' counsel asking for a copy of the gazette of India dated 31st of October, 1972 on 9th of November as well as on 15th of November, 1972. He also referred us to the reply received by the counsel from the Assistant Manager of Publication & Supply dated 15th of November, 1972 informing him that the Gazette of India Extraordinary dated 31st of October, 1972 has not yet been received in this office and therefore the same could not be supplied to him. From this it is sought to be concluded that even upto 15th of November, 1972, the Gazette of the 31st of October, 1972 was not available with the Assistant Manager Publication and Supply and therefore necessarily supports the petitioners version that the Gazette of 31st of October, 1972 was not published by then. The petitioners had also given notice to the respondents to produce certain documents with regard to the publication of the Gazette dated 31st of October, 1972. A further affidavit dated 28th of April, 1973, was filed by Mr. H.C Poddar, Director of the petitioners reiterating that the Gazette notification of 31st of October, 1972 was not printed by then. In reply to this an affidavit dated 1st May 1973 has been filed by the Manager of the Government of India Press. In this reply it is stated that the notification dated 31st of October, 1972 was sent to the Government of India Press by the Ministry of Foreign Trade by special messenger and was received in the Gazette of India Extraordinary Section in the press at 9.20 P.M on 31st of October, 1972. It is further stated that it was numbered as job No. 22 III and at the same time the process of the printing was commenced after duly assigning a job number. A copy of the document has been attached which shows that it was received at 9.20 P.M at the Press, and the endorsement of 1st of November, 1972 is stated to have been made on the next date as is the usual practice. It is denied that there is any interpolation in the dak book as had been alleged in the affidavit of the petitioners. It is also stated that the S.O No. was also given on 31st of October, 1972 and the entry of this was made in the register on 1st of November, 1972. After the printing of the gazette dated 31st of October, 1972 the copies were sent to the section for distribution to the various ministries. It is also stated that the printing was done on 31st of October, 1972, and the last and the final despatch of the notification was issued on 19th of November, 1972. Details have been given of the practice obtaining in the Government of India Press that at about the same time when the order is received from the Ministry for Printing in the official Gazette the Manager of Publication Delhi-6 under his own signatures sends the relevant wrapper in which the first copies of the printed gazette are to be placed and despatched to various addresses supplied by him immediately on printing.

The copies of the said Gazette as per the established practice of the Government of India Press and the practice obtaining in the office of the Manager of Publication Delhi-6 were placed in the relevant wrappers which are addressed to the various Ministries, Departments, Libraries and other subscribers as per list supplied by the Manager of Publication, Delhi-6, (annexed to the affidavit was given a list of the addresses supplied by the Manager of Publication Delhi-6). It is claimed that the Act of placing the printed gazette in the wrapper completes the Act of Publication which was complete on 31-10-1972. It is further submitted that the gazette so printed and placed in wrappers duly signed by the Manager, Publication effects the necessary publication. The formal despatch, however, took place on 1-11-1972 on 11.35 A.M

It is thus the case of the respondent that the gazette notification was printed on 31st of October, 1972, as it purports to show. Now section 81 of the Indian Evidence Act states that the Court shall presume the genuineness of every document purporting to be . . . the official gazette. The official gazette containing the order under section 18A of the Act of 1951 with respect to the petitioners' undertaking purports to have been printed and published on 31st of October, 1972. Having regard to the presumption under Section 81 of the Evidence Act read with section 114 (e) of the Indian Evidence Act there could be no escape from the conclusion that it must be taken to have been printed and published on the date which it bears namely 31st of October, 1972 and would thus comply with the statute which only requires that an order should be notified in the official gazette and the notification will come into force if nothing else is said, on the date of its own publication vide Pritpal Singh Rattan Singh v. The Chief Commissioner of Delhi and another(AIR 1966 Punjab, 4) (13). That presumption under Section 81 of the Evidence Act extends also to the gazette having been published on the date it bears was held in Totavarti Sitharam Chimakurty Kotlingam Firm v. The State of Andhra Pradesh (ILR 1961 — 1 A.P 296) (14). We, thus, find no reason to hold that the order was not notified in the official gazette on 31st of October, 1972 as it purports to show.

It was then urged that even if it was assumed that notification in the official gazette was published on 31-10-1972 the same still did not bring the petitioner undertaking within section 2 (d) (iv) of the impugned Act. The argument is that the impugned Act is deemed to have come into force on 31st day of October, 1972. section 5 (3) of the General Clauses Act provides that unless the contrary is expressed the Central Act shall be construed as coming into operation immediately on the expiry of the day preceding its commencement. The argument proceeds that the impugned Act must therefore be deemed to have come into force from the mid night between 30th and 31st of October, 1972, and as admittedly the notification at the earliest was published sometime after 9-25 P.M on 31-10-1972 the notified order must be taken to have come into existence subsequent to the impugned Act. In our opinion the invoking of section 5 (3) of the General Clauses Act is misconceived, and the said Act has no applicability in the facts of the case. The requirement of section 2 (d) (iv) is that the management of which was authorised by the Central Government by a notified order made under Section 18 (A) to be taken over by a person or body of persons but such management could not be taken over by such person or body of persons before the appointed day. The emphasis is only on the fact that though a notified order had been passed, but yet the management could not be taken over in pursuance of that order before the appointed day i.e 31st day of October, 1972. Therefore, all that has to be seen is whether a notified order under Section 18A exists and if so whether in pursuance of this management could not be taken over before the appointed day. In the present case on our finding that there exists a notified order of 31-10-1972 and in pursuance of that order the management could not be taken over before the appointed day, the provisions of section 2 (d) (iv) are applicable to the petitioners undertaking and this part of the argument of the petitioners is therefore rejected.

Even if the petitioners case in (C.W 1051 of 1972) was not covered by section 2 (d) (iv) on the ground of there being no notified order, it would still be within the impugned Act because of section 2 (d) (v) which provides that a textile undertaking will be sick textile undertaking if the management of which ought to be (according to the report made after investigation appointed after 1st of January, 1970 under Section 15 of Act of 1951) taken over under Section 18 (A) of Act of 1951 but in relation to which no notified order authorising any person to take over the management of such undertaking was made before the appointed date. In the case of the petitioners in C.W 1051 of 1972 investigation under Section 15 of the Act of 1951 had been ordered against the petitioners by the Central Government by its order dated 27.5.1971 Thus section 2 (d) (v) would be attracted. Mr. Sen had objected that this sub-clause could not be invoked by the respondents because of the stand taken by the respondents in the counter affidavit filed in C.W 1051 of 1972. In the reply by the respondents, while denying the invalidity of Sec. 2 (c) (v) of the impugned ordinance (which corresponds to S. 2 (d) (v) of the impugned Act) it was stated that the petitioners had no locus standi to challenge the said provision as the petitioners' mill is not taken over under the said provision and that the petitioners' mill is taken over by virtue of its inclusion in the schedule to the ordinance. Objection was also taken that it was not open to the counsel for the respondents to invoke 2 (d) (v) in the alternative as it was not known whether the report of the investigation was that the management of petitioners' undertaking ought to be taken over under Section 18A of the Act of 1951. This point would have had validity had the respondents persisted in not placing the report of the investigation before the Court. But during the course of the arguments the respondents placed on record the report of the investigation committee, (the petitioners were also given a copy of it and they also filed affidavits in pursuance of it). A reference to the report given on 29.3.1972 shows that the Committee recommended to the Government to arrange for taking over the mill undertaking under the Act of 1951. On these facts admittedly Sec. 2 (d) (v) will be applicable. It is true that the respondents had in their reply not relied on S. 2 (d) (v), but only on the First schedule. But it is well established that wrong reference to the source of powers under which the action was taken by the Government would not per se vitiate that action if it could be justified under some other power under which the government could lawfully do that Act, vide Hukum Chand Mills Ltd. v. state of Madhya Pradesh and another (52 ITR 583) (15). It has also been held that if an authority has a valid power to do a particular act, the fact that it purported to do that under a provision of law which did not confer power to do that act would not invalidate the act vide. The Amritsar Improvement Trust v. Baldeva Inder Singh and others (1972 (1) SCC 165) (16). Thus the petitioners' undertaking will be covered within the impugned Act either by virtue of Section 4 (1) read with First schedule or even by applying the definition clause of section 2 (d) (iv) or section 2 (d) (v). This part of the argument of the counsel for the petitioners therefore fails.

The next part of arguments assert that the impugned Act is a discriminatory piece of legislation. The contention is that there are a number of other mills against whom either investigation under Section 15 or orders under section 18 (A) of the Act of 1951 have been passed in the past and yet they have not been included in the impugned Act. It is also mentioned that if the petitioners' undertaking are considered to be covered by virtue of inclusion in the First schedule yet there is discrimination as there is no valid classification for including some and leaving others out of impugned Act. Another contention is that the petitioners' undertaking which have been included within the impugned Act and those other mills which are not included belong to the same class and there is no reasonable justification in law for classifying them separately. It is apparent that these arguments assume that both the act of 1951 and the impugned act deal with the same subject matter and situation and the further assumption that what is now sought to be remedied by the impugned Act could also have been done by the Act of 1951. This calls for the examination of the act of 1951 and the impugned act in order to see whether the purpose and object of both the Acts is the same, or whether they subserve difference purposes.

The first obvious difference that one finds between the act of 1951 and the impugned act is that while the former deals with various industries which are indicated in the first schedule, textile being one of them, the later is concerned exclusively with only sick textile under taking i.e not with textile industry as a whole, but only with one aspect of it. It was observed in The Hingir-Rampur Coal Co., Ltd. And Others, v. The State of Orissa and Others (1961 SCR (2) 537) (17).

“The functions of the Development Councils constituted under this Act prescribed by section 6 (4) bring out the real purpose and object of the Act. It is to increase the efficiency or productivity in the scheduled industry or group of scheduled industries, to improve or develop the service that such industry or group of industries renders or could render to the community, or to enable such industry or group of industries to render such service more economically.”

No doubt under Section 18A of Act of 1951, the Central Government is empowered to assume the management of an industrial undertaking, in certain cases, but the main object of the Act of 1951 was to provide for the development and regulation of industries mentioned in the first schedule. The power that was taken by the Central Government to take over the management was for a limited object and for a limited time so as to put the industrial undertaking back on its feet and then to return it back to the old management. This was hardly a satisfactory method of dealing with sickness in the industry. If anything, it placed a premium on mismanagement. Some of the managements may even have welcomed the intervention of the government who would nurse the undertaking back to health by spending on the administration of the mills and increasing its profitability and when the sick mill had recouped to return it back to the very management which had been responsible in the first instance for its sickness. It is obvious that if the objective was to advance public good by modernising the industry so that it could subserve the interest of general public, provisions of Act of 1951 were grossly inadequate to meet the need of the time. Though the government had taken over under its management certain textile undertakings, the circumstances in other units were also showing symptoms of sickness in the sense that either they were lying closed for some time or that the mills had been leased out to certain persons who were not interested in developing them on long term basis but were only interested in short terms gains. In other cases investigation committees which had been appointed had reported that the mills were sick and should be taken over. It was to solve these problems connected with the sick textile undertakings that the Government had necessarily to consider passing some special measures. It was apparently in pursuance of this pressing and immediate need that the impugned Ordinance was first issued which was replaced by the impugned Act. The Government also came to the conclusion that as far as the sick textile undertakings were concerned short-terms remedies would no longer suffice and nationalisation of undertakings would have to be resorted to in the public interest. Another serious problem which faced the Government was that once these units had been properly rehabilitated and amount had been spent on it, it would hardly be in public interest that these undertakings should be returned back to the management. While this process of thinking was going on there was a danger that if any delay occurred the assets of these undertakings whose nationlisation was contemplated might be frittered away; thus defeating the very purpose of the legislation. It was in these circumstances that first the impugned Ordinance was issued which was replaced by the impugned Act.

The object of the impugned Act as spelt out from the long title is a very different one, namely to provide for taking over in the public interest of the management of sick textile undertakings pending nationalisation of such undertakings for the expeditious rehabilitation of such-undertakings so that such rehabilitation may sub-serve the interest of the general public by the augmentation of the production and distribution at fair prices of cheaper varieties of cloth. The impugned Act thus deals only with one aspect of one industry namely the sick textile undertakings. It is not concerned with any other industries included in the schedule of the Act of 1951. The impugned Act does not unlike the Act of 1951, concern itself with healthy undertakings, even in textile industry. One major and basic difference between the act of 1951 and the impugned act is that the undertakings which have been taken over by the impugned Act were taken over as a measure of immediate necessity pending their nationalisation. It is important in this regard to know the circumstances which prevailed when the Parliament passed the impugned Act. Although the statement of the objects and reasons appended to a bill is not admissible as an aid to the construction of the Act as passed, yet it may be referred to only for the limited purpose of ascertaining the condition prevailing at the time which necessitated the making of law vide A. Thangal Kunju Musaliar v. M. Venkatachalam Potti (AIR 1956 SC 246) (18). The statement of objects and reasons may be referred to and are relevant for the understanding of the circumstances under which the Act was passed and the reasons which necessitated it. It would appear that the principal reason which necessitated the bringing forth of the impugned Ordinance was the need for long-term rehabilitation of the undertakings in question in order to maintain production and employment and further to ensure maximization of production and distribution at fair price of cheaper varieties of cloth which could not be undertaken under any of the existing statutory provisions. It appears that as large sums were required to be invested in the operation of these undertakings for their modernization and that necessarily required larger investment and inevitable a longer period, action under the Act of 1951 for take over for a limited period was unpractical and had to be ruled out. This was because the maximum period for which an undertaking could be taken over under the Act of 1951 was 15 years. Obviously it was not in the public interest that the State should invest large sums of public money in these undertakings with a view to modernize them and bring them back to health and then return it back to the old management. This course would hardly be conducive to public good and would be open to the criticism of use of public funds for the benefit of private interests. A policy decision therefore was taken by the Government to nationalise such undertakings, as in its view that alone could safeguard and subserve general good of the community at large. Once that decision was taken by the Government a genuine apprehension arose in its mind that unless the management of these undertakings was immediately taken over there might be large scale frittering away of assets which would undoubtedly be detrimental to the public interest. A reference to the long title of the impugned Act would also show that these sick textile undertakings have been taken over pending nationalisation of such undertakings and for the expeditious rehabilitation of such undertakings so that such rehabilitation sub-serves the interest of general public.

The policy and purpose of a given measure may be deduced from a long title and the preamble vide Bishambhar Singh v. State of Orissa (AIR 1954 SC 139 at p. 144) (19) and in re: The Kerala Education Bill 1957, Special Ref. No. 1 of 1958 (AIR 1958 Supreme Court 956) (20). The title and preamble, whatever their value might be as aids to the constructions of a statute, undoubtedly throw light on the intent and design of the Legislature and indicate the scope and purpose of the Legislation itself; vide Poppatlal Shah. Partner of M/s Indo Malayan Trading Co. v. The State of Madras (AIR 1953 Supreme Court 274 (21). ‘The title of the statute is an important part of the Act and may be referred to for the purpose of ascertaining its general scope, and throwing light upon its construction,’ vide Interpretation of Statutes, by Maxwell, 12th Edition, Page 4. It was in these circumstances that the impugned Act came to be passed. This clearly brings out a sharp difference between the case of the petitioners and others which are covered by the impugned Act and those which are being left out. It is therefore, futile for the petitioners to say that the act of 1951 and the impugned act operate in the same field or cover the same eventuality. That this is not so will be further clear if a reference is made to Section 4 (2) of the impugned Act. Section 4 (2) says that if after the commencement of the Act any investigation is ordered under Section 15 and further it is reported after such investigation that the management of such textile undertaking ought to be taken over, under Section 18A of the Act of 1951, the Central Government, may if it is satisfied after consideration of such report and other relevant matters that such undertaking ought to be declared to be sick textile undertaking make a declaration to that effect and further declare that the management of such textile undertaking ought to be taken over by it under this Act and on and from the date of such declaration the textile undertaking specified in such declaration shall be deemed to be a sick textile undertaking. It is important to note that the mere passing of an order under Section 18A of the Act of 1951 does not automatically result in the inclusion of such undertaking in the impugned Act. The Central Government has first to give a declaration before a textile mill will be included within the impugned Act. Had these two Acts been for the same purpose, Section 4 (2) of the impugned Act instead should have provided that where after the commencement of the impugned Act any order is passed under section 18a of act of 1951 with respect to any textile undertaking, the same would be automatically deemed to be a sick textile undertaking. But this not having been provided it shows the intention of the legislature to treat the act of 1951 and the impugned act as being separate and so serving distinct and different purposes.

We were referred to some of the provisions of the impugned Act and the Act of 1951 for the purpose of showing that the former were more onerous than the latter. One of the differences pointed out is that under the Act of 1951 section 18 (B) (1) (D) and 18 (F) (G), the controller has himself to take possession of the undertaking and to make inventories, the period being six months whereas under the impugned Act Section 5 (6) imposes an obligation on the person-in-charge of management to prepare an inventory within ten days, and the failure to do so entails punishment under section 15. Punishment under the Act of 1951 is said to be only upto 6 months whereas under the impugned Act it is said to be seven years. Another difference pointed out was that under the Act of 1951 the rights of the shareholders under section 397 and 398 was kept intact while the same was not available under the impugned Act, and thus some of the rights of shareholders were kept intact. Another difference pointed out was that under the impugned Act power is given to terminate the contract of employees after one month's notice whereas no such power was given under the Act of 1951. We do not agree that because under the Act of 1951 the controller has to prepare the inventory whereas the responsibility has been cast under the impugned Act on the person who is in charge of the management to prepare an investory by itself amounts to discrimination. The provision requiring a person in charge of the management of a sick textile undertaking to prepare an inventory is in accord with the object of the Act which is to get the full list of the inventories within the shortest possible time and it is only natural and reasonable to expect that the person who is in-charge of the management would be the best person to give such a list and responsibility therefore has been correctly put on him. This provision has a laudable object of seeing that the assets and inventories of the mill are not taken away surreptitiously. The other differences are regarding rights of the employees and the shareholders and it is futile to compare it with the rights of the management. That apart, the argument of onerousness is not really available to the petitioners. The fallacy in the argument stems from treating Act of 1951 and impugned Act as serving the same purpose. As we are holding that they subsurve different purposes there is no logic in comparing their provisions. They are meant for different objects and the onerousness of provisions of one Act can have no relevancy to the validity of the other Act.

Reference by the counsel for the petitioners to “Northern India Caterers (Private) Ltd. and another v. State of Punjab and another” (AIR 1967 SC 1581) (22) has no relevancy. There the Court was considering the vires of Punjab Public Premises and Land (Eviction and Rent Recovery) Act (31 of 1959). It found that the procedure under section 5 of the Punjab Act 31 of 1959 is obviously more drastic and prejudicial than the one under the Civil Procedure Code and as the Court found that there was unguided discretion of the Collector to resort to one or the other and to pick and choose some of those in occupation of public properties and premises for the application of the more drastic procedure under Section 5, it held that section has lent itself open to the charge of discrimination and as being violative of Article 14. Thus as the Act of 1951 and the impugned Act operate in their own separate fields and have different objects and purposes of their own the argument of discrimination on the ground of onerousness is misconceived and must be rejected.

In considering the validity of the impugned statute on the ground that it violates Article 14 it would first be necessary to ascertain the policy underlying the statute and the object intended to be achieved by it. In this process the preamble to the Act and its material provisions can and must be considered. Having thus ascertained the policy and the object of the Act the Court should apply the dual test in examining the validity. Is the classification rational and based on intelligible differentia; and has the basis of differentiation any rational nexus with its avowed policy and object ? If both these tests are satisfied the statute must be held to be valid; and in such a case the consideration as to whether the same result could not have been better achieved by adopting a different classification would be foreign to the scope of the judicial enquiry, vide AIR 1960 SC 457.

It was also alleged in the petition that Article 14 of the Constitution was violated because approximately 70 mills had been taken over from time to time under the Act of 1951 but only 16 mills out of them had been picked up for coverage, under the impugned Act. It was alleged that approximately 40 undertakings which also were taken over by the Central Government under the Act of 1951 have not been brought under the impugned Act and there was thus discrimination. Further grievance was made that there were at least 15 mills which are closed and not working but those undertakings have not been taken over under the impugned Act. Thus it was claimed that the 40 undertakings are similarly situate and are governed by identical statutory and other relevant factors which govern the cases of the undertakings taken over under the impugned Act on the footing of orders under section 18 (A) of the Act of 1951 having been made in respect thereof. But notwithstanding the said fact the said 40 mills have not been taken over under the impugned Act for nationalisation and thus there was discrimination against the petitioner. An affidavit in reply filed in CW 1051/72 by Mr. J.C Jately, Director, Ministry of Industrial Development dated 13th March, 1972 denies the allegation of favouritism or discrimination. From this counter affidavit it transpires that orders under section 18 (A) of the Act of 1951 had been passed with respect to 64 mills (the Petitioner in CW 1051/72 being one of them). Out of these 64 mills 7 have been included and taken over under the impugned Act. The management of these 7 mills had not been taken over prior to 31st October, 1972. A further affidavit dated 19th April, 1973 was filed by Mr. V.A Rao Under Secretary, Ministry of Industrial Development (affidavit was filed in C.W 1068/72 but with the consent of parties was also treated to have been filed in CW 1051/72). It is explained in that counter affidavit that though orders had been passed with respect to these 7 mills possession could not be taken over by the Central Government before 31st October, 1972 because two of them were with the receiver and regarding two of them there was a stay order by the Courts and with respect to the remaining three including the petitioner in CW 1051/72 orders were passed only on 31st Oct., 1972. Thus these 7 mills which have been included in the impugned Act were those the management of which could not be taken over under section 18 (A) of the Act of 1951 before 31st October, 1972. Thus these 7 mills constitute a distinct class by themselves. As regards the grievance that there were other 15 closed mills which have not been included in the impugned Act, it is stated in the reply that in fact there were 14 mills and not 15 mills as was mentioned by the petitioners with reference to annexure ‘F’ (item 9 not being there). From annexure II to Mr. Rao's affidavit we find that items 1, 2, 3, 11 and 14 have already been taken over under section 18 (A) of the Act of 1951 prior to coming into force of the impugned Act. Items 5, 6, 8, and 9 are denied to be closed mills. With regard to items No. 4, 7, 12, and 13 it is mentioned that a decision has been taken not to take them over as they cannot be restarted with a reasonable input. Regarding item No. 10, it is stated to have been taken over under the impugned Act.

Thus only those 7 mills, the management of which could not be taken over before the appointed date have been included in the impugned Act. There is obvious justification for making this classification between 7 on one side and the 57 on the other. As the management of the other 57 was already with the Central Government there was ample time to take a decision whether to nationalise those undertakings or not without any danger that their assets would be frittered away in the meanwhile by the private management. But with regard to other seven as the management had not been taken over by the Central Government and as once a policy decision has been taken to nationalise those industries, apprehension that the assets might be in the meanwhile frittered away was genuine and immediate steps to prevent it had to be taken and it was for this purpose that these 7 mills and other such textile undertakings were included within the impugned Act.

There is thus obvious and rational basis for classification between those textile undertakings which have been left out of the ambit of the impugned Act and those covered by it and it has a reasonable relationship to the object of the impugned Act which was enacted in pursuance of a policy decision taken with regard to the sick textile undertakings to nationalise them while no such decision has been taken with regard to others left out of the ambit of the impugned Act.

It is obvious that the object of the impugned Act was to meet an emergent situation and to prevent the closure of a large number of textile mills and to take steps for their expeditious rehabilitation so that the same could sub-serve the interest of general public by augmentation of production and distribution at fair prices of cheaper varieties of cloth. It cannot be denied that the prospect of closure of a large number of mills leading to the fall of production of essential commodity like cloth and which would also lead to large scale unemployment called for immediate attention on the part of Parliament on a top priority basis.

While the Government had under its control the 57 undertakings which it has taken over under the Act of 1951 other textile undertakings were also being be set with further difficulties and were either lying closed or were showing symptoms which might lead to their ultimate closure with the necessary unemployment and further bad consequences. Faced with such a situation, the Government had necessarily to decide whether to proceed under the Act of 1951 or to consider whether there is any better alternative. One snag in proceeding under the Act of 1951 was that the undertaking would have to be returned after 15 years (at the maximum) and this necessarily restricted the scope of investment for the purpose of modernization in those mills. In order to properly rehabilitate the undertakings large amounts running into crores of rupees had to be invested to modernize these units and it would be anomalous and ironical and certainly against public interests and welfare if these undertakings were returned back to the very management which, according to the Government's own opinion, was responsible for bringing the undertakings to its present sorry state of affairs. The Government thus having taken a decision that the evil was so rampant that in order to remedy the mischief it was necessary to nationalise these undertakings, the enacting of the impugned Act was the inevitable corollary.

Once a decision regarding nationalisation of these undertakings had been known to the management, it would have been puerile to expect the old management to continue to invest further funds and take steps for rehabilitation and modernization of these undertakings. As a matter of fact the worst thing that could happen to economy would be the uncertainty with regard to the future of any undertaking because in that case neither the private management would take any interest in developing the undertaking nor could the Government take necessary steps in that regard. In our view if faced with that situation the Parliament took a policy decision to include only those textile undertakings (the management of which had not been taken over by the Central Government before the appointed day) in the impugned Act, pending nationalisation of such undertakings, in the public interest, no question of discrimination arises as the classification is based on intelligible differentia and further that differentia bears a rational relation to the object sought to be achieved by the impugned Act.

The next contention was that there was no valid justification to include only 46 mills in the impugned Act, pending their nationalisation while no such decision has been made with regard to other 57 mills against whom orders under the Act of 1951 had been passed. It is claimed that those 57 textile undertakings which are being managed under the Act of 1951 will be restored back to the private management, but the petitioner's undertaking will not be restored because it has been included in the impugned Act, pending nationalisation and there was thus hostile discrimination against the petitioners. This argument proceeds on the assumption as if it is incumbent on the Legislature to nationalise whole industry and that if it resorts to partial nationalisation it is per se discriminatory. We do not agree. It is apparent that large funds are required for rehabilitation and modernization of the undertakings included in the impugned Act. If after considering the question of resources and other relevant circumstances and the immediacy of the problem the Parliament took a policy decision to include only some of the undertakings in the impugned Act, it cannot for that reason alone be said to be violating equality clause of the Constitution.

As observed in Express Newspaper (Private) Ltd. and others v. The Union of India and others (AIR 1958 SC 578) (23), “It is obvious that the enactment of this measure is for the amelioration of the conditions of the workmen in the newspaper industry. It would not be possible for the State to take up all the industries together and even as a matter of policy it would be expedient to take the industries one by one. Even in regard to the workmen employed it would be equally expedient to take a class of employees who stand in a separate category by themselves for the purpose of benefiting them in the manner contemplated. This circumstance by itself would, therefore, not be indicative of any undue preference or a prejudicial treatment being meted out to that particular industry, the main object being the amelioration of the conditions of those workmen”.

“There can be no legal objection to phased programme in the nationalisation of transport services in a state or a district or the framing of one scheme for the district or part of a district where Government makes it clear that each scheme would be implemented in its entirety commencing from different dates has been held in J.Y Kondala Rao and others v. Andhra Pradesh State Road Transport Corporation and others, (AIR 1961 SC 82), (24).

“It is for the legislature to determine what categories it would embrace within the scope of legislation and merely because certain categories which would stand on the same footing as those which are covered by the legislation are left out would not render legislation which has been enacted in any manner discriminatory and violative of the fundamental right guaranteed by Article 14 of the Constitution”, vide Sakhawant Ali v. State of Orissa (AIR 1955 Supreme Court 166 at p. 170), (25).

“The Courts recognise in the Legislature some degree of elasticity in the matter of making a classification between persons, objects and transactions. Provided the classification is based on some intelligible ground, the Courts will not strike down that classification, because in the view of the Court it should have proceeded on some other ground or should have included the class elected for special treatment some other persons, objects or transactions which are not included by the Legislature. The Legislature is free to recognise the degree of harm and to restrict the operation of a law only to those cases where the need is the clearest. The Legislature need not extend the regulation of a law to all cases it may possibly reach, and may make a classification founded on practical grounds of convenience. Classification to be valid must, however, disclose a rational nexus with the object sought to be achieved by the law which makes the classification, vide R.C Cooper v. Union of India (AIR 1970 SC 564) “, (26).

In support of the argument that the classification by placing some undertakings in the impugned Act and leaving out others there was violation of Article 14 the counsel for the petitioners referred to some cases. But none of them are of any assistance. The observations of Bose. J. in Bidi Supply Company v. The Union of India & others, (1956 S.C.R 267) (27) holding that section 5 (7A) of the Income-tax Act was ultra vires Article 14 of the Constitution as it gave to the executive unlimited power to order transfer of a case of assessee from one place to another without giving any hearing and because such a power was not hedged around with reasonable restrictions are not relevant to the case before us apart from the fact that in a later case in Pannalal Biniraj v. Union of India (1957 SCR 233) (28) this view was not accepted and the Court held that section 5 (7A) of the Indian-Income-Tax Act was a measure of administrative convenience and was constitutionally valid and did not infringe any of the fundamental rights conferred by Articles 14 and 19 of the Constitution.

In the present case the legislature itself has chosen to make the classification and there is no discretion with the executive.

Next case referred to was K.T Moppil Nair v. State of Kerala (AIR 1961 SC 552) (29). In that case land tax had been imposed at a flat rate per acre without reference to the income either actual or potential from the property or to the value of the soil. The Court held that as there was no attempt of classification inequality is writ large on the Act.

In State of Andhra Pradesh and another v. Nalla Raja Reddy and others (AIR 1967 SC 1458) (29a) the imposition of land revenue assessment was held to be arbitrary as the Court found that the classification based on “ayacut” has no reasonable relation to the duration of water supply and also that the minimum rate fixed had no relation to the quality or the productivity of the soil.

In New Manek Chowk Spg. and Wvg. Mills Co. Ltd. v. Municipal Corporation of the City of Ahmedabad and others (AIR 1967 SC 1801 (30) the Municipal Corporation of Ahmedabad had imposed property tax on the textile mills on the basis of flat rate per 100 sq. ft. The Court found that this method was not one generally recognised for ratings and that applied indiscriminately it was sure to give rise to inequality as there had been no classification of the factories on any rational basis.

Next case referred was Nagpur Improvement Trust v. Vithal Rao and others (1973 (1) SCC 500) (31). In that case the validity of Act was challenged on various grounds; one of them being that it was in violation of Article 14 of the Constitution in as much as it empowered the acquisition of land at prices lower than those which would have been payable if the same had been acquired under the Land Acquisition Act. It was held by the Court that different principles of compensation cannot be laid down if the land is acquired for or by an Improvement Trust or Municipal Corporation or the Government because as far as the owner is concerned it does not matter to him whether the land is acquired by one authority or the other. The Court also observed that the existence of two Acts enable the state to give one owner different treatment from another equally situate and the owner who is discriminated against can claim the Protection of Article 14. This case has no applicability as we have already held that the objects of the impugned act and the act of 1951 are different.

In the resent case the grievance made out is only this that if the purpose of impugned Act is the rehabilitation of the sick textile undertakings why is it that the Parliament has only included the undertakings mentioned in the First Schedule to the impugned Act and left out others though covered by the Act of 1951. This is really an argument of either covering all by the same legislation or none at all. Now a legislature does not have to tax everything in order to tax something. It can pick and choose districts, objects, persons, methods and even rates of taxation as long as it does reasonably vide Willis, Constitutional Law of United States, p. 587.

In this connection reference may with advantage be made to Vivian Joseph Ferreria and another v. Municipal Corporation of Greater Bombay and others (1972) 2 S.C.R 257 (32) where the vires of Bombay Building and Repairs and Reconstruction Board Act, 1969 imposing cess on residential buildings in the city of Bombay was challenged. Challenge was made to the Act on the ground that there was no classification and no rationale in dividing the residential and non-residential buildings as a number of buildings falling in both groups had been found to be in imminent dangerous condition and posed the problem of danger to human lives and of collapse and therefore both the kinds ought to have been subject to the Provisions of the Act. Repelling this challenge, Shelat J. (who spoke for the Court) noticed that due to a variety of circumstances and increasing pressure on residential premises, house collapse in large numbers every year raised problems which were of imminent concern to the State and observed that if in these circumstances the legislature took a policy decision to give priority to the residential tenant premises in respect of which in its opinion, the danger was graver and more imminent, no challenge to the division between residential and non-residential premises can be sustainable particularly when dealing with a part of the problem and confining its treatment to residential premises only was considered feasible” “.. . The classification of residential premises from the rest and that between those existing at the time when the Act was brought into force from the new ones which might be built thereafter can be regarded as based on intelligible differentia and related to the objectives and their feasibility which the legislature had in mind while undertaking the questioned legislation.”

In “Miss Rita Kumari v. Union of India and others” (1973) 1 SCC 454 (33) the Government of India had introduced a scheme by which a certain number of seats in Government Medical Colleges were reserved for repatriates from Burma but only for those who came on or after June 1, 1964. This was challenged as making discrimination between those repatriates like the petitioners who had come from Burma earlier to the said date i.e, June 1, 1964 and those who came subsequently. This challenge was negatived by the Court with the observation that though the petitioners were repatriates like some of the respondents but there was a difference between the two categories as the former had come to India earlier while the respondents had immigrated much later. The Court, therefore, found that as the objects of the rule creating reservations of seats was rehabilitation and re-settlement it cannot be said that the classification so made administratively had no reasonable nexus to the objects in view.

Reference may also be made to the observations of Holmes J. in Louisville Gas & E. Co. v. Coleman (277 U.S 52) (34) where the learned judge observed that it might as well or nearly as well be a little more to one side or the other, but when it is seen that a line or point there must be, and that there is no mathematical or logical way of fixing it precisely the decision of the legislature must be accepted unless we can say that it is very wide of any reasonable mark.

When talking of discrimination simply because the same law is not made universally applicable, it must be remembered that the equality at which the ‘equal protection’ clause aims is not a disembodied equality. The Fourteenth Amendment enjoins the equal protection of laws, and laws are not abstract propositions. They do not relate to abstract units A, B & C but are expressions of policy arising out of specific difficulties addressed to the attainment of specific ends by the use of specific remedies vide Harbert Tigner v. State of Taxas (310 U.S 141) (35).

It is well settled that it must be presumed that the legislature understands and correctly appreciates the need of its own people that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds vide Shri Ram Krishna Dalmia and others v. Shri Justice S.R Tandolkar and others (AIR 1958 SC 538) (36).

Thus the Parliament was the best judge of which particular undertakings it wanted to nationalise and once it took the decision to restrict it to these 46 mills it was only natural and proper that it should immediately take them over pending nationalisation, otherwise the object of the impugned Act might be defeated.

We, therefore, do not find any violation of Article 14 simply because the impugned Act includes 46 textile undertakings only and does not include those 57 textile undertakings the management of which had already been taken over under section 18 (A) of the Act of 1951 and thus was already vested in the Central Government.

The next ground urged in support of the assertion that the impugned Act violates Article 14 was that Section 4 (1) which provided that on and from the appointed day (i.e, the 31st October, 1972) the management of all the sick textile undertakings, specified in the First Schedule shall vest in the Central Government was discriminatory, as it had arbitrarily picked up that date.

It is pointed out that had the management of the petitioner's undertaking been taken over under the Act of 1951, before the appointed day, they would have escaped being included in the impugned Act and this makes the Act per se discriminatory. We do not agree.

It is apparent that legislature when passing an Act has to fix some date for its commencement. It is only natural in those circumstances for the legislature to declare that on and from a particular date which it specifies the provisions of the Act will become applicable. Obviously when the Act comes into force it will apply to those which fall within its provisions. A sick textile undertaking has been defined in the impugned Act, and section 2 (d) (iv) and (v) cover those undertakings the management of which had not been taken over by then under the Act of 1951. By that provision no favouritism or undue favour has been shown to any particular undertaking, nor any hostile discrimination has been shown against the petitioners. The definition clause makes the provisions of the impugned Act applicable to the petitioner as well as others who are similarly situate and the reference to the appointed day is applicable to all cases. The date is thus only a matter of administrative convenience.

Per se there is nothing discriminatory in applying the impugned Act to those undertakings whose management had not been taken over as they form a distinct class from those undertakings which had been taken over under the Act of 1951 earlier by the Government. Another vital difference between the two groups was that the undertakings which are covered by the impugned Act have been taken over pending nationalisation and thus there is nexus to the object sought to be achieved by the impugned Act.

In this connection it is important to note that in R.C Cooper v. Union of India (AIR 1970 SC 564) only those 14 banks had been nationalised whose deposits shown in their returns as furnished on the last Friday of June 1969 to the Reserve Bank of India were not less than 50 crores. The Supreme court held that this classification was valid because it took the view that it was open to the legislature not to extend the regulation of a law to all cases it may possibly reach and may make a classification founded on practical grounds of convenience.

In challenging the constitutional validity of Travancore Taxation Income (Investigation Commission) Act on the ground of violation of Article 14 it was urged before the Court that discrimination was inherent in terms of section 5 (1) by reason of its operation being limited only to those persons whose cases were referred to the Commission on or before 16th February, 1950 and that this arbitrarily left out persons who had evaded the payment of tax on income made during the war period but whose cases were not referred to the commission on or before that date although they were otherwise similarly situated. Rejecting this contention the Court observed. “We are of the opinion that the fixation of the date for references for investigation by the Government to the Commission viz., 16-2-1950 was not an attribute of the class of substantial evaders of income-tax which were intended to be specifically treated under the drastic procedure prescribed in the Travancore Act 14 of 1124 but was a mere accident and a measure of administrative convenience vide T.K Musaliar v. Venkatachalam (AIR 1956 SC 246) (37). In the present case date fixed is applicable to all in the same class. Reference may be made to State of Madras v. Parvathi Ammal (ATR 1957 Madras 42) (38) where the following excerpts from Willoughby in his Constitutional Law is extracted that “.. . no one is guaranteed that in fact, through the fortuitous operation of a law which in itself is not discriminative, a special burden may not be imposed or the enjoyment of a privilege taken away.”

If there was equality and uniformity within each group, the law could not be discriminatory, though due to fortuitous circumstances in a peculiar situation some included in a class might get some advantage over others, so long as they were not sought out for special treatment vide Khandige Sham Bhat and others v. The Agricultural Income Tax Officer [1963 (3) SCR 809] (39).

And every law must have a beginning or time from which it operates, and no rule which seeks to change the law can be held invalid for the mere reason that it effects an alteration in the law. . . It cannot be attacked on the ground of discrimination which is said to consist in the rule having drawn a dividing line at the date when it came into force for determining whether the allotment was valid or not vide Bihari Lal Batra v. Chief Settlement Commissioner (AIR 1965 SC 134), (40). The challenge on the ground of violation of Article 14 therefore fails.

Re-Article 19:

It is common case that the President issued a proclamation of emergency under Article 352 of the Constitution on December 3, 1971 and that it is still in operation and has not been revoked. While a Proclamation of Emergency is in operation, nothing in Article 19 shall restrict the power of the State as defined in Part III to make any law or to take any executive action which the State would but for the provisions contained in that Part be competent to make or to take.

As the impugned Act has been passed during the operation of the Proclamation of Emergency, Mr. Sen did not address any arguments on the basis of alleged violation of article 19 by the impugned act. Mr. Ved Vyas, the counsel for the petitioners in C.W 1068/72 however sought to invoke Article 19. But Mr. Ved Vyas could not ignore that the proclamation of Emergency was as a matter of fact in operation. He, however, sought to argue that the continuance of the Proclamation of Emergency at the present time was a fraud on the Constitution and was an abuse of the powers vested in the President by the Constitution, as according to the learned counsel, there was no material on the basis of which the President could be satisfied that a grave emergency exists at present. The counsel suggested that the Proclamation of Emergency was made in the wake of circumstances then prevailing and as those circumstances are now non-existent, there was no justification in law for the Proclamation of Emergency to be continued. This argument thus wants this Court to decide that there are no circumstances justifying the continuance of Proclamation of Emergency. It is unnecessary for us to determine the larger question whether it is open to a party to challenge the continuance of the Proclamation of Emergency on the ground that the condition precedent for the satisfaction of the President does not exist any longer and that continuance will be nothing but a colourable exercise of power and, therefore, liable to be struck down or that the satisfaction of the President under Article 352 is not justicable and is immune from challenge in a Court of Law. This is because no specific or even indirect challenge was made in the petition to the Proclamation of Emergency or to the continuance of the same. The result, therefore, has been that the respondent, Union of India has not been given any opportunity to meet this point. As the point sought to be raised by Mr. Ved Vyas during arguments has not been raised in the petition we feel that it would not be appropriate for us to deal with it especially as such a contention must depend on a number of facts which must be pleaded first. We, therefore, do not think that Mr. Ved Vyas can be allowed to urge this point. As we are not deciding this point, it is necessary to discuss “Manohar Lal, v. Emperor” AIR 1943 Lahore 1) 40a and “Price Brothers and Co. v. The Board of Commerce of Canada” (54 DLR 286 (41) referred by Mr. Ved Vyas. We may however, refer to “P.L Lakhanpal v. Union of India” (AIR 1967 Supreme Court 243) (42) wherein their lordships have observed that a proclamation issued under clause 1 of Article 352 may be revoked only in the manner laid down by clause 2 and rejected the contention that as for sometime past there was no armed aggression against the territory of India, the continuance of the proclamation was unjustified. Challenge, therefore, on the ground of Article 19 fails.

Re: Article 31:

The impugned Act is also claimed to infringe Article 31. It is alleged that the taking over of the management by the impugned Act amounts to acquisitioning and requisitioning by the authorities but without paying any just compensation. The compensation which is payable to the petitioners for the taking over of the management and the assets of the properties is stated to come to Rs. 47 (it is Rs. 26 in C.W 1068/72) approximately per month after 8,000 spindles which are not in use are taken into account whereas if the said spindles are taken into account the compensation payable to the petitioner would come to a sum of Rs. 34. It is said that there is no basis for fixation of compensation and the whole amount fixed is illusory and is in violation of fundamental rights of the petitioner guaranteed under Article 31 of the Constitution. In the return affidavit filed by the respondent the position taken is that the provisions of the Act do not purport to acquire the property of the petitioner. The ordinance and the impugned Act are said to be covered by the provisions of 31 A, 31 B and 31 C. It is also claimed that under the amended provisions of 31 (2), it is not open to the petitioner to challenge the amount that is payable under the impugned Act. It is also claimed that the impugned Act will fall within Article 31 C, as being an enactment in pursuance of the Directive Principles of State Policy contained in Article 39 (b) & (c) of the Constitution.

Reliance by the respondent on 31 A, 31 B is without any merit. It is now well settled that Article 31 (A) (1) (a) has relevance to agrarian reforms and development vide “Nagpur Improvement Trust and another v. Vithal Rao and others” (1973) 1 SCC 500) (43).

Article 31 B validates those Acts which have been included in the Ninth Schedule. The impugned Act is not one of them and, therefore, 31 B is not applicable. Article 31 C is equally inapplicable as the impugned Act has not been passed to give effect to the policy of the State towards securing the principles specified in clause (b) or clause (c) of Article 39. The impugned Act has as its object the taking over of the sick textile undertakings with a view to rehabilitating them and modernizing them pending the nationalisation of such undertakings.

The next question is whether there has been infringement of clause (2) of Article 31 of the Constitution. Mrs. Pappu sought to contend that by the impugned Act there has been no acquisition or requisition of the property of the petitioner and therefore this Article was not applicable. According to the learned counsel all that had been done by the impugned Act was to take over the management of the undertaking and this did not amount to requisitioning of the property. We were referred to Guru Datta Sharma v. State of Bihar and another (AIR 1961 SC 1684) (44) where it was held that the deprivation of the land holder under the Bihar Forest Act of 1946 of the right of management and control over forests without his legal title there to or the beneficial enjoyment thereof being affected does not amount to acquisition of land within Section 292 (2) of the Government of India Act, 1935. We do not think that this authority has any relevancy at all, as Section 299 only dealt with compulsory acquisition and did not include requisition as in clause (2) of Article 31. Reference to Section 4 (1) of the impugned Act shows that on the appointed day the management of all the sick textile undertakings shall vest in the Central Government. Section 4 (3) further clarifies that sick textile undertakings shall be deemed to include all assets rights, power, privilege of textile company in relation to the said sick textile undertaking and all property moveable and immovable including, land, building, workshop automobiles, cash balances as were immediately before the appointed day, in the ownership, possession, power or control of the textile company whether within or outside India. It is apparent that when a management of the sick textile undertaking has vested in the Central Government under the impugned Act, the textile company though legally continues to be the owner of the textile undertakings, is deprived of one of its rights viz. to manage the textile undertaking and is denied the right to deal with any of the assets. In that situation this may not amount to acquisition, but will certainly be requisitioning as the Central Government has taken possession of the textile undertaking in the only manner in which it is capable of being taken over, short of acquisition. That the taking over of the management of any property by the State is considered by the Constitution itself as amounting to requisition will be clear if a reference is made to Article 31A (1) (b) which provides that notwithstanding anything contained in Article 13 no law providing for the taking over of the management of any property by the State for a limited period either in public interest or in order to secure the proper management of the property shall be deemed to be void on the ground that it takes away or infringes any of the rights conferred by Article 14, 19 or 31. It is apparent that if the taking over of the management of any property by the State was not considered as amounting to compulsory requisition within the meaning of Article 31 (2) there would have been no need to provide for such an exception in case the take over is for a limited period. There is thus no escape from the conclusion that the impugned Act has compulsorily requisitioned the property of the petitioners and, therefore, clause (2) of Article 31 would be attracted.

We may also notice that Mrs. Pappu argued that as the taking over of the management by the impugned Act was pending nationalisation, it was for a limited period and the same was covered by Article 31A (1) (b). We do not agree. The specification for a limited period mentioned in Article 31 A (1) (b) necessarily assumes that after the expiry of a limited period the management will be returned to the old management. But the impugned Act does not at all contemplate the return to private management and specifically provides for take over of the management of sick textile undertakings pending nationalisation of such undertakings. Thus the take over of management cannot be said to be for a limited period within Article 31 (A) (1) (b).

Proceeding from this position the contention of the counsel for the petitioners is that Section 6 which provides for payment to the owner of every textile undertaking an amount in cash by the Central Government for vesting in it under sub-section (1) and sub-section (2) of Section 4 the management of sick textile undertakings of such company lays down no principles and only gives illusory compensation. Now Article 31 (2) as amended by the Constitution (Twenty-fifth Amendment) Act, 1971 (with effect from 20-4-1972) provides that no property shall be compulsorily acquired or requisitioned save for a public purpose and save by authority of a law which provides for acquisition or requisitioning of the property for an amount which may be fixed by such law or which may be determined in accordance with such principles and given in such manner as may be specified in such law; and no such law shall be called in question in any court on the ground that the amount so fixed or determined is not adequate. This Article as interpreted by the majority of the learned Judges in Fundamental Rights case His Holiness Kesavananda Bharati Sripadagalyaru v. State of Kerala and Another. (Writ petition No. 135 of 1970) (45) decided on 24-4-1973 by the Supreme Court, means in the words of Sikri C.J ‘that a person whose property is acquired can no longer claim full compensation or just compensation but he can still claim that the law should lay down principles to determine the amount which he is to get and these principles must have a rational relation to the property sought to be acquired.. . Parliament cannot empower legislatures to fix an arbitrary amount or illusory amount.’ It was observed by Hegde and Mukherjea JJ. in the same case, ‘There may be several other relevant grounds for fixing a particular amount in a given case or for adopting one or more of the relevant principles for the determination of the price to be paid. In all these matters the legislative judgment is entitled to great weight. It will be for the aggrieved party to clearly satisfy the court that the basis adopted by the legislature has no reasonable relationship to the value of the property acquired or that the amount to be paid has been arbitrarily fixed or that the same is an illusory return for the property taken. So long as the basis adopted for computing the value of the property is relevant to the acquisition in question or the amount fixed can be justified on any such basis, it is no more open to the court to consider whether the amount fixed or to be determined is adequate.

Now sub-section (2) of Section 6 lays down the principles for determining the amount and provides that it shall be computed at the rate of;

(i) fifty paise per one thousand spindles or any part thereof, in the case of a sick textile undertaking having spindles only;

(ii) one rupee per one hundred looms or any part thereof, in the case of a sick textile undertaking having looms only;

(iii) fifty paise per one thousand spindles or any part thereof, and one rupee per one hundred looms or any part thereof, in the case of a sick textile undertaking having both spindles and looms.

The petitioners’ grievance is that this amount is arbitrary and is giving illusory compensation, as the same is fixed without taking into account the individual characteristics of spindles and looms concerned, that is to say, the age thereof or working efficiency thereof and the yield/thereof and is, therefore, per se discriminatory.

Grievance is also made that the assets and property of the undertaking is getting large income and rental and nothing is being paid to the petitioners for all this. In our view the grievance of the petitioners is misconceived and based on misapprehension of the position in law. It is beyond controversy that no law can be called in question on the ground that the amount so determined is not adequate. The principles specified for determining amount on the basis of spindles and looms in section 6 of the impugned act are relevant to the determination of amount and cannot be said to be extraneous or irrelevant for this purpose and, would, therefore, be beyond the pale of challenge.

No doubt the petitioners maintain that the amount fixed by the impugned Act is arbitrary and illusory. But apart from their bald assertion, no material has been placed on record to substantiate this plea as to how and in what manner the amount given for the take over of the management is illusory. If the suggestion is that if amount was computed by taking into account the age and quality of spindles the petitioners would have got more amount than they are likely to get now, this is a grievance about the adequacy of the amount which plea is specifically barred under Article 31 (2) of the Constitution. Here the principles specified are applicable to all without any discrimination and if in working out in practice it results in some getting more compensation for older spindles as compared to others with newer spindles. This relates to the adequacy of the amount and hence not open to protection under Article 31 (2).

Now the impugned Act has taken over only the management of the sick textile undertakings. All the assets which are deemed to vest in the Central Government under Section 4 vest only for the purpose of facilitating and managing the undertakings. It is not as if the property moveable or immoveable or assets belonging to the textile company in relation to the said sick textile undertaking and which vest in the Central Government are being appropriated by it or that it is open to the Central Government to utilise these assets etc. for purposes other than for the benefit of the sick textile undertaking. The only effect of vesting is to keep the assets intact so that the Central Government or the custodian which is appointed to manage the sick textile undertaking can avail of these assets for the purpose of running the textile undertaking which is the very purpose of the impugned Act. It is futile for the petitioners to urge that they are being deprived of their assets and rental income without payment of an amount. As no such assets are being appropriated by the Central Government, there is no law which entitles the petitioners to any amount.

All that has happened is that instead of the petitioners managing the undertakings they are to be managed by the Central Government by virtue of the impugned Act. The argument of the petitioners that they are entitled to compensation for all the property, assets in relation to such textile undertaking cannot be accepted as it is neither warranted in principle nor it is supported by the object of the impugned Act. Manifestly if the management is being taken over by the Central Government all the assets etc. of the textile undertaking form an inextricable part of it and there is no question of paying any amount to the petitioners for it at this stage, because the impugned Act is taking over only the management and is not an Act for nationalising and acquiring the sick textile undertaking.

In our view the petitioners have failed to prove that there has been any non-compliance with Article 31 (2) of the Constitution.

Re: Article 301:

The next challenge was that the impugned Act violated Article 301 of the Constitution. This Article was interpreted in Atiabari Tea Co. Ltd. v. State of Assam, (AIR 1961 SC 232) (46) and Automobile Transport (Rajasthan Ltd. etc. v. State of Rajasthan (AIR 1962 SC 1406) (47) as follows:

“Our conclusion therefore is that when Art. 301 provides that trade shall be free throughout the territory of India it means that the flow of trade shall run smooth and unhampered by any restriction either at the boundaries of the States or at any other points inside the States themselves. It is the free movement or the transport of goods from one part of the country to the other that is intended to be saved, and if any Act imposes any direct restrictions on the very movement of such goods it attracts the provisions of Art. 301 and its validity can be sustained only if it satisfies the requirements of Art. 302 or Art. 304 of Part XIII.”

We do not appreciate how Article 301 is attracted to the present case. The impugned Act has taken over the management of undertakings. There is nothing in the impugned Act which in any way restricts the free flow of trade or impedes it. The impugned Act is not concerned with that aspect at all. There is only a change in the management of the undertaking from private hands to that of the Central Government. We are unable to see how Article 301 has any relevancy at all. That apart Article 301 is subject to other provisions of part XIII. It will thus be seen that the amplitude of freedom guaranteed by Article 301 can be cut down by the Parliament by a law made in the public interest. The impugned Act is a law made by the Parliament. We have already held that this Act does not offend any other Article of the Constitution. The object of the impugned Act is to take over in public interest the management of the sick textile undertakings pending nationalisation. The impugned Act has also as its object the modernisation and rehabilitation of the undertakings with a view to sub-serve the interest of the general public. The impugned Act thus is admittedly in the public interest. That being so the challenge on the ground of violation of Article 301 is futile because the impugned Act in any case conforms to the requirement of Article 302. It was not suggested that the impugned Act in any way over-steps the restrictions mentioned in Article 303. Mr. Sen referred us to State of Mysore v. H. Sanjeevia (AIR 1967 SC 1189) (48), and the District Collector of Hyderabad and others v. M/s. Ibrahim and Co. (AIR 1970 SC 1275) (49) in support of his contention. Both these authorities have no relevancy. In Sanjeevia's case Rule 2 framed under the Mysore Forest Act, absolute prohibition against the transportation of forest produce between the hours of 10 p.m and sun rise was placed. The court held that provisos to R. 2 were not made by the Legislature of the State but were made by the executive government in exercise of the delegated authority and as such the provisos to the rule enacted by the State Government must therefore be deemed to be invalid as infringing the guarantee under Article 301 on the freedom of trade, commerce and intercourse. In M/s. Ibrahim and Co. case the dealers were carrying on the business of sugar and other commodities in the twin cities of Hyderabad and Secundrabad and were registered under the Andhra Pradesh Sugar Dealers Licensing Order, 1963. Later on the State Government passed an executive order the result of which was that the dealers who had licenses for the distribution of the sugar throughout the state were prevented from carrying on their business as before. The court held that the right of the dealers could not be taken away by the executive order contrary to the statutory order and that this was also bad as it violated Article 301 of the Constitution.

It will thus be seen in both the cases that the restriction was imposed either by a statutory rule or by an executive order and what was held was that the guarantee of Article 301 could only be circumscribed by the legislature of a State by passing a law as laid down in clause (b) of Article 304, and as there was no law passed by the legislature of a State there was violation of Article 301. No such question arises in the present case. The impugned Act having been passed by Parliament in public interest as required by Article 302, there can be no question of its being violative of Article 301.

As a result of the above, the attack on the constitutionality of the impugned Act by the petitioners fails.

As a result of our above discussion this writ petition fails and is dismissed. In the circumstances of the case there will be no order as to costs.

Petition dismissed.