K.K Desai, J.:— This is a petition under art. 226 of the Constitution challenging the validity of an order of the Central Government dated March 24, 1962, purported to have been passed under sub-s. (4) of s. 89 of the Companies Act, 1956 (I of 1956) (hereinafter referred to as the Act). The order that was passed is annexed as document No. 7 to the petition. The substance of the order is:

“…in exercise of the powers conferred by sub-section (4) of section 89 of the said Act the Central Government hereby rescinds its Order No. 3(1)-CL.VI/57, dated 29-7-1957.”

2. The previous order was passed also under sub-s. (4) of s. 89 of the Act. That was an “exemption order” granting the petitioner-Company an exemption from the requirements of sub-ss. (1), (2) and (3) of s. 89. The facts leading to the filing of this petition are shortly as follows: The petitioner-Company is a joint stock company registered on May 5, 1947, under the Indian Companies Act, 1913 (VII of 1913). The memorandum of association and the articles of association of the petitioner-Company are annexed as document No. 2 to the petition. It appears that the authorised capital of the Company is Rs. 10 lakhs divided into (a) 38,000 Ordinary shares of Rs. 25 each, and (b) 25,000 Deferred shares of Rs. 2 each. The issued and subscribed capital of the Company is Rs. 7,88,175 divided into 31,527 ordinary shares of Rs. 25 each and Rs. 50,000 divided into 25,000 deferred shares of Rs. 2 each. Admittedly, the Table A in the First Schedule to the Indian Companies Act, 1913, was adopted in a large way, and as regards the voting rights in respect of these shares, the result was that each holder of an ordinary share of Rs. 25 and each holder of a deferred share of Rs. 2 was entitled to the same voting rights, namely, one vote for each share owned by him. The whole of the deferred share capital of Rs. 50,000 was owned by five persons. In anticipation of the coming into force of the Companies Act, 1956, the petitioner-Company made an application to the Central Government in connection with a situation which was likely to arise by reason of the present provisions in ss. 87 to 90 of the Act. In pursuance of what transpired in correspondence between the petitioner-Company and the Central Government, the five share-holders being the owners of the deferred shares of the capital of Rs. 50,000 executed a deed of trust transferring all the deferred shares to the trustees of the trust who now own these shares. The managing agency rights were also made property and subject matter of this trust. After the present Companies Act came into force in April 1956, the Central Government, in pursuance of the powers reserved to it under sub-s. (4) of s. 89, passed an order dated March 30, 1957, exempting the petitioner-Company from the requirements of sub-ss. (7), (2) and (3) of s. 89, in respect of the above 25,000 deferred shares for a period of three months with effect from April 1, 1957. The recitals in the order refer to the application made by the petitioner-Company for exemption and also to the fact that the Central Government was of the opinion that the exemption was “required in the public interest”. By a further order of exemption also passed under sub-s. (4) of s. 89 of the Act on July 29, 1957, the Central Government again exempted the petitioner-Company from the requirements of sub-ss. (1), (2) and (3) of s. 89 in respect of the above 25,000 deferred shares. There are no conditions attached to the above exemption order as regards the period or any other matter. In this order also, one of the recitals is that the Central Government was of the opinion that the exemption was “required in the public interest.”

3. It appears that in February 1960 and thereafter representations were made to the Central Government making certain allegations regarding the management of the Company and requesting the Central Government to withdraw the exemption. In response to the correspondence addressed, the petitioner-Company gave detailed replies regarding all these representations and submitted the same to the Central Government. Ultimately, by the impugned order dated March 24, 1962, it was recited that sufficient time to consolidate its position had been given to the petitioner-Company and that the exemption was no longer required in the public interest; and on the basis of these recitals and in purported exercise of the powers reserved to it under sub-s. (4) of s. 89, the Central Government rescinded the order of exemption dated July 29, 1957. Certain correspondence and representations on behalf of the petitioner-Company were thereafter addressed to the Central Government details of which it is unnecessary to refer here. Having not succeeded in its representations, the petitioner-Company ultimately filed this petition on July 4, 1962, challenging the validity of the above order of rescission of exemption dated March 24, 1962.

4. The substance of the main contention made in the petition is as follows: There is no power under sub-s. (4) of s. 89 of the Act in the Central Government to revoke and withdraw an exemption granted under that sub-section. Having regard to the time-limit mentioned in sub-ss. (1) and (3) of s. 89 and in respect whereof exemption could be granted Tinder sub-s. (4) upon expiry of the time-limit specified in sub-s. (1) there can be no power, express or implied, to revoke orders of exemption previously made. The order of revocation having been passed long after the expiry of the time-limit specified in sub-s. (1) a situation had been created which resulted into impossibility of carrying out the obligations mentioned in sub-ss. (1) and (3). The order, therefore, is arbitrary and without jurisdiction. The petitioners have also made certain other contentions in the petition; but in the view which we are taking we find it unnecessary to recite those contentions here.

5. After the Fifteenth Amendment to the Constitution was passed, the Union of India was joined in this petition as respondent No. 2. The Union of India has not filed separate return in reply to the contentions made in the petition. The case of respondents Nos. 1 and 2 is to be found in the return filed by respondent No. 1. In his return respondent No. 1 has denied the contentions raised by the Petition. Apart from certain preliminary contentions, the reply of the respondents as appearing in the return filed by respondent No. 1 is that the power to grant exemption under sub-s. (4) of s. 89 of the Act implied the power to withdraw that exemption and also obviously the order of exemption. Reliance is strongly placed in that connection on the provisions in ss. 14 and 21 of the General Clauses Act. Respondent No. 1 also contends that the exemption having been withdrawn, the petitioner-Company is now bound to comply with the substantive requirements of sub-ss. (1) and (3) of s. 89 within a reasonable time. He denies that the order of withdrawal is a quasi-judicial order as alleged by the petitioner-Company. He also denies the petitioner's contention that the deferred shares are protected by the provisions of s. 90 read with s. 106 of the Act. The main defence to the petition is that having regard to the provisions in ss. 14 and 21 of the General Clauses Act, there was implied power in the Central Government to withdraw the exemption granted under sub-s. (4) of s. 89. It is admitted that express power was not given by sections of the Act then existing to the Central Government to withdraw or cancel exemptions granted under sub-s. (4) of s. 89.

[His Lordship after dealing with some preliminary contentions raised by respondent No. 1, proceeded.]

6. Counsel for both sides have developed their arguments in connection with the contentions made in the petition on the footing of the contents of ss. 85 to 90 of the Act. The arguments advanced have all been about the true effect and construction of the provisions in s. 89. It is, therefore, convenient to refer to these sections first before mentioning how the arguments were developed. These sections fall in Part IV of the Act relating to “Share Capital and Debentures”. This part begins with s. 82. The first three sections relate to the nature of shares, numbering of shares and certificate of shares. The heading of the portion beginning with s. 85 is “Kinds of share capital”. Section 85 defines “preference share capital” and “equity share capital”. Section 86 provides that the share capital of a company limited by shares formed after the commencement of this Act, or issued after such commencement, shall be of two kinds only, namely: (a) equity share capital; and (b) preference share capital. Sections 85 to 89 have a bearing and affect voting rights attached to, inter alia, deferred shares, issued i.e brought into existence prior to the date of the commencement of the Act. These voting rights are specifically referred to in s. 90 which mentions the extent to which voting rights attached to these shares would continue to be protected. For that reason, in s. 90 it is provided that nothing in ss. 85 to 89 shall affect these rights “except as otherwise provided in section 89”. Section 87 relates to voting rights and provides by sub-s. (1) as follows:

“87. (1) Subject to the provisions of section 89…

(a) every member of a company limited by shares and holding any equity share capital therein shall have a right to vote, in respect of such capital, on every resolution placed before the company; and

(b) his voting right on a poll shall be in proportion to his share of the paid up equity capital of the company.”

7. It is not necessary to refer to the further sub-sections of that section. It is sufficient to emphasise that the intent and purpose of s. 87 is that every shareholder holding equity share capital should be entitled to have a vote, and on a poll should be entitled to voting right in proportion to his share of and/or contribution to the paid up equity capital of the company. This section further deals with preference share capital and holders of preference shares, with which subject we are not concerned in this petition. Section 88 provides, inter alia, that no company shall issue any shares which carry voting rights or rights as to dividend, capital or otherwise which are disproportionate to the rights attaching to the holders of other shares.

8. The relevant parts of s. 89 run as follows:

“89. (1) If at the commencement of this Act any shares, by whatever name called, of any existing company limited by shares carry voting rights in excess of the voting rights attaching under sub-section (1) of section 87 to equity shares in respect of which the same amount of capital has been paid up, the company shall, within a period of one year from the commencement of this Act, reduce the voting rights in respect of the shares first mentioned so as to bring them into conformity with the voting rights attached to such equity shares under sub-section (1) of section 87.

(2) Before the voting rights are brought into such conformity, the holders of the shares in question shall not exercise in respect thereof voting rights in excess of what would have been exercisable by them if the capital paid up on their shares had been equity share capital, in respect of the following resolutions placed before the company,…”

[The resolutions mentioned relate to the appointment of a director or of a managing agent or secretaries and treasurers and agreements in respect of these matters; to the appointment of buying or selling agents; and to the grant of loans and such other matter.]

“(3) If by reason of the failure of the requisite proportion of any class of members to agree, it is not found possible to comply with the provisions of sub-section (1), the company shall, within one month of the expiry of the period of one year mentioned in that sub-section, apply to the Court for an order specifying the manner in which the provisions of that sub-section shall be complied with; and any order made by the Court in this behalf shall bind the company and all its shareholders.

If default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one thousand rupees.

(4) The Central Government may, in respect of any shares issued by a company before the 1st day of December, 1949, exempt the company from the requirements of sub-sections (1), (2), and (3), wholly or in part, if in the opinion of the Central Government the exemption is required either in the public interest or in the interests of the company or of any class of shareholders therein or of the creditors or any class of creditors thereof.

Every order of exemption made by the Central Government under this sub-section shall be laid before both Houses of Parliament as soon as may be after it is made.”

9. Section 90 is in the following terms:

“90. Nothing in sections 85 to 89 shall,—

(a) in the case of any shares issued before the commencement of this Act, affect any voting rights attached to the shares save as otherwise provided in section 89, or any right attached to the shares as to dividend, capital or otherwise; or

(b) apply to a private company, unless it is a subsidiary of a public company.”

10. The main question that arises in this petition is whether under sub-s. (4) of s. 89 of the Act there is power in the Central Government to revoke, rescind and/or withdraw an exemption order once made. Mr. Phadke for the petitioner has submitted that on a true construction of the provisions in ss. 87 to 90, it is clear that once exemption is granted from the obligations created under sub-s. (1) of s. 89 there is no power left in the Central Government to withdraw the exemption. The exemption must always in his submission refer to all the liabilities and obligations created under sub-ss. (1), (2) and (3) of s. 89. The nature of the obligations is such that it could only be discharged in the manner and within the time prescribed in sub-ss. (1) and (3). The manner and time prescribed is such that exemptions once granted cannot be withdrawn. The power to exempt as contained in sub-s. (4) relates to property rights, being voting rights in this case of deferred share-holders. The power once exercised affects and deals with the share-holders and the company in general permanently. The exemption once granted so affects this property and alters the situation in such a manner that it cannot be permissible to retrace the step of exemption once taken. The power is to be exercised on the fulfilment of the conditions mentioned in sub-s. (4). These conditions, if once fulfilled, apply to the facts and circumstances of a company “at the date of the commencement of the Act”. These circumstances cannot be reconsidered after the exemption is granted. He submitted at one stage that the orders of exemption would be quasi-judicial orders but has at a later stage of the proceedings not pressed that contention. His submission is that the power of exemption vested under sub-s. (4) in the Central Government is to be exercised for the reasons of (i) public interest, or (ii) the interests of the company, or (iii) of any class of share-holders, and this power when exercised decides finally matters which cannot be reconsidered. These adjudications and opinions deal, finally and once for all, with rights to property and for that reason there can be no warrant for revoking and/or rescinding them. In developing his arguments, he has mainly emphasised the consequence of the period of one year mentioned in sub-ss. (1) and (3). He relied upon the fact that the orders made under sub-s. (4) are directed to be placed on the Table of the Parliament. He relied upon the provisions in ss. 25(3)(b) and 250(5) of the Act. He has relied upon s. 637A which was pointed out in reply by Mr. Bhabha for the respondents. His further contention was that the mischief that is sought to be dealt with by the provisions in s. 87 relates to oppression of minority by majority. It relates to mismanagement by minority of the affairs of the company. There are other alternative provisions like ss. 397 and 408 which are available to deal with such mischief. He again laid great emphasis on the language of the provisions in s. 90, which, according to him, saved voting rights of previously existing deferred share-holders.

11. Mr. Bhabha for the respondents has contended that some of the arguments made on behalf of the petitioner are not relevant. He also mainly relied upon the provisions in ss. 87 to 90. The burden of his contention was that the only substantive provision which governed the rights of all share-holders from the date of the commencement of the 1956 Act was contained in s. 87(1)(a) read with s. 9 of the Act. According to him, after the date of the coming into force of the Act, having regard to the provisions in s. 87, it was not possible for any company to have any shares by way of equity capital wherein the voting rights were not in proportion to share-holders paid up equity capital of the company. Basing his further arguments on the above contention, he submitted that the provisions in sub-ss. (1) and (3) of s. 89 are merely “machinery sections” to bring the constitution of all the companies into conformity, as regards the voting rights of the share-holders, with the provisions in s. 87. His contention was that there is no fresh obligation of any kind created against any company under sub-ss. (1) and (3) of s. 89. Developing his argument, he stated that each of the sub-sections must be construed as a whole and each throwing light on the other. He had to make this submission having regard to the difficult language regarding time-limit in sub-ss. (1) and (3). His further argument was that having regard to the well-established principle that power to do anything must include power to revoke that thing, and under the provisions in ss. 14 and 21 of the General Clauses Act it was permissible at all times for the Central Government to withdraw exemptions granted under sub-s. (4). Towards this submission he contended that the phrase in sub-s. (3) “shall, within one month of the expiry of the period of one year mentioned in that sub-section, apply to the Court” meant and should be read as “within one month of the expiry of the period of one year from the date of revocation and/or rescission of the order of exemption”. He developed this contention by referring to some authorities where the phrase “the commencement of this Act” had been considered. We will presently refer to these authorities. His case was that having regard to the provisions in s. 14 of the General Clauses Act, the power contained in sub-s. (4) could from time to time be exercised and that under s. 21 of the same act there was implied right to withdraw orders made previously. It is not necessary that the conditions of the time-limit contained in sub-s. (1) of s. 89 should continue to exist for exercising the powers of exemption under sub-s. (4). He denied that the provisions of s. 637A were helpful to the petitioner.

12. The clients of Mr. Bobde being a group of shareholders had applied to be made parties to this petition on September 8, 1964. That application was first made in August 1964 and the consideration of the application was adjourned to hearing of this petition. His clients wanted to raise several controversial facts in connection with the management of the petitioner-Company, and also as regards the controversial question of rights of different groups of share-holders of the Company. We have refused that application as, in our view, it is impossible that such controversies can be decided in writ jurisdiction. Even so, we have permitted Mr. Bobde to advance arguments in connection with the questions raised by the petitioner and the respondents. Mr. Bobde submitted that on a true construction of sub-s. (1) of s. 89, it is not possible that during the one year mentioned in that sub-section any order of exemption can become necessary or be made by the Central Government. He has made certain submissions regarding the true construction and effect of s. 81(1)(a), which we will deal with while discussing that section.

13. In connection with the questions raised by the parties, it has appeared to us that the real question is about the true construction and effect of the provisions in ss. 87 to 90. In connection with the question of implied powers and the application of s. 21 of the General Clauses Act, it is first necessary to mention that in the case of State of Bihar v. D.N Ganguly . [1958] A.I.R S.C 1018. the same question arose. In that case, in the first instance references to arbitration had been made by the Government of Bihar under s. 10(1) of the Industrial Disputes Act, 1947. By a subsequent notification also purported to have been made under the very same provisions the Government purported to supersede the prior notifications of reference to arbitration. This action of the Government was challenged by the petitions filed before the High Court at Patna under arts. 226 and 227 of the Constitution. The contention of the petitioners was that the Government of Bihar had no power or authority to supersede the earlier notifications. The petitioners succeeded in the High Court and the matters were taken in appeal by the State Government to the Supreme Court. Dr. Banerjee for the appellant urged before the Supreme Court that in dealing with the question about the powers of the appropriate Government under s. 10(1) of the Act, the relevant facts which transpired between the parties must be borne in mind. He also argued that the power to cancel a reference made under s. 10(1) of the Act must be held to be implied, and in support of his argument he relied upon s. 21 of the General Clauses Act. It is convenient to quote the section here:

“Where, by any Central Act or Regulation, a power to issue notifications, orders, rules or bye-laws is conferred, then that power includes a power, exercisable in the like manner and subject to the like sanction and conditions (if any), to add to, amend, vary or rescind any notifications, orders, rules or bye-laws so issued.”

14. Now, in connection with this contention, the Supreme Court observed (p. 1021):

“…It is well settled that this section embodies a rule of construction and the question whether or not it applies to the provisions of a particular statute would depend on the subject-matter, context, and the effect, of the relevant provisions of the said statute. In other words it would be necessary to examine carefully the scheme of the Act, its object and all its relevant and material provisions before deciding whether by the application of the rule of construction enunciated by Sec. 21, the appellant's contention is justified that the power to cancel the reference made under Sec. 10(1) can be said to vest in the appropriate government by necessary implication. If we come to the conclusion that the context and effect of the relevant provisions is repugnant to the application of the said rule of construction, the appellant would not be entitled to invoke the assistance of the said section.”

15. The contention of the petitioner before us is that the context and effect of the relevant provisions of the Act is such that it would be repugnant to apply the above rule of construction to the power of exemption created in favour of the Central Government under sub-s. (4) of s. 89. Having regard to the observations of the Supreme Court in the above case it will be necessary to examine the scheme of the Act, its object and all relevant and material provisions. If on such examination it appears to us that the power of revocation claimed by way of implication would be repugnant to the provisions, object and/or the scheme of the Act, we would be justified in holding that the contentions made by the respondents are not tenable.

16. Reference has been made to other authorities where the effect of s. 21 of the General Clauses Act is discussed. In view of the above complete observations of the Supreme Court regarding the true effect of s. 21 in the above decision, we do not deem it necessary to refer to those authorities.

17. We will now consider the question of the true effect and construction of the above sections of the companies act relied upon by the parties.

18. It is clear on a reading of ss. 87 and 88 of the Act that the intent of the provisions of these sections was that every shareholder of equity capital must on a poll have voting right in proportion to his share of contribution to the paid up equity capital of the Company. The Legislature disapproved of all the previously existing disproportion as regards voting rights of parties holding equity capital. The intention of the Legislature was that the disproportion previously existing must not continue. Provision about this matter having been made in ss. 87 and 88, provision was made for protecting the existing disproportionate voting rights of parties holding shares issued before the date of the commencement of the Act. It is clear on a reading of s. 90 that nothing in the above two sections or even s. 89 could affect any voting rights attached to shares issued before the commencement of the Act “save as otherwise provided in section 89”. This provision in s. 90 is clear and unambiguous. In considering the rights of deferred share-holders of any company the Court would be bound to give effect to the above saving provisions in s. 90. Now, it is also clear on a reading of s. 90 that voting rights of the deferred share-holders of the previously existing companies are liable to be altered in the only prescribed manner, that is, in accordance with the provisions in s. 89 and not otherwise. If the above is the effect of the provisions in s. 90, it is difficult to appreciate the argument that the provisions in sub-ss. (1) and (3) of s. 89 do not create any fresh obligations and are merely “machinery sections”. It is difficult to accept this contention that the rights of deferred share-holders are not protected by s. 90 and that they are in fact and for all purposes having regard to the provisions in ss. 87 and 89 of the Act, governed by s. 87. The contention that there is no new obligation created under s. 89, seems to us not justified having regard to the language of sub-ss. (1) and (3) of s. 89. The provision in sub-s. (1) which creates (fresh) obligation is in the phrase—

“…the company shall…reduce the voting rights in respect of the shares first mentioned so as to bring them into conformity with the voting rights attached to such equity shares under sub-section (1) of section 87.”

19. As the provisions in s. 90 exclude altogether the application of s. 87 so as to affect voting rights attached to the share issued before the commencement of the Act, we would not be justified in holding that to such voting rights or to the shares carrying such voting rights, the provisions in s. 87 are directly applicable. On the contrary, it requires to be repeated that though the policy of the law is clear as regards the voting rights in respect of the equity share capital and is contained in ss. 87 and 88, because of the protection granted to the holders of shares issued before the commencement of the Act by s. 90, the voting rights attached to such shares can only be affected by and in the manner prescribed under sub-ss. (1), (2) and (3) of s. 89 and not otherwise.

20. The true effect, therefore, of the provisions in sub-ss. (1) and (3) of the s. 89 is that there was an obligation on all previously existing companies to reduce the voting rights of the deferred shareholders with disproportionately excessive voting rights so as to bring them into conformity with sub-s (1) of s. 87 within one year from the date of the commencement of the Act. Mr. Bhabha contended that the importance in sub-s, (1) of s. 89 is to the period. According to him, there is no emphasis in this section on the obligation to reduce. This was so, according to him, because this must be held to be a “machinery section”. Having regard to the construction which we have arrived at about the provisions in s. 90 read with sub-s. (1) of s. 89, we are unable to accept this contention.

21. In connection with the construction which we have arrived at, the reference to the period of time mentioned in sub-s. (3) is relevant. This subjection refers (i) to the failure of the requisite proportion of any class of members to agree, and (ii) to the reduction mentioned in sub-s. (1). For that reason, if it is found impossible to comply with the provisions in sub-s. (1), it is provided that the company must make an application within one month of the expiry of the period of one year mentioned in that sub-section. The question is: Is it permissible to construe this provision to read ‘within one month of the expiry of the period of one year from the date of revocation of exemption granted under sub-section (4)’ as suggested by Mr. Bhabha? The language of the sub-section is clear. The obligation that is cast on the defaulting companies is to make the application mentioned in the sub-section within one month of the expiry of the period of one year. That provision has relation with the next sub-paragraph in the sub-section which makes it an offence not to make such an application. This phrase in the sub-section directly refers to the period of one year mentioned in sub-s. (1). That period, as we have already pointed out, is of one year from the commencement of the Act. Obviously, the date of the commencement of the Act must for all purposes remain the same. In this case, it was April 1, 1956. The application to Court must therefore be made on or before May 1, 1957. That date is not liable to be extended. Having regard to the clear language in these sub-sections, we are unable to accept this contention made by Mr. Bhabha.

22. The power of exemption referred to in sub-s. (4) must of necessity relate to obligations mentioned in sub-ss. (1), (2) and (3). That is apparent on a reading of the language of sub-s. (4). If our construction of sub-s. (1) is correct, the exemption must relate to the obligation of the petitioner-Company to so alter its memorandum of association and articles of association that the deferred share-holders who contributed Rs. 2 each per share should not have one vote per share. The right of vote of other share-holders who contributed Rs. 25 per share to the equity capital would have to be altered so that the proportion of the voting rights would be equalized in proportion to the capital contribution by each shareholder to the whole of the capital of the company. In substance, the company had to alter its memorandum and articles so that the share-holders had voting rights in accordance with and in proportion to their contribution to the capital of the Company. This change in the memorandum and articles was to be brought about in accordance with the powers reserved to the company and share-holders under the articles of association and the relevant provisions in the Act. It is for this reason that reference is made in sub-s. (3) to “If… it is not possible to comply with the provisions of sub-section (1)” because of “the requisite proportion of any class of members not agreeing” to the resolution proposed for amending the company's memorandum of association and articles of association to bring the voting rights in conformity with, the provisions in s. 87. It is necessary to remember in this connection that it is not the attempt of the Parliament to change the memorandum of association and articles of association of different companies. The Act provides about the manner and method in which these deeds of constitution of companies can be altered. The Legislature did not forget while enacting the provisions of ss. 87 to 90 that the matter of alteration to be made in these documents would require to be carried out in accordance with the usual procedure. It is for that reason that in spite of having made provision relating to voting rights in ss. 87 and 88, by s. 90 protection was given in respect of the previously existing companies and the direct application of these sections was specifically avoided. It was for this reason that in sub-s. (3) Courts were invested with powers which are altogether new. The memorandum of association and articles of association were not sought to be altered by any provisions of law at all. In regard to companies which defaulted in carrying out the obligations created by s. 89, provision was made in sub-s. (3) to empower the Court to get the memorandum and articles altered, and in that connection, to make orders specifying the manner in which the same had to be done. In other words, the Court was empowered to overlook, if necessary, the relevant provisions in the memorandum and articles of different companies as also the scheme of the Act for the alteration of these documents. It is thus clear that the provisions in s. 87 were not made (directly) applicable so as to affect voting rights of the shareholders in respect of the shares issued before the commencement of the Act.

23. What we have discussed above goes to emphasise the fact that on a true construction of sub-s. (4) of s. 89 the exemption that can be granted under that sub-section must of necessity be related to the obligations created under sub-ss. (1) and (3) and the consequential matters referred to in sub-s. (2). This exemption has no relevance to the period of one year mentioned in sub-s. (1). To accept the contention that this has only relevance and bearing on the period of one year would result into the absurd position that by executive action of exemption, the period prescribed by statute in sub-s. (1) could be altered. The contention that the exemption related only to the period of one year mentioned in sub-s. (1) appears to us to be far-fetched and involving the proposition that executive orders could be made to enlarge the time prescribed by statute.

24. The obligations cast on companies under sub-ss. (1) and (3) could be carried out only once and relate to the circumstances of a company as at the commencement of the Act. For the purposes of the time of one year prescribed by sub-s. (1) the only material date is the date of the commencement of the Act. If examination is granted in connection with these obligations at any time, it is difficult to see what other obligations can thereafter survive. Obviously, after the expiry of one year mentioned in sub-s. (1) no obligation can survive. Of necessity, by executive action of withdrawal of exemption once granted, a second and new obligation of the same nature as mentioned in sub-s. (1) cannot be created. The nature of the obligation being of the above kind, it appears to us that the scheme of this section is such that an exemption once granted cannot be withdrawn at any stage whatsoever. The withdrawal of exemption after the period of one year in sub-s. (1) would of necessity result into creation of a new obligation by executive action. This circumstance appears to us to be of such importance that we must come to the conclusion that exemptions once granted under sub-s. (1) cannot be revocable at all.

25. In connection with the argument that the provisions in s. 21 of the General Clauses Act would apply to the power of exemption it is relevant again to notice that the matter of voting rights was, up to the date of the commencement of the 1956 Act, wholly governed in respect of each company by the provisions in its memorandum of association and articles of association. The Act makes specific provision relating to the method and manner of alteration of memorandum of association and articles of association. Reference in this connection can be made to ss. 16 and 17, as also s. 31. It is necessary to remember that where rights of different classes of share-holders are to be affected, the provisions for alteration of articles are more stringent as can be ascertained by reading ss. 106 and 107. Indirect reference to these sections is contained in sub-s. (3) of s. 89 when it states “If, by reason of the failure of the requisite proportion of any class of members to agree it is not found possible to comply with the provisions of sub-section (1)…”.

26. The right of voting is an important right and by a study of the various relevant sections of the Act, it can with case be ascertained that protection of such right is the subject-matter of diverse sections of the Act. There is provision for exercising right of vote so as to affect the whole administration of companies.

27. The consequence of the provisions in the Act relating to general meetings of the shareholders and the right of voting of the shareholders at these meetings and the right of the general meeting to appoint directors and managing agents and to decide other matters is that a group of shareholders controlling a majority of votes controls business, management, and finance of the whole company. This is often done through elected directors. The result of provisions relating to the right of sale of shares and having the transfer of shares registered is that by sale of the controlling block of shares, control of business, management, and finance of a company could be completely transferred in favour of the new purchasers of that block of shares. It is not convenient to refer here in that connection to all the provisions and sections of the Act. It appears to us that these are well-established consequences of the provisions of the Act. It is also permissible to take judicial notice of the fact that in the context of the modern times, large industries and businesses requiring large finances cannot be carried on in private sector except through the machinery of incorporated companies. It is in the context of these provisions, objects and scheme of the Act that we are called upon to construe the provisions in sub-s. (4) of s. 89. It is in this context that we have to find whether it can justifiably be held that the rule of construction as contained in s. 21 of the General Clauses Act is applicable to the power of exemption created in favour of the Central Government under this sub-section. The more relevant provisions in this context are obviously the provisions in ss. 87 to 90. If the construction which we have arrived at as regards the true effect of sub-s. (1) of s. 89 is true, apparently, the exemption that could be given under sub-s. (4) relates to the obligation of the companies existing prior to the date of the commencement of the Act to amend their memoranda of association and articles of association, so as to bring the right of vote in the shareholders into conformity with the provisions in s. 87. It is obvious that obligation as against the companies existing, at the date of the commencement of the Act, can only be found to exist in the provisions in sub-s. (1) of s. 89. That, as we have already said, is the result of the phrases “Subject to the provisions of section 89 in s. 87, and “Nothing in sections 85 to 89” in s. 90, in the first part of the section. The obligation created against these companies under sub-s. (1) of s. 89 was apparently to deal with the mischief of disproportionately excessive voting rights held by shareholders in proportion to the capital contributed by them as against other shareholders who made excessive and larger contribution to the capital of the company. Even so, under sub-s. (4) of s. 89 a right has been conferred on the Central Government to exempt the previously existing companies from the obligation created under sub-s. (1) of s. 89. The opinion, therefore, that the Central Government has to form under sub-s. (4) primarily relates to the question as to whether for any of the reasons mentioned in sub-s. (4), it was desirable, in spite of the provisions in s. 87, that the previously existing companies should carry on the management and business of the company under the control of a few shareholders having disproportionately excessive voting rights as compared to the proportion of their capital contribution as against the other shareholders. The obvious result of the exemption granted under sub-s. (4) in the case of the petitioner-Company was that a few shareholders owning the 25,000 deferred shares continued to control, by exercise of their single vote in respect of each share, the whole of the business, management, and finances of the petitioner-Company. The question that the Central Government had, therefore, to consider and in fact considered was desirability for one or more of the reasons mentioned in sub-s. (4) to allow that situation to continue by granting exemption from the obligations created against the company under sub-s. (1). The opinion had to be based on one of the four reasons mentioned in sub-s. (4), namely: (i) public interest, (ii) interests of the company, (iii) interests of any class of shareholders therein, and (iv) interests of the creditors or any class of creditors thereof. The question had, in view of the language of sub-s. (4), to be decided on the facts which must exist on the date when the obligation mentioned in sub-s. (1) arose and continued to exist against the petitioner-Company. It should have been apparent to the Central Government having regard to the above general scheme of the Act that in the event of exemption being granted, the obligation under sub-s. (1) would cease to exist altogether, and as from the date of exemption the company and its shareholders would proceed to deal with their rights as regards the management, business and finances of the company and their shares as if there was no obligation of any kind against the Company to bring the voting rights of its deferred shareholders into conformity with the provisions in s. 87. It is needless to state that these are extremely important and serious consequences as regards the property rights of the company on the one hand and its shareholders on the other.

28. In addition, it is necessary to repeat that the period of time mentioned in sub-s. (1) was not liable to be extended by any executive action taken under sub-s. (4). The intention of the Legislature was that the obligation must be carried out in the manner prescribed under sub-ss. (1) and (3). The question is whether having regard to the above circumstances, it is permissible to hold that the rule of construction as contained in s. 21 of the General Clauses Act was intended to be applicable to the power created under sub-s. (4). In our view, the situation that would be created by holding that the exemptions granted under sub-s. (4) could be revocable would be entirely contrary and repugnant to the whole of the scheme of the Act. As the administration, management and affairs of a limited company are liable to be controlled by a group of shareholders owning majority of votes it appears to us that it was never intended that the rule of construction in s. 21 of the General Clauses Act should be applicable to the power of exemption vested in the Central Government under sub-s. (4). It is difficult to find that it was permissible for the Central Government, having regard to the provisions in s. 14 of the General Clauses Act, from time to time to pass and revoke orders of exemption under sub-s. (4).

29. It needs to be repeated that the circumstances on the basis whereof the Central Government is to form its opinion that exemption be granted under sub-s. (4) will be circumstances existing during the period in which the obligation cast under sub-s. (1) commenced and continued to exist. That period must expire within one year from the date of the commencement of the Act. It is necessary to state that we do not want to express any opinion as regards the question of the right of a Court to make orders under sub-s. (3), to enable a company to bring its memorandum of association and articles of association into conformity with the provisions in s. 87 even after the expiry of the above period. It is quite possible that the Court would continue to have such powers continuously and at all times. We are, however, not called upon to decide that question.

30. It is necessary to refer here to the case of Juvan Sinhji v. Balbhadrasinhji . [1963] A.I.R Gujarat 209.. Having regard to the facts involved it became necessary in that case for Mr. Justice Bhagwati to consider the true effect of the provisions in ss. 87 to 90 of the Act. The relevant observations in para. 6 at page 215 are as follows:

“…Whatever inequality in respect of voting rights existed under the Articles of Association would have come to an end immediately on the coming into force of the Companies Act, 1956, by reason of the combined operation of Sections 87 and 9 and the new structure of voting rights prescribed by Section 87 would have become operative immediately on the commencement of the Act. Section 90, however, provides that nothing in Secs. 85 to 89 shall, in the case of any shares issued before the commencement of the Act, affect any voting rights attached to the shares save as otherwise provided in Section 89. There is thus an express provision in the act that the provisions of section 87 shall not in the case of any shares issued before the commencement of the Act, affect any voting rights attached to the shares save as otherwise provided in Section 89. The new structure of voting rights prescribed by Section 87 would not, therefore, apply to the shares issued before the commencement of the Companies Act, 1956, save to the extent provided in Section 89.”

31. In further considering the true effect of these sections in para. 14 at page 221 the learned Judge observed:

“…it is obvious that the Company failed to bring the voting rights of the shares into conformity with the voting rights prescribed by Section 87(1) within the period of one year prescribed by Section 89(1) but that cannot make any difference. Even if the Company did not bring the voting rights of the shares into conformity with the voting rights prescribed by Section 87(1) as required by Section 89(1), the voting rights could not be exercised by the members of the Company in accordance with the old Articles of Association after the expiration of the period of one year from the date of commencement of the Companies Act, 1956, in view of the provisions of Section 9. The Company could not by refusing to carry out the provisions of Section 89(1) perpetuate the disproportionate voting rights provided under the old Articles of Association. It was only for a period of one year from the date of commencement of the Companies Act, 1956, that the old voting rights could continue and thereafter the voting rights had to be exercised in accordance with the provisions of section 87.”

32. With respect, we regret that we are unable to agree with the observations in the last quoted passage. The Court has not given due effect to the provisions in s. 90 that the voting rights attached to the shares issued prior to the commencement of the 1956 Act could not be affected except in the manner prescribed by s. 89. The Court has not considered the fact that voting rights could not be affected without necessary alterations in the articles of association of the company by resolutions passed in that connection in accordance with the procedure prescribed by the Act.

33. Reliance has been placed in connection with the true effect of the provisions in s. 21 of the General Clauses Act on the case of Bhola Prasad v. U.A Goswami . [1963] A.I.R Pat. 437.. The observations in that case are to the effect that the provisions of s. 21 contain a rule of construction relating to powers exercised by executive authority under what is described as “delegated legislative powers”. This rule of construction is not applicable to orders of administrative nature. The contention on behalf of the respondent is that the powers to give exemption as contained in sub-s. (4) of s. 89 are of the nature of “delegation of legislative powers” and/or “subordinate legislation”. The rule of construction contained in s. 21 is, therefore, applicable to these powers. We have in this connection already considered all relevant matters and find it unnecessary to further discuss the question.

34. Reference has also been made to the case of K.P Khetan v. Union of India . [1957] A.I.R S.C 676.. In this case also the Supreme Court came to consider the true effect of the provisions in s. 21 of the General Clauses Act. The observations in this case are of the nature similar to the observations in the subsequent case of State of Bihar v. D.N Ganguly, which we have referred to.

35. On behalf of the respondents reference has been made to the case of Rambhau v. D.G Tatke . [1959] A.I.R Bom. 538, S.C 61 Bom. L.R 148. and Parthasarathy Mudaliar v. State of Madras . [1957] II M.L.J 300.. These cases relate to withdrawal of exemptions once granted. In the first case, the observations relate to the withdrawal of exemption granted under the Minimum Wages Act, 1948. In the second case, they relate to the withdrawal of exemption granted under the Madras General Sales Tax Act, 1939. There is no dispute between the parties that exemptions granted for non-application of Minimum Wages Act and Sales Tax Act can always be withdrawn. The reason for this is that the context of the legislative provisions in the cases referred to above clearly indicates the policy to be enforced by executive authority. The context also indicates that the executive authority must have from time to time a right to include and exclude certain industries and goods from the applicability of these Acts. The question in all cases must be, as observed by the Supreme Court in the case of State of Bihar v. D.N Ganguly, to find out upon examination of the scheme and object of the relevant Act and the context in which the powers are conferred if the rules of construction as contained in ss. 14 and 21 are applicable or repugnant.

36. In connection with the true construction of the phrase “at the commencement of this Act” as contained in s. 89, Mr. Bhabha relied upon the case of Kediar Nath v. Kishan Lal . [1952] A.I.R All. 500.. The question before the Court in that case related to the provisions in s. 15 of the U.P Temporary Control of Rent and Eviction Act, 1947. Section 15 of that Act provided:

“In all suits for eviction of a tenant from any accommodation pending on the date of the commencement of this Act, no decree for eviction shall be passed, except on one or more of the grounds mentioned in section 3.”

37. The Act provided for the extension of applicability of the provisions of the Act to the areas notified under the provisions of the Act. The suit for ejectment related to property situate in the area to which the Act had not been applied. Much subsequent to the date of the institutions of the suit by a notification issued under the Act the provisions of the Act were made applicable to the area in question. The question that arose before the Court was whether the suit was pending on the date of the commencement of the Act. On behalf of the plaintiff, it was contended that the suit was not pending “on the date of the commencement of the Act”. In that connection, the Court observed:

“There is no valid ground to make any distinction between ‘the date of the commencement of the Act’ in section 15 and the date when the Act is applied to a particular area”.

38. On the footing of the above construction, the contention made on behalf of the plaintiff was rejected. We do not see how the observations made in that case can affect the true construction and effect of the phrase “at the commencement of this Act” as contained in s. 89 of the Companies Act. In the context in which the phrase is used in s. 89, it is abundantly clear that it is meant to indicate the date from which the obligation mentioned in sub-s. (1) attaches and is created against all the previously existing companies. This date must for all purposes continue to remain April 1, 1956.

39. The result of the above discussion is that in our view the rule of construction as contained in s. 21 of the General Clauses Act is not applicable to the provisions in sub-s. (4) of s. 89 of the Act.

40. The power of exemption created under sub-s. (4) can be exercised once and finally only, and there is no right of revocation of exemption once granted.

[His Lordship after dealing with a point not material to this report, concluded.]

41. In that view of the matter, we find it unnecessary to discuss the various arguments advanced in connection with the true construction of s. 637A on behalf of the petitioner-Company and the respondents. As we are in favour of the petitioner on the main ground of the true construction and effect of sub-s. (4) of s. 89 and/or ss. 87 to 90 of the Companies Act, we deem it unnecessary to decide the further questions raised on behalf of the petitioner-Company.

42. The result is that we must strike down and we hereby declare the impugned order of revocation of exemption dated March 24, 1962, as invalid and of no effect. There shall be a mandamus against the respondents restraining them from enforcing that order of revocation. The respondents will pay the costs of the petitioner-Company.

43. Order accordingly.