Full Judgment Text
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PETITIONER:
SHRI RAM KRISHNA DALMIA
Vs.
RESPONDENT:
SHRI JUSTICE S. R. TENDOLKAR & OTHERS(and connected appeal)
DATE OF JUDGMENT:
28/03/1958
BENCH:
DAS, SUDHI RANJAN (CJ)
BENCH:
DAS, SUDHI RANJAN (CJ)
AIYYAR, T.L. VENKATARAMA
SINHA, BHUVNESHWAR P.
DAS, S.K.
SARKAR, A.K.
CITATION:
1958 AIR 538 1959 SCR 279
ACT:
Commission of Inquiry-Legislation empowering Government to
appoint Commission-Constitutionality-If violates guarantee
of equality before the law-Notification setting up
Commission and conferring Powers there upon Legality of-If
ultra vires the Act Whether Commission usurps judicial
functions-Commissions of Enquiry Act, 1952 (LX of 1952), s.
3-Constitution of India, Arts. 14 and 246 : Seventh
Schedule, Entry 94, List I and Entry 45, List III.
HEADNOTE:
In exercise of the powers conferred upon it by S. 3 of the
Commissions of Enquiry Act, 1952, the Central Government by
a notification dated December 11, 1956, appointed a
Commission of Inquiry to inquire into and report in respect
of certain companies mentioned in the Schedule attached to
the notification and in respect of the nature and extent of
the control and interest which certain persons named in the
notification exercised over these companies. By subsequent
notifications the Central Government made all the provisions
of sub-ss. (2), (3), (4) and (5) Of s. 5 Of the Act
applicable to the Commission and fixed a period Of 2 years
from February 11, 1957, as the period within which the
Commission was to exercise its function and to make its
report. The four persons named filed three applications
under Art. 226 of the Constitution before the Bombay High
Court questioning the validity of the Act and of the
notification and praying for writs for quashing the same.
The High Court dismissed the applications and ordered that
the said notification was legal and valid except as to the
last part of cl. 10 thereof which empowered the Commission
to recommend the action which should be taken as and by way
of securing redress or punishment or to act as a preventive
in future cases. The petitioners as well as the Union of
India filed appeals :
Held, that the Act wag’ valid and intra vires and that the
notification was also valid excepting the words " as and by
way of securing redress or punishment " in cl. 10 thereof
which went beyond the Act.
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The Act was enacted by Parliament under entry 94 of List I
and entry 45 of List III of the Seventh Schedule of the
Constitution which relate to inquiries for the purposes of
any of the matters in List I and in Lists 11 and III
respectively. The inquiry which may be set up by a law made
under these entries is not limited,
280
in its scope and ambit, to future legislative purposes only.
Such a law may also be for administrative purposes and the
scope of the inquiry under such a law will cover all matters
which may properly be regarded as ancillary to such
inquiries.
The Act does not delegate to the Government any arbitrary or
uncontrolled power and does not offend Art. 14 Of the
Constitution. The discretion given to the Government to set
up a Commission of Inquiry is guided by the policy laid down
in the Act that the executive action is to be taken only
when there exists a definite matter of public importance
into which an inquiry is necessary.
Kathi Raning Rawat v. State of Saurashtra, [1952] S. C. R.
435, applied.
The Commission is merely to investigate, record its findings
and make its recommendations which are not enforceable
proprio vigore. The inquiry or report cannot be looked upon
as judicial inquiry in the sense of its being an exercise of
judicial function properly so called and consequently-
Parliament or the Government cannot be said to have usurped
the functions of the judiciary.
The notification was well within the powers conferred on the
Government by s. 3 Of the Act and did not go beyond the
provisions of the Act. The conduct of an individual person
or company or a group of individual persons or companies
may, in certain circumstances, become a definite matter of
public importance within the meaning Of s. 3(i) and call for
an inquiry. Besides, s. 3 authorises the Government to
appoint a Commission. of Inquiry not only for the purpose of
making an inquiry into a definite matter of public
importance but also for the purpose of performing such
functions as may be specified in the notification.
It has not been established that the petitioners and their
companies have been arbitrarily singled out for the purpose
of hostile and discriminatory treatment and subjected to a
harassing and oppressive inquiry. In matters of this kind
the Government has of necessity to act upon the information
available to it. It is the best judge of the reliability of
the source of the information and if it acts in good faith
and honestly comes to the conclusion that the act and
conduct of the petitioners and the affairs of their
companies constitute a definite matter of public importance
the Court will be slow to adjudge the action to be bad and
illegal. The bare possibility that the powers may be
misused or abused cannot Per se make the power bad. The
power having been entrusted to the Central Government and
not to any petty official, abuse of power cannot be easily
assumed.
In determining whether there is any intelligible differentia
on the basis of, which the petitioners and their companies
have been grouped together it is permissible to look not
only at the facts appearing in the notification but also the
facts brought to the notice of the Court upon affidavits.
The facts in the present case
281
afford sufficient support to the presumption of
constitutionality of the notification and the petitioners
have failed to discharge the onus which was on them to prove
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that other people or companies, similarly situated have been
left out and that the petitioners and their companies have
been singled out for discriminatory and hostile treatment.
The recommendations of the Commission of Inquiry are of
great importance to the Government in order to enable it to
make up its mind as to what legislative or administrative
measures should be adopted to eradicate the evil found or to
implement the beneficial objects it has in view. There can
be no objection to the Commission recommending the
imposition of some form of punishment which will, in its
opinion, be sufficiently deterrent to delinquents in future.
But the Commission cannot be asked to make recommendations
for taking any action " as and by way of securing redress or
punishment " in respect of wrongs already done or committed
as this is the function of a Court of law.
Even though the original notification appointing the Commis-
sion did not fix the time within which the Commission was to
complete its report the Government could validly do so by a
subsequent notification.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals ’Nos. 455 to 457
and 656 to 658 of 1957.
Appeals from the judgment and order dated April 29, 1957, of
the Bombay High Court in Misc. Applications Nos. 48 to 50
of 1957.
G. S. Pathak, S. K. Kapur, P. N. Bhagwati and Ganpat Rai,
for the appellant in C. A. No. 455 of 1957 & respondent in
C. A. No. 656 of 1957.
Sachin Choudhry, R. J. Joshi, J. B. Dadachanji, Rameshwar
Nath and St N. Andley, for the appellants in C. As. Nos.
456 & 457 of 1957 and respondents in
C. As. Nos. 657 & 658 of 1957.
C. K. Daphtary, Solicitor-General for India, G. N. Joshi,
K. H. Bhabha and R. H. Dhebar, for respondent No. 4 in C.
As. Nos. 455 to 457 of 1957 and appellant in C. As. Nos.
656 to 658 of 1957.
1958. March 28. The Judgment of the Court was delivered by
DAS C. J.-These six several appeals are directed against a
common judgment and order pronounced on
36
282
April 29, 1957, by a Division Bench of the Bombay High Court
in three several Miscellaneous Applications under Art. 226
of the Constitution, namely, No. 48 of 1957 filed by Shri
Ram Krishna Dalmia (the appellant in Civil Appeal No. 455 of
1957), No. 49 of 1957 by Shri Shriyans Prasad Jain and Shri
Sital Prasad Jain (the appellants in Civil Appeal No. 456 of
1957) and No. 50 of 1957 by Shri Jai Dayal Dalmia and Shri
Shanti Prasad Jain (the appellants in Civil Appeal No. 457
of 1957). By those Miscellaneous Applications the
petitioners therein prayed for an appropriate direction or
order under Art. 226 for quashing and ,setting aside
notification No. S. R. 0. 2993 dated ]December 11, 1956,
issued by the Union of India in exercise of powers conferred
on it by s. 3 of the Commissions of Enquiry Act (LX of 1952)
and for other reliefs. Rules were issued and the Union of
India appeared and showed cause. By the aforesaid judgment
and order the High Court discharged the rules and dismissed
the applications and ordered that the said notification was
legal and valid except as to the last part of cl. (10)
thereof from the words " and the action" to the words " in
future cases " and directed the Commission not to proceed
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with the inquiry to the extent that it related to the
aforesaid last part of cl. (10) of -the said notification.
The Union of India has filed three several appeals, namely,
Nos. 656, 657 and 658 of 1957, in the said three
Miscellaneous Applications complaining against that part of
the said judgment and order of the Bombay High Court which
adjudged the last part of el. (10) to be invalid.
The Commissions of Inquiry Act, 1952 (hereinafter referred
to as the Act), received the assent of the President on
August 14, 1952, and was thereafter brought into force by a
notification issued by the Central Government under s. 1 (3)
of the Act. As its long title states, the Act is one " to
provide for the appointment of Commissions of Inquiry and
for vesting such Commissions with certain powers ". Sub-sec-
tion (1) of s. 3, omitting the proviso not material for our
present purpose, provides:
The appropriate Government may, if it is of
283
opinion that it is necessary so to do, and shall, if a
resolution in this behalf is passed by the House of the,
People or, as the case may be, the Legislative Assembly of
the State, by notification in the Official Gazette, appoint
a Commission of Inquiry for the purpose of making an inquiry
into any definite matter of public importance and performing
such functions and within such time as may be specified in
the notification, and the Commission so appointed shall make
the Inquiry and perform the functions accordingly."
Under sub-s. (2) of that section the Commission may consist
of one or more members and where the Commission consists of
more than one member one of them may be appointed as the
Chairman thereof. Section 4 vests in the Commission the
powers of a civil court while trying a suit under the Code
of Civil Procedure in respect of the several matters
specified therein, namely, summoning and enforcing
attendance of any person and examining him on oath,
requiring discovery and production of any document,
receiving evidence on affidavits, requisitioning any public
record or copy thereof from any court or officer, issuing
commissions for examination of witnesses or documents and
any other matter which may be prescribed. Section 5 empowers
the appropriate Government, by a notification in the
Official Gazette, to confer on the Commission additional
powers as provided in all or any of the sub-ss. (2), (3),
(4) and (5) of that section. Section 6 provides that no
statement made by a person in the course of giving evidence
before the commission shall subject him to, or be used
against him in, any civil or criminal proceeding except a
prosecution for giving false evidence by such statement
provided that the statement is ’made in reply to a question
which he is required by the Commission to answer or is
relevant to the subject matter of the inquiry. The
appropriate Government may under s. 7 issue a notification
declaring that the Commission shall cease to exist from such
date as may be specified therein. By s. 8 the Commission is
empowered, subject to any rules that may be made, to
regulate its own procedure including the time and place of
its
284
sittings and may act notwithstanding the temporary absence
of any member or the existence of any vacancy among its
members. Section 9 provides for indemnity to the
appropriate Government, the members of the Commission or
other persons acting under their directions in respect of
anything which is done or intended to be done in good faith
in pursuance of the Act. The rest of the sections aye not
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material for the purpose of these appeals.
In exercise of the powers conferred on it by s. 3 of the Act
the Central Government published in the Gazette of India
dated December 11, 1956, a notification in the following
terms:
MINISTRY OF FINANCE
(Department of Economic Affairs)
ORDER
New Delhi, the 11th December, 1956
S. R. O. 2993-Whereas it has been made to appear to the
Central Government that:
(1) a large number of companies and some firms were
promoted and/or controlled by Sarvashri Ramakrishna Dalmia,
Jaidayal Dalmia, Shanti Prasad Jain, Sriyans Prasad Jain,
Shital Prasad Jain or some one or more of them and by others
being either relatives or employees of the said person or
persons, closely connected with the said persons;
(2) large amounts were subscribed by the investing public
in the shares of some of these companies;
(3) there have been gross irregularities (which may in
several respects and materials amount to illegalities) in
the management of such companies including manipulation of
the accounts and unjustified transfers and use of funds and
assets;
(4) the moneys subscribed by the investing public were in a
considerable measure used not in the interests of the
companies concerned but contrary to their interest and for
the ultimate personal benefit of those in control and/or
management; and
(5) the investing public have as a result suffered
considerable losses.
285
And Whereas the Central Government is of the opinion that
there should be a full inquiry into these matters which are
of definite public importance both by reason of the grave
consequences which appear to have ensued to the investing
public and also to determine such measures as may be deemed
necessary in order to prevent a recurrence thereof;
Now, therefore, in exercise of the powers conferred by
section 3 of the Commissions of Inquiry Act (No. 60 of
1952), the Central Government hereby appoints a Commission
of Inquiry consisting of the following persons, namely :
Shri Justice S. R. Tendolkar, Judge of the High Court at
Bombay, Chairman.
Shri N. R. Modi of Messrs A. F. Ferguson & o., Chartered
Accountants, Member.
Shri S. C. Chaudhuri, Commissioner of Income-tax, Member.
1.The Commission shall inquire into and report on and in
respect of:
(1) The administration of the affairs of the companies
specified in the schedule hereto;
(2) The administration of the affairs of such other
companies and firms as the Commission may during the course
of its enquiry find to be companies or firms connected with
the companies referred to in the schedule and whose affairs
ought to be investigated and inquired into in connection
with or arising out of the inquiry into the affairs of the
companies specified in the schedule hereto;
(3)The nature and extent of the control, direct and
indirect, exercised over such companies and firms or any of
them by the aforesaid Sarvashri Ram Krishna Dalmia, Jaidayal
Dalmia, Shanti Prasad Jain, Sriyans Prasad Jain, their
relatives, employees and persons connected with them;
(4)The total amount of the subscription obtained from the
investing public -and the amount subscribed by the aforesaid
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persons and the extent to which the funds and assets thus
obtained or acquired were misused, misapplied or
misappropriated;
(5) The extent and nature of the investments by
286
and/or loans to and/or the use of the funds or assets by and
transfer of funds between the companies aforesaid;
(6)The consequences or results of such investments, loans
transfers and/or use of funds and assets ;
(7)The reasons or motives of such investments, loans
transfers and use and whether there was any justification
for the same and whether the same were made bona fide, in
the interests of the companies concerned ;
(8) The extent of the losses suffered by the investing
public, how far the losses were avoidable and what steps
were taken by those in control and/or management to avoid
the losses;
(9) The nature and extent, of the personal gains made by
any person or persons or any group or groups of persons
whether herein named or not by reason of or through his or
their connection with or control over any such company or
companies;
(10) Any irregularities frauds or breaches of trust or
action in disregard of honest commercial practices or
contravention of any law (except contraventions in respect
of which criminal proceedings are pending in a Court of Law)
in respect of the companies and firms whose affairs are
investigated by the Commission which ma come to the
knowledge of the Commission and the action which in the
opinion of the Commission should be taken as and by way of
securing redress or punishment or to act as a preventive in
future cases.
(11) The measures which in the opinion of the Commission are
necessary in order to ensure in the future the due and
Proper administration of the funds and assets of companies
and firms in the interests of the investing public.
SCHEDULE
1. Dalmia Jain Airways Ltd.
2. Dalmia Jain Aviation Ltd., (now known as Asia Udyog
Ltd.)
3. Lahore Electric Supply Company Ltd., (now known as
South Asia Industries Ltd.)
4. Sir Shapurji Broacha Mills Ltd.
287
5. Madhowji Dharamsi Manufacturing Company Ltd.
6. Allen Berry and Co. Ltd.
7. Bharat Union Agencies Ltd.
8. Dalmia Cement and Paper Marketing Company Ltd., (now
known as Delhi Glass Works Ltd.)
9. Vastra Vyavasaya Ltd. Ordered that the Order be
published in the Gazette of India for public information.
(No. F. 107 (18INS/56)).
H.M. Patel
Secretary.
It should be noted that the above notification did not
specify the time within which the Commission was to complete
the inquiry and make its report.
On January 9, 1957, the Central Government issued another
-notification providing that all the provisions of sub-ss.
(2), (3), (4), and (5) of s. 5 should apply to the
Commission. As the notification of December 11, 1956, did
not specify the time within which the Commission was to make
its report, the Central Government on February 11, 1957,
issued a third notification specifying two years from that
date as the time within which the Commission of Inquiry
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should exercise the functions conferred on it and make its
report. On February 12, 1957, three several Miscellaneous
Applications were filed under art. 226 of the Constitution
questioning the validity of the Act and the notification
dated December 11, 1956, on diverse grounds and praying for
a writ or order for quashing the same.
It will be convenient to advert to a few minor objections
urged before us on behalf of the petitioners in support of
their appeals before we come to deal with their principal
and major contentions. The first objection is that the
notification has gone beyond the Act. It is pointed out
that the Act, by s. 3, empowers the appropriate Government
in certain eventualities to appoint a Commission of Inquiry
for the purpose of making an inquiry into any definite
matter of public importance and for no other purpose. The
contention is that the conduct of an individual person
288
or company cannot possibly be a matter of public importance
and far less a definite matter of that kind. We are unable
to accept this argument as correct. Widespread floods,
famine and pestilence may quite easily be a definite matter
of public importance urgently calling for an inquiry so as
to enable the Government to take appropriate steps to
prevent their recurrence in future. The conduct of
villagers in cutting the bunds for taking water to their
fields during the dry season may cause floods during the
rainy season and we can see no reason why such unsocial
conduct of villagers of certain villages thus causing floods
should not be regarded as a definite matter of public
importance. The failure of a big bank resulting in the loss
of the life savings of a multitude of men of moderate means
is certainly a definite matter of public importance but the
conduct of the. persons in charge -and management of such a
bank which brought about its collapse is equally a definite
matter of public importance. Widespread dacoities in parti-
cular parts of the country is, no doubt, a definite matter
of public importance but we see no reason why the conduct,
activities and modes operandi of particular dacoits and
thugs notorious for their cruel depredations. should not be
regarded as definite matters of public importance urgently
requiring a sifting inquiry. It is needless to multiply
instances. In each case the question is: is there a
definite matter of public importance which calls for an
inquiry ? We see no warrant for the proposition that a
definite matter of public importance must necessarily mean
only some matter involving the public benefit or advantage
in the abstract, e. g., public health, sanitation or the
like or some public evil or prejudice, e. g., floods, famine
or pestilence or the like. Quite conceivably the conduct of
an individual person or company or a group of individual
persons or companies may assume such a dangerous proportion
and may so prejudicially affect or threaten to affect the
public well-being as to make such conduct a definite matter
of public importance urgently calling for a full inquiry.
Besides, s. 3 itself authorises the appropriate Government
to appoint a Commission
289
of Inquiry not only for the purpose of making an inquiry
into a definite matter of public importance but also for the
purpose of performing such functions as, may be specified in
the notification. Therefore, the notification is well
within the powers conferred on the appropriate Government by
s. 3 of the Act and it cannot be questioned on the ground of
its going beyond the provisions of the Act.
Learned counsel for the petitioners immediately replies that
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in the event of its being held that the notification is
within the terms of the Act, the Act itself is ultra vires
the Constitution. The validity of the Act is called in
question in two ways. In the first place it is said that it
was beyond the legislative competency of Parliament to enact
a law conferring such a wide sweep of powers. It is pointed
out that Parliament enacted the Act in exercise of the
legislative powers conferred on it by Art. 246 of the
Constitution read with entry 94 in List I and entry 45 in
List III of the Seventh Schedule to the Constitution. The
matters enumerated in entry 94 in List 1, omitting the words
not necessary for our purpose, are " inquiries......... for
the purpose of any of the matters in this List ", and those
enumerated in entry 45 in List III, again omitting the
unnecessary words, are " inquiries............ for the
purposes of any of the matters specified in List II or List
111. " Confining himself to the entries in so far as they
relate to " inquiries ", learned counsel for the petitioners
urges that Parliament may make a law with respect to
inquiries but cannot under these entries make a law
conferring any power to perform any function other than the
power to hold an inquiry. He concedes that, according to
the well recognised rule of construction of the provisions
of a Constitution, the legislative heads should be construed
very liberally and that it must be assumed that the
Constitution intended to give to the appropriate legislature
not only the power to legislate with respect to the
particular legislative topic but also with respect to all
matters ancillary thereto. Indeed the very use of the words
" with respect to in Art. 246 supports this principle
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of liberal interpretation. He, however, points out that the
law, which the appropriate legislature is empowered to make
under these entries must be with respect to inquiries for
the purposes of any of the matters in the relevant lists and
it is urged that the words " for the purpose of " make it
abundantly clear that the law with respect to inquiries to
be made under these two entries must be for the purpose of
future legislation with respect to any of the legislative
heads in the relevant lists. In other words, the argument
is that under these two entries the appropriate legislature
may make a law authorising the constitution of a Board or
Commission of Inquiry to inquire into and ascertain facts so
as to enable such legislature to undertake legislation with
respect to any of the legislative topics in the relevant
lists to secure some public benefit or advantage or to
prevent some evil or harm befalling the public and thereby
to protect the public from the same. But if an inquiry
becomes necessary for, say, administrative purposes, a law
with respect to such an inquiry cannot be made under these
two entries. And far less can a law be made with respect to
an inquiry into any wrongs alleged to have been committed by
an individual person or company or a group of them for the
purpose of punishing the suspected delinquent. This
argument has found favour with the High Court, but we are,
with great respect, unable to accept this view. To adopt
this view will mean adding words to the two entries so as to
read " inquiries for the purpose of future legislation with
respect to any of the matters in the List or Lists mentioned
therein. The matter, however, does not rest here. A
careful perusal of the language used in entry 45 in List III
does, in our view, clinch the matter. Entry 45 in List III,
which is the Concurrent List, speaks, inter alia, of "
inquiries for the purpose of any of the matters in List II
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or List 111. Under Art. 246 read with this entry,
Parliament as well as the Legislature of a State may make a
law with respect to " inquiries for the purpose of any of
the matters in List II." Parliament, under Art. 246, has no
power to make a law with respect to any of the
291
matters enumerated in List 11. Therefore, when Parliament
makes a law under Art. 246 read with., entry 45 in List III
with respect to an inquiry for the purposes of any of the
matters in List 11, such law can never be one for inquiry
for the purpose of future legislation by Parliament with
respect to any of those matters in List 11. Clearly
Parliament can make a law for inquiry for the purpose of any
of the matters in List 11 and none the less so though
Parliament cannot legislate with respect to such matters and
though none of the State Legislatures wants to Legislate on
such matters. In our opinion, therefore, the law to be made
by the appropriate legislature with respect to the two
legislative entries referred to above may cover inquiries
into any aspect of the matters enumerated in any of the
lists mentioned therein and is not confined to those matters
as mere heads of legislative topic. Quite conceivably the
law with respect to inquiries for the purpose of any of the
matters in the lists may also be for administrative purposes
and the scope of the inquiry under such a law will cover all
matters which may properly be regarded as ancillary to such
inquiries. The words " for the purposes of " indicate that
the scope of the inquiry is not necessarily limited to the
particular or specific matters enumerated in any of the
entries in the list concerned but may extend to inquiries
into collateral matters which may be necessary for the
purpose, legislative or otherwise, of those particular
matters. We are unable, therefore,to hold that the Inquiry
which may be set up by a law made under these two entries
is, in its scope or ambit, limited to future legislative
purposes only.
Learned counsel then takes us through the different heads of
inquiry enumerated in the notification and urges that the
inquiry is neither for any legislative nor for any
administrative purpose, but is a clear usurpation of the
functions of the judiciary. The argument is that Parliament
in authorising the appointment of a Commission and the
Government in appointing this Commission have arrogated to
themselves judicial powers which do not, in the very nature
292
of things, belong to their respective domains which must be
purely legislative and executive respectively. It is
contended that Parliament cannot convert itself into a court
except for the rare cases of dealing with breaches of its
own privileges for which it may punish the delinquent by
committal for contempt or of proceedings by way of
impeachment. It cannot, it is urged, undertake to inquire
or investigate into alleged individual wrongs or private
disputes nor can it bring the supposed culprit to book or
gather materials for the purpose of initiating proceedings,
civil or criminal, against him, because such inquiry or
investigation is clearly not in aid of legislation. It is
argued that if a criminal prosecution is to be launched, the
preliminary investigation must be held under the Code of
Criminal Procedure and it should not be open to any
legislature to start investigation on its own and thereby to
deprive the citizen of the normal protection afforded to him
by the provisions of the Code of Criminal Procedure. This
line of reasoning also found favour with the High Court
which, after considering the provisions of the Act and the
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eleven heads of inquiry enumerated in the notification, came
to the conclusion that the last portion of el. (10)
beginning with the words " and the action " and ending with
the words ’,in future cases" were ultra vires the Act and
that the Government was not competent to require the
Commission to hold any inquiry or make any report with
regard to the matters covered by that portion of cl. (10),
for such inquiry or. report amounts to a usurpation of the
judicial powers of the Union or the State as the case may
be.
While we find ourselves in partial agreement with the actual
conclusion of the High Court on this point, we are, with
great respect, unable to accept the line of reasoning
advanced by learned counsel for the petitioners, which has
been accepted by the High Court for more reasons than one.
In the first place neither Parliament nor the Government has
itself undertaken any inquiry at all. Parliament has made a
law with respect to inquiry and has left it to the
appropriate Government to set up a Commission of Inquiry
under
293
certain circumstances referred to in s. 3 of the Act. The
Central Government, in its turn, has, in exercise of the
powers conferred on it by the Act, set up this Commission.
It is, therefore, not correct to say that Parliament or the
Government itself has undertaken to hold any inquiry. In
the second place the conclusion that the last portion of cl.
(10) is bad because it signifies that Parliament or the
Government had usurped the functions of the judiciary
appears to us, with respect, to be inconsistent with the
conclusion arrived at in a later part of the judgment that
as the Commission can only make recommendations which are
not enforceable proprio vigore there can be no question of
usurpation of judicial functions. As has been stated by the
High Court itself in the latter part of its judgment, the
only power that the Commission has is to inquire and make a
report and embody therein its recommendations. The
Commission has no power of adjudication in the sense of
passing an order which can be enforced proprio vigore. A
clear distinction must, on the authorities, be drawn between
a decision which, by itself, has no force and no penal
effect and a decision which becomes enforceable immediately
or which may become enforceable by some action being taken.
Therefore, as the Commission we are concerned with is merely
to investigate and record its findings and recommendations
without having any power to enforce them, the inquiry or
report cannot be looked upon as a judicial inquiry in the
sense of its being an exercise of judicial function properly
so called and consequently the question of usurpation by
Parliament or the Government of the powers of the judicial
organs of the Union of India cannot arise on the facts of
this case and the elaborate discussion of the American
authorities founded on the categorical separation of powers
expressly provided by and under the American Constitution
appears to us, with respect, wholly inappropriate and
unnecessary and we do not feel called upon, on the present
occasion, to express any opinion on the question whether
even in the absence of a specific provision for separation
of powers in our Constitution, such as there is
294
under the American Constitution, some such division of
powers-legislative, executive and judicial-is, nevertheless
implicit in our Constitution. In the view we have taken it
is also not necessary for us to consider whether, had the
Act conferred on the appropriate Government power to set up
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a Commission of Inquiry with judicial powers, such law could
not, subject, of course, to the other provisions of the Con-
stitution, be supported as a law made under some entry in
List I or List III authorising the setting up of courts read
with these two entries, for a legislation may well be
founded on several entries.
Learned Counsel appearing for the petitioners, who are
appellants in Civil Appeals Nos. 456 and 457 of 1957, goes
as far as to say that while the Commission may find facts on
which the Government may take action, legislative or
executive, although he does not concede the latter kind of
action to be contemplated, the Commission cannot be asked to
suggest any measure, legislative or executive, to be taken
by the appropriate Government. We are unable to accept the
proposition so widely enunciated. An inquiry necessarily
involves investigation into facts and necessitates the
collection of material facts from the evidence adduced
before or brought to the notice of the person or body
conducting the inquiry and the recording of its findings on
those facts in its report cannot but be regarded as
ancillary to the inquiry itself, for the inquiry becomes
useless unless the findings of the inquiring body are made
available to the Government which set up the inquiry. It
is, in our judgment, equally ancillary that the person or
body conducting the inquiry should express its own view on
the facts found by it for the consideration of the
appropriate Government in order to enable it to take such
measure as it may think fit to do. The whole purpose of
setting up of a Commission of Inquiry consisting of experts
will be frustrated and the elaborate process of inquiry will
be deprived of its utility if the opinion and the advice of
the expert body as to the measures the situation disclosed
calls for cannot be placed before the Government
295
for consideration notwithstanding that doing so cannot be to
the prejudice of anybody because it has no force of its own.
In our view the recommendations of a Commission of Inquiry
are of great importance to the Government in order to enable
it to make up its mind as to what legislative or
administrative measures should be adopted to eradicate the
evil found or to implement the beneficial objects it has in
view. From this point of view, there can -be no objection
even to the Commission of Inquiry recommending the imposi-
tion of some. form of punishment which will, in its opinion,
be sufficiently deterrent to delinquents in future. But
seeing that the Commission of Inquiry has no judicial powers
and its report will purely be recommendatory and not
effective proprio vigore and the statement made by any
person before the Commission of Inquiry is, under s. 6 of
the Act, wholly inadmissible in evidence in any future
proceedings, civil or criminal, there can be no point in the
Commission of Inquiry making recommendations for taking any
action " as and by way of securing redress or punishment "
which, in agreement with the High Court, we think, refers,
in the context, to wrongs already done or committed, for
redress or punishment for such wrongs, if any, has to be
imposed by a court of law, properly constituted exercising
its own discretion on the facts and circumstances of the
case and without being in any way influenced by the view of
any person or body, howsoever august or high powered it may
be. Having regard to all these considerations it appears to
us that only that portion of the last part of cl. (10) which
calls upon the Commission of Inquiry to make recommendations
about the action to be taken " as and by way of securing
redress or punishment ", cannot be said to be at all
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necessary for or ancillary to the purposes of the
Commission. In our view the words in the latter part of the
section, namely, " as and by way of securing redress or
punishment ", clearly go outside the scope of the Act and
such provision is not covered by the two legislative entries
and should, therefore, be deleted. So deleted the latter
portion of cl. (10) would read and the action which in the
opinion of the Commission
296
should be taken to act as a preventive in future cases ".
Deletion of the words mentioned above from cl. (10) raises
the question of severability. We find ourselves in
substantial agreement with the reasons given by the High
Court on this point and we hold that the efficacy of the
notification is in no way affected by the deletion of the
offending words mentioned above and there is no reason to
think that the Government would not have issued the
notification without those words. Those words do not appear
to us to be inextricably wound up with the texture of the
entire notification.
The principal ground urged in support of the contention as
to the invalidity of the Act and/or the notification is
founded on Art. 14 of the Constitution. In Budhan Choudhry
v. The State of Bihar (1) a Constitution Bench of seven
Judges of this Court at pages 1048-49 explained the true
meaning and scope of Art. 14 as follows:
" The provisions of Article 14 of the Constitution have come
up for discussion before this court in a number of cases,
namely, Chiranjit Lal Choudhuri v. The Union of India (2) ,
The State, of Bombay v. F. N.Balsara(3),The state of west
Bengal v. Anwar Ali Sarkar (4 ), Kathi Baning -Rawat v. The
State of Saurashtra(5) Lachmandas Kewalram Ahuja v. The
State Of Bombay (6), Qasim Razvi v. The State of Hyderabad
(7) and Habeeb Mohamad v. The State of Hyderabad (8). it is,
therefore, not necessary to enter upon any lengthy
discussion as to the meaning, scope and effect of the
article in question. It is now well established that while
article 14 forbids class legislation, it does not forbid
reasonable classification for the purposes of legislation.
In order, however, to pass the test of permissible
classification two conditions must be fulfilled, filled
namely, (i) that the classification must be founded on an
intelligible differentia which distinguishes persons or
things that are grouped together
(1) [1955] 1 S.C.R. 1045.(2) [1950] S.C.R. 869.
(3) [1951] S.C.R. 682.(4) [1952] S.C.R. 284.
(5) [1952] S.C.R. 433.(6) [1952] S.C.R. 710.
(7) [1953] S.C.R. 581 (8) [1953] S.C.R. 661.
297
from others left out of the group and, (ii) that that
differentia must have a rational relation to the object
sought to be achieved by the statute in question. The
classification may be founded on different bases, namely,
geographical, or according to objects or occupations or the
like. What is necessary is that there ’Must be a nexus
between the basis of classification and the object of the
Act under consideration. It is also well established by the
decisions of this Court that article 14 condemns
discrimination not only by a substantive law but also by a
law of procedure."
The principle enunciated above has been consistently adopted
and applied in subsequent cases. The decisions of this
Court further establish-
(a) that a law may be constitutional even though it relates
to a single individual if, on account of some special
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circumstances or reasons applicable to him and not
applicable to others, that single individual may be treated
as a class by himself;
(b) that there is always a presumption in favour of the
constitutionality of an enactment and the burden is upon him
who attacks it to show that there has been a clear
transgression of the constitutional principles;
(c) 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;
(d) that the legislature is free to recognise degrees of
harm and may confine its restrictions to those cases where
the need is deemed to be the clearest ;
(e) that in order to sustain the presumption of
constitutionality the court may take into consideration
matters of common knowledge, matters of common report, the
history of the times and may assume every state of facts
which can be conceived existing at the time of legislation;
and
(f)that while good faith and knowledge of the existing
conditions on the part of a legislature are to be presumed,
if there is nothing on the face of the
38
298
law or the surrounding circumstances brought to the notice
of the court on which the classification may reasonably be
regarded as based, the presumption of constitutionality
cannot be carried to the extent of always holding that there
must be some undisclosed and unknown reasons for subjecting
certain individuals or corporations to hostile or
discriminating legislation.
The above principles will have to be constantly borne in
mind by the court when it is called upon to adjudge the
constitutionality of any particular law attacked as
discriminatory and -violative of the equal protection of the
laws.
A close perusal of the decisions of this Court in which the
above principles have been enunciated and applied by this
Court will also show that a statute which may come up for
consideration on a question of its validity under Art. 14 of
the Constitution, may be placed in one or other of the
following five classes:-
(i) A statute may itself indicate the persons or things to
whom its provisions are intended to apply and the basis of
the classification of such persons or things may appear on
the face of the statute or may be gathered from the
surrounding circumstances known to or brought to the notice
of the court. In determining the validity or otherwise of
such a statute the court has to examine whether such
classification is or can be reasonably regarded as based
upon some differentia which distinguishes such persons or
things grouped together from those left out of the group and
whether such differentia has a reasonable relation to the
object sought to be achieved by the statute, no matter
whether the provisions of the statute are intended to apply
only to a particular person or thing or only to a certain
class of persons or things. Where the court finds that the
classification satisfies the tests, the court will uphold
the validity of the law, as it did in Chiranjitlal Chowdhri
v. The Union of India (1), The State of Bombay v. F. N.
Balsara (2), Kedar Nath
(1) [1950] S.C.R. 869.
(2) [1951] S.C.R. 682,
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299
Bajoria v. The State of West Bengal (1), V. M. Syed Mohammad
& Company v. The State of Andhra (2) and Budhan Choudhry v.
The State of Bihar (3).
(ii)A statute may direct its provisions against one
individual person or thing or to several individual persons
or things but, no reasonable basis of classification may
appear on the face of it or be deducible from the
surrounding circumstances, or matters of common knowledge.
In such a case the court will strike down the law as an
instance of naked discrimination, as it did in Ameerunnissa
Begum v. Mahboob Begum (4) and Ramprasad Narain Sahi v. The
State of Bihar (3).
(iii)A statute may not make any classification of the
persons or things for the purpose of applying its provisions
but may -leave it to the discretion of the Government to
select and classify persons or things to whom its provisions
are to apply. In determining the question of the validity
or otherwise of such a statute the court will not strike
down the law out of hand only because no Classification
appears on its face or because a discretion is given to the
Government to make the selection or classification but will
go on to examine and ascertain if the statute has laid down
any principle or policy for the guidance of the exercise of
discretion by the Government in the matter of the selection
or classification. After such scrutiny the court will
strike down the statute if it does not lay down any
principle or policy for guiding the exercise of discretion
by the Government in the matter of selection or
classification, on the ground that the statute provides for
the delegation of arbitrary and uncontrolled power to the
Government so as to enable it to discriminate between
persons or things similarly situate and that, therefore, the
discrimination is inherent in the statute itself. In such a
case the court will strike down both the law as well as the
executive action taken under such law, as it did in State of
West Bengal v. Anwar, Ali Sarkar (6), Dwarka Prasad Laxmi
Narain v. The State of Uttar Pradesh(7)
(1) [1954] S.C.R. 30. (2) [1954] S.C.R. I 117.
(3) [1955] 1 S.C.R. 10045 (4) [1953] S.C.R. 44
(5) [1953] S.C. R. 1129. (6) [1952] S.C.R. 284.
(7) [1954] S.C.R. 803.
300
and Dhirendra Krishna Mandal v. The Superintendent and
Remembrancer of Legal Affairs (1).
(iv) A statute may not make a classification of the persons
or things for the purpose of applying its provisions and may
leave it to the discretion of the Government to select and
classify the persons or things to whom its provisions are to
apply but may at the same time lay down a policy or
principle for the guidance of the exercise of discretion by
the Government in the matter of such selection or
classification, the court will uphold the law as
constitutional, as it did in Kathi Raning Rawat v. The State
of Saurashtra (2).
(v) A statute may not make a classification of the persons
or things to whom their provisions are intended to apply and
leave it to the discretion of the Government to select or
classify the persons or things for applying those provisions
according to the policy or the principle laid down by the
statute itself for guidance of the exercise of discretion by
the Government in the matter of such selection or
classification. If the Government in making the selection
or classification does not proceed on or follow such policy
or principle, it has been held by this Court, e. g., in
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Kathi Raning Rawat v. The State of Saurashtra (2) that in
such a case the executive action but not the statute should
be condemned as unconstitutional
In the light of the foregoing discussions the question at
once arises: In what category does the Act or the
notification impugned in these appeals fall ?
It will be apparent from its long title that the purpose of
the Act is to provide for the appointment of Commissions of
Inquiry and for vesting such Commissions with certain
powers. Section 3 empowers the appropriate Government, in
certain circumstances therein mentioned, to appoint a
Commission of Inquiry for the purpose of making an inquiry
into any definite matter of public importance and performing
such functions within such time as may be specified in the
notification. It seems clear-and it has not been
controverted-that on a proper construction of this
(1) [1955] 1 S.C.R. 234.
(2) [1952] S.C.R. 435.
301
section, the functions the performance of which is
contemplated must be such as are ancillary to and in aid of
the inquiry itself and cannot be read as a function
independent of or unconnected with such inquiry. That being
the position, as we conceive it to be, the question arises
as to the scope and ambit of the power which is conferred by
it on the appropriate Government. The answer is furnished
by the statute itself, for s. 3 indicates that the
appropriate Government .can appoint a Commission of Inquiry
only for the purpose of making an inquiry into any definite
matter of public importance and into no other matter. In
other words the subject matter of the inquiry can only be a
definite matter of public importance. The appropriate
Government, it follows, is not authorised by this section to
appoint a Commission for the purpose of holding an inquiry
into any other matter. Learned Solicitor-General, in the
premises, submits that the section itself on the face of it,
makes. a classification so that this statute falls within
the first category mentioned above and contends that this
classification of things is based on an intelligible
differentia which has a reasonable relation to the object
sought to be achieved by it, for a definite matter of public
importance may well call for an inquiry by a Commission. In
the alternative the learned Solicitor-General urges that in
any case the section itself quite clearly indicates that the
policy of Parliament is to provide for the appointment of
Commissions of Inquiry to inquire into any definite matter
of public importance and that as there is no knowing when,
where or how any such matter may crop up Parliament
considers it necessary or expedient to leave it to the
appropriate Government to take action as and when the
appropriate moment will arrive. In the tempo of the
prevailing conditions in modern society events occur which
were never foreseen and it is impossible for Parliament or
any legislature to anticipate all events or to provide for
all eventualities and, therefore, it must leave the duty of
taking the necessary action to the appropriate Government.
This delegation of authority, however, is not unguided or
uncontrolled,
302
for the discretion given to the appropriate Government to
set up a Commission of Inquiry must be guided by the policy
laid down, namely, that the executive action of setting up a
Commission of Inquiry must conform to the condition of the
section, that is to say, that there must exist a definite
matter. of public importance into which an inquiry is, in
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the opinion of the appropriate Government, necessary or is
required by a resolution in that behalf passed by the House
of the People or the Legislative Assembly of the State. If
the preambles or the provisions of the statutes classed
under the first category mentioned above could be read as
making a reasonable classification satisfying the
requirements of Art. 14 and if the preamble to the statute
considered in the case of Kathi Raning Rawat (1) could be
construed as laying down sufficiently clearly a policy or
principle for the guidance of the executive, what objection
can there be to construing s. 3 of the Act now under our
consideration as also making a reasonable classification or
at any rate as declaring with sufficient clarity the policy
of Parliament and laying down a principle for the guidance
of the exercise of the powers conferred the appropriate
Government so as to bring this statute at least in the
fourth category, if not also in the first category ? On the
authorities, as they stand, it cannot be said that an
arbitrary and uncontrolled power has been delegated to the
appropriate Government and that, therefore, the law itself
is bad.
Learned counsel for the petitioners next contends that if
the Act is good in the sense that has declared its policy
and laid down some principle for the guidance of the
Government in the exercise of the power conferred on it, the
appropriate Government has failed to exercise its discretion
property on the basis of a, reasonable classification.
Article 14 protects all persons from discrimination by the
legislative as well as by the executive organ of the State.
"State" is defined in Art. 12 as including the Government
and "law " is defined in Art. 13 as including any
notification or order’ It has to be conceded, therefore,
that
(1) [1952] S.C.R. 435.
303
it is open to the petitioners also to question the consti-
tutionality of the notification. The attack against, the
notification is that the Government has not properly
implemented the policy or followed the principle laid down
in the Act and has consequently transgressed the bounds of
the authority delegated to it. It is pointed out that in
March, 1946, one Shri Tricumdas Dwarkadas, a solicitor of
Bombay, had been appointed an officer on Special Duty to
indicate the lines on which the Indian Companies Act was to
be revised. He made a report which was, however, incomplete
in certain particulars. Thereupon the Government appointed
Shri Thiruvenkatachari, the Advocate-General of Madras, to
make further inquiry. The last mentioned gentleman
submitted his report and on the basis of that report, it is
said, a memorandum containing tentative proposals was
prepared and circulated to elicit the opinions of various
organisations. On October 28, 1950, a Committee called the
Indian Company Law Committee-popularly known as the Bhaba
Committee-was appointed. That Committee went round and
collected materials and made its comprehensive report on the
basis of which the new Indian Companies Act has recently
been remodeled. As nothing new has since then happened why,
it is asked’, should any further inquiry be made ? The
conclusion is pressed upon us that there can, in the
circumstances, be no definite matter of public importance
which can possibly call for an inquiry. We find no force in
this argument. In the first place the Bhaba Committee at p.
29 of its Report recommended that further inquiries may, in
future, have to be made regarding some matters relating to
Companies and, therefore, the necessity for fresh inquiry
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cannot be ruled out. In the next place the appropriate
Government is empowered to appoint a Commission of Inquiry
if, in its opinion, it is necessary so to do. The preambles
to the notification recite that certain matters enumerated
under five heads had been made to appear to the Central
Government in consequence of which the Central Government
had come to the conclusion that there should be a full
inquiry into those matters which,
304
in its opinion, were definite matters of public importance
both by reason of the grave consequences which appeared to
have ensued to the investing public and for determining such
measures as might be deemed necessary in order to prevent a
recurrence thereof. Parliament in its wisdom has left the
matter of the setting up of a Commission of Inquiry to the
discretion of the appropriate Government and if the appro-
priate Government has formed the opinion that a definite
matter of public importance has arisen and calls for an
inquiry the court will not lightly brush aside the opinion.
Learned counsel for the petitioners argues that granting
that the question as to the necessity for constituting a
Commission of Inquiry has been left to the subjective
determination of the appropriate Government the actual
setting up of a Commission is conditioned by the existence
’of some definite matter of public importance. If there be
no such definite matter of public importance in existence
then no question of necessity for appointing a Commission
can arise. Reference is then made to the first preamble to
the notification and it is pointed out that all the matters
alleged to have been made to appear to the Central
Government relate to some supposed act or conduct of the
petitioners. The contention is repeated that the act and
conduct of individual persons can never be regarded as
definite matters of public importance. We are unable to
accept this argument as sound, for as we have already
stated, the act or conduct of individuals may assume such
dangerous proportions as may well affect the public well-
being and thus become a definite matter of public
importance. We do not, therefore, agree that the
notification should be struck down for the absence of a
definite matter of public importance calling for an inquiry.
The point which is next urged in support of these appeals
and which has given us considerable anxiety is that the
petitioners and their companies have been arbitrarily
singled out for the purpose of hostile and discriminatory
treatment and subjected to a harassing and oppressive
inquiry. The provisions of Art. 14,
305
it is contended, protect every person against discrimination
by the State, namely, against the law as well as the
executive action and this protection extends to State action
at all its stages. The petitioners’ grievance is that the
Government had started discrimination even at the earliest
stage when it conceived the idea of issuing the
notification. Reference is made to the Memorandum filed by
the Bombay Shareholders’ Association before the Bhaba
Committee showing that the same or similar allegations had
been made not only against the petitioners and their
companies but against other businessmen and their companies
and that although the petitioners and their companies and
those other persons and their companies were thus similarly
situate, in that allegations had been made against both, the
Government arbitrarily applied the Act to the petitioners
and their companies and issued the notification concerning
them but left out the others from its operation. It is true
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that the notification primarily or even solely affects the
petitioners and their companies but it cannot be overlooked
that Parliament having left the selective application of the
Act to the discretion of the appropriate Government, the
latter must of necessity take its decision on the materials
available to it and the opinion it forms thereon. The
appropriate Government cannot in such matters be expected to
sit down and hold a judicial inquiry into the truth of the
materials brought before it, and examine the informants on
oath in the presence of the parties who are or may be likely
to be affected by its decision. In matters of this kind the
appropriate Government has of necessity to act upon the
information available to it. It is the best judge of’ the
reliability of its source of information and if it acts in
good faith on the materials brought to its notice and
honestly comes to the conclusion that the act and conduct of
the petitioners and the affairs of their companies
constitute a definite matter of public importance calling
for an inquiry with a view to devise measures for preventing
the recurrence of such evil, this Court, not being in
possession of all the facts will,
39
306
we apprehend, be slow to adjudge the executive action to be
bad and illegal. We are not unmindful of the fact that a
very wide discretionary power has been conferred on the
Government and, indeed, the contemplation that such wide
powers in the hands of the executive may in some cases be
misused or abused and turned into an engine of oppression
has caused considerable anxiety in our mind. Nevertheless,
the bare possibility that the powers may be misused or
abused cannot per se induce the court to deny the existence
of the powers. It cannot be overlooked that Parliament has
confided this discretion, not to any petty official but to
the appropriate Government itself to take action in
conformity with the policy and principle laid down in the
Act. As this Court ’has said in Matajog Dobey v. H. C.
Bhari (1), " a discretionary power is not necessarily a
discriminatory power and that abuse of power is not to be
easily assumed where the discretion is vested in the
Government and not in a minor official. " We feel sure,
however, that if this law is administered by the Government
" with an evil eye and an unequal hand " or for an oblique
or unworthy purpose the arms of this Court will be long
enough to reach it and to strike down such abuse with a
heavy hand. What, then, we inquire, are the salient facts
here ? The Central Government appointed investigators to
scrutinise the affairs of three of the petitioners’
concerns. Those investigators had made their reports to the
Central Government. The Central Government had also the
Bhaba Committee Report and all the Memoranda filed before
that Committee. It may also have had other information
available to it and on those materials it formed its opinion
that the act and conduct of the petitioners and the affairs
of their companies constituted a definite matter of public
importance which required a full inquiry. Up to this stage
there is no question of legal proof of the allegations
against the petitioners as in a court of law. The only
question is: do those allegations if honestly believed,
constitute a definite matter of public importance ? We are
unable to say that they do not.
(1) [1955] S.C.R. 925, 932.
307
Reference is again made to the several matters enumerated in
the five clauses set out in the first, preamble to the
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notification and it is urged that those matters do not at
all disclose any intelligible differentia on the basis of
which the petitioners and their companies can be grouped
together as a class. On the part of the Union of India
reference is made to the affidavits affirmed by Shri H. M.
Patel, the Principal Secretary to the Finance Ministry of
the Government of India purporting to set out in detail as
the background thereof, the circumstances which led to the
issue of the impugned notification and the matters recited
therein and the several reports referred to in the said
affidavit. Learned counsel for the petitioners take the
objection that reference cannot be made to any extraneous
matter and that the basis of classification must appear on
the face of the notification itself and reliance is placed
on certain observations in the dissenting judgments in
Chiranjitlal Chowdhury’s case (1) and in item (2) of the
summary given by Fazl Ali J. in his judgment in F. N.
Balsara’s case (2). In Chiranjitlal Chowdhury’s case (1) the
majority of the Court read the preamble to the Ordinance
which was replaced by the Act which was under consideration
there as part of the Act and considered the recitals,
reinforced as they were by the presumption of validity of
the Act, as prima facie sufficient to constitute an
intelligible basis for regarding the company concerned as a
class by itself and held that the petitioner there had not
discharged the onus that was on him. The dissenting Judges,
after pointing out that the petition and the affidavit did
not give any indication as to the differentia on the basis
of which the company had been singled out, went on to say
that the statute also did not on the face of it indicate any
basis of classification. This was included in cl. (2) of
the summary set out in the judgment in F. N. Balsara’s case
(2). Those observations cannot, therefore, be read as
meaning that the classification must always appear on the
face of the law itself and that reference cannot be made to
(1) [1550] S.C.R. 869.
(2) [1951] S.C.R. 682.
308
any extraneous materials. In fact in Chiranjitlal
Chowdhury’s case (1) parliamentary proceedings, in so far as
they depicted the surrounding circumstances and furnished
the background, were referred to. In Kathi Raning Rawat’s
case (2) the hearing was adjourned in order to enable the
respondent to put in an affidavit setting forth the material
circumstances. In Kedarnath Bajoria’s case (3) the
situation brought about by the war conditions was taken
notice of The same may be said of the cases of A. Thanyal
Kunju Musaliar v. V. Venkitachulam Potti (4) and Pannalal
Binjraj v. Union of India (5). In our judgment, therefore,
there can be no objection to the matters brought to the
notice of the court by the affidavit of Shri H. M. Patel
being taken into consideration along with the matters
specified in the notification in order to ascertain whether
there was any valid basis for treating the petitioners and
their companies as a class by themselves.
Learned counsel for the petitioners next urges that even if
the matters referred to in Shri H. M. Patel’s affidavits and
those appearing on the face of the notification are taken
into consideration one cannot deduce therefrom any
differentia which may be taken to distinguish the
petitioners and their companies from other persons and their
companies. The qualities and characteristics imputed to the
petitioners and their companies are not at all peculiar or
exclusive to them but are to be found equally in other
persons and companies and yet they and their companies have
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been singled out for hostile and discriminatory treatment
leaving out other persons and companies which are similarly
situate. There is no force in this argument. Parliament
has confided the task of the selective application of the
law to the appropriate Government and it is, therefore for
the appropriate Government to exercise its discretion in the
matter. It is to be expected-and, until the contrary is
proved, it is to be presumed-that the Government, which is
responsible to Parliament, will act honestly, properly and
in conformity with the
(1) [1950] S.C.R. 869. (2) [1952] S.C.R. 435.
(3) [1954] S.C. R. 30. (4) [1955] 2 S.C.R. 1196.
(5) [1957] S.C.R. 233.
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policy and principle laid down by Parliament. It may well
be that the Central Government thought that even if one, or
more of the particular qualities and characteristics
attributed to the petitioners and their companies may be
found in another person or company, the combination of those
qualities and characteristics which it thought were present
in the petitioners and their companies was of a unique
nature and was not present in any other person or company.
In its appreciation of the material facts preparatory to the
exercise of the discretion left to it by Parliament the
Central Government may have thought that the evil was more
pronounced in the petitioners and their concerns than any
other person or concern and that the need for an inquiry was
more urgent and clear in the case of the petitioners and
their companies than in the case of any other person or
company. What is the gist and substance of’ the allegations
against the petitioners and their companies ? They are that
a small group of persons had from before 1946 acquired
control over a number of companies including a blanking
company and an insurance company ; that some of these
companies were private companies and the others were public
companies in which the public had invested considerable
moneys by buying, shares; that the financial years of some
of these companies were different from those of the others;
that the funds of’ the limited companies were utilised in
purchasing shares in other companies having large reserve
funds with a view to get control over them and to utilise
those funds for acquiring shares in other companies or
otherwise utilise those funds for the personal benefit of
these individuals; that the shares were acquired on blank
transfer deeds and were not registered in the names of the
companies with whose funds they were purchased so as to
permit the same shares to be shown in the balance sheets of
the different companies having different financial years;
that after 1951 several of these companies were taken into
voluntary liquidation or their assets were transferred to
another company under some pretended scheme of’ arrangement
or re-organisation; that after getting control of
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a company they appointed some of themselves as managing
director or selling agent on high remuneration and after a
while cancelled such appointment on paying fabulous amounts
as and by way of compensation; that funds of one company
were transferred to another company to cover up the real
financial position. It is needless to add other allegations
to explain the matter. The question before us is not
whether the allegations made on the face of the notification
and in the affidavits filed on behalf of the Union of India
are true but whether the qualities and characteristics, if
honestly believed to be found in the petitioners, are so
peculiar or unique as to constitute a good and valid basis
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on which the petitioners and their companies can be regarded
as a class by themselves. We are not of opinion that they
do not. It is not for us to say on this application and we
do not in fact say or even suggest that the allegations
about the petitioners and their concerns are at all well
founded. It is sufficient for our present purpose to say
that the facts disclosed on the face of the notification
itself and the facts which have been brought to our notice
by the affidavits afford sufficient support to the
presumption of constitutionality of the notification. There
being thus a presumption of validity in favour of the Act
and the notification, it is for the petitioners to allege
and prove beyond doubt that other persons or companies
similarly situate have been left out and the petitioners and
their companies have been singled out for discriminatory and
hostile treatment. The petitioners have, in our opinion,
failed to discharge that onus. Indeed nowhere in the
petitions is there even an averment that there are other
persons or companies similarly situate as the petitioners
and their companies. It has to be remembered that the
allegations set forth in the memorandum submitted by the
Bombay Shareholders’ Association to the Bhaba Committee have
not been proved by legal evidence. And further that report
itself contains matters which may be taken as calculated to
lend support to the view that whether regard is had to the
combination of a variety of evils or to their degree, the
petitioners may quite conceivably
311
be grouped as a class by themselves. In our judgment the
plea of the infraction of the equal protection, clause of
our Constitution cannot be sustained.
The next contention is that the notification is bad, because
the action of the Government in issuing it was mala fide and
amounted to an abuse of power. Learned counsel appearing
for the petitioner, who is the appellant in Civil Appeal No.
455 of 1957, makes it clear that no personal motive or
illwill against the petitioners is imputed to any one, but
he points out that the Bhaba Committee had been set up and
the Companies Act has been remodelled and, therefore, the
present Commission was not set up for any legitimate
purpose. The main idea, according to learned counsel, was
to obtain information which the Government could not get by
following the ordinary procedure under the Code of Criminal
Procedure and this ulterior motive clearly makes the
governmental action mala fide. This point has been further
emphasised by learned counsel appearing for the petitioners,
who are appellants in Civil Appeals Nos. 456 and 457 of
1957. He has drawn our attention to the affidavits filed by
his clients and contends that it was well-known to the
Government that none of them was concerned in promoting or
managing any of the companies and their position being thus
well-known to the Government, their inclusion in the
notification was both outside the power conferred by the
Government and also constituted a mala fide exercise of the
power conferred on it. No substantial ground in support of
this point has been brought before us and we are not
satisfied that the circumstances referred to in the
notification and the affidavits filed on behalf of the
Union of India, may not, if true, be the basis of a further
inquiry into the matter. It will be for the Commission
to inquire into the allegations and come to its own findings
and make its report containing its recommendations. It is
not desirable that we should say anything more on this
point. All that we need say is that the charge of mala
fides has not been brought home to the Government.
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A point was taken that the original notification was
defective in that it did not fix the time within which the
Commission was to complete its report and that a subsequent
notification fixing a time could not cure that defect. We
do not think there is any substance in this too. The third
notification quoted above amended the original notification
by fixing a time. There was nothing to prevent the
Government from issuing a fresh notification appointing a
Commission and fixing a time. If that could be done, there
was no reason why the same result could not be achieved by
the combined effect of two notifications. In any case the
amending notification taken together with the original
notification may be read as a fresh notification within the
meaning of s. 3 of the Act, operative at least from the date
of the later notification.
It is feebly argued that the notification is bad as it
amounts to a delegation of essential legislative function.
Assuming that there is delegation of legislative function,
the Act having laid down its policy, such delegation of
power, if any, is not vitiated at all, for the legislation
by the delegates will have to conform to the policy so laid
down by the Act. Lastly a point is raised that the
notification is bad because it violates Art. 23 of the
Constitution. It is frankly stated by the learned counsel.
that this point is rather premature at this stage and that
he desires to reserve his client’s right to raise it in
future.
No other point has been urged before us and for reasons
stated above the appeals Nos. 455, 456 and 457 of 1957 are
dismissed with costs. Appeals Nos. 656, 657 and 658 of 1957
succeed only in part, namely, to the extent that only the
word-, " by way of redress or punishment " occurring in the
latter portion of el. (10) will be deleted so that the
latter portion of cl. (10) will read as: " and the action
which in the opinion of the Commission should be
taken.................. to act as a preventive in future
cases " as indicated above. We make no order as to the
costs of these three appeals.
C. A. Nos. 455, 456 and 457 of 1957 dismissed.
C. A. Nos. 656, 657 and 658 of 1957 Partly allowed.
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