| Citation | 1951 AIR 1951 |
| Date Of Judgement | 4th December 1950 |
| Court | Supreme Court Of India |
| Case Type | Writ Petition |
| Bench | Hon’ble Justice H. J. Kania (CJI), Hon’ble Justice Saiyid Fazal Ali, Hon’ble Justice M. Patanjali Sastri Hon’ble Justice B. K. Mukherjee and Hon’ble Justice S. R. Dass |
| Petitioner | Chiranjit Lal Chowdhuri |
| Respondent | Union Of India & Ors. |
| Referred | Constitution of India 1950; Articles-14, 19(1)(f), 19(5), 31, 32Indian Companies (Amendment) Act, 1930Sholapur Spinning and Weaving Company (Emergency Provisions) Act, 1950 |
FACTS OF THE CASE-
In this case, the petition was filed by Chiranjit Lal Chaudhary, who was a shareholder of Sholapur Spinning and Weaving Company Limited which was governed under the provisions of the Indian Companies Act. He was the holder of three ordinary shares and eight preference shares which were pledged under the Bank of Baroda. But, In August 1949, The mills of the company were shut down and the reason Which was specified in the ordinance laid that it was due to the mismanagement & Due to the need to produce essential commodities. Later a Central Act named, Sholapur and Weaving Company (Emergency Provisions) Act was enacted for the regulation of the Company’s affairs. This Act empowered the government to interfere in the functioning of the mill, appoint new directors and to curtail voting rights of the shareholders and also to modify the Indian Companies Act which was regarding the company. The Act somewhere recreated and validated the provisions of the Ordinance and It was questioned by the Petitioner (Shareholder). The petitioner challenged the constitutional validity of both the Ordinance Stated the Act to be violative of Article 14, 19(1)(f) and 31 of the Constitution Of the India and of the shareholder as well as the Company. Further, the petitioner prayed for the writ of mandamus against the Central Government, Government of Bombay & Directors restraining them from interfering with the management of the Company and to declare the Ordinance and Act as unconstitutional.
ISSUES INVOLVED-
- Whether the Sholapur and Weaving Company (Emergency Provisions) Act in contravention to Article 14, 19(1)(f) & 31 of the Constitution?
- Whether the impugned Act imposed any restriction on the petitioner’s right of acquisition of private property of the Company or the shareholder?
Arguments-
The primary purpose of the Sholapur and Weaving Company(Emergency Provisions) Act was to control and take over the possession of the mill of the Sholapur Spinning and Weaving Company limited. This action was argued to be beyond the power of the legislative body. The Act was made applicable to only this company and not to other companies. Further, the Act also denied the provision of equality and equal protection of the law as guaranteed under Article 14 of the Constitution of India. Thus, this was violative of Article 14 of the Constitution of India. The Act restricted the rights of the shareholders thereby causing unreasonable interference with the rights provided under Article 19(1)(f) of the Constitution of India. The petitioner also claimed violation of Article 31 of the Constitution of India which was caused as a result of the control of the Government on the company’s property. The possession was unjustified provided without any compensation.
The condition of the mill was unusual and the inquiry revealed that there was mismanagement in the company. Thus, to control the situation and for smooth functioning of the Company, the Central Government laid the Ordinance first and further this Act. The classification made was reasonable and thus there was no violation of Article 14 of the Constitution of India. The power defined under Article 31(1) of the Constitution is different from those rights mentioned under Article 31(2) of the Constitution. The appointment of Directors in the management of the Company by the Government does not lead to dispossession of property.
JUDGEMENT-
On the question related to the violation of Article 19(1)(f) and Article 31 of the Constitution the bench opined that there has been no curtailment of the rights of the petitioner. On the question relating to the infringement of Article 14 of the Constitution, the five-judge bench held the judgment in the ratio of 3:2. The majority judgment was given by Hon’ble Chief Justice H. J. Kania, Justice Saiyid Fazal Ali, and Justice B. K. Mukherjee while Justice M. Patanjali Sastri and Justice S. R. Dass dissented from the majority. The Hon’ble Court held that the Sholapur and Weaving Company(Emergency Provisions) Act does not deprive the petitioner (shareholder) of enjoyment of his basic rights. Also, the Act enacted does not aim for the acquisition of property of the company. There is a mere denial of the voting rights of the shareholders while the petitioner still has the right to hold and earn income from his shares. Also, there is no infringement with the rights provided under Article 14 and Article 19(1)(f) of the Constitution as per the majority. Therefore the Appeal Stood Dismissed.
References-
This Article is Written by Saurabh Sharma Of Vivekananda Institute Of Professional Studies, Intern At Legal Vidhiya.
