MUKHERJEA, J. - (1.) THIS appeal by special leave from a judgment and order of the Delhi High Court arises out of a petition under Articles 226 and 227 of the Constitution of India made by Keshav Mills Company Limited (hereinafter referred to as the Company) and Navin Chandra Chandulal Parekh who is a share-holder and a Director of the Company challenging the validity of an order dated 24 November 1970 passed by the Government of India under Sec. 18A of the Industries (Development and Regulation) Act, 1951 (65 of 1951) (hereinafter referred to as the Act) by which the Gujarat State Textile Corporation Ltd. has been appointed the authorised controller of the Company for a period of five years. The Delhi High Court dismissed the writ petition after hearing the parties and hence this appeal. The facts and circumstances leading to the filing of the petition are briefly stated as follows.
(2.) THE Company is the owner of Cotton textile mill at Petlad known as Keshav Mills. THE Company was established in 1934 and, as far as one can judge from the facts and figures cited in the petition, the Company made flourishing business between the years 1935 and 1965. Indeed, if the appellants' figures are to be believed, - and there is no reason to disbelieve them, each holder of the 250 ordinary shares of the Company seems to have received Rupees 33,685/- in course of a period of 30 years between 1935 and 1964/65 as profit on an initial investment of Rupees 1,000/- only. On top of this the Company's capital block was increased from Rupees 10.62 lakhs in 1935 to Rupees 78,38,900/- at the end of the year 1964/65. All these profits, however, went to a close group of people, since 80 per cent of the share capital belongs to petitioner Parekh, his family members, relations and friends and only 20 per cent share-capital is in the hands of the members of the public. THE Company, however, fell on evil days after the year 1964/65 and the textile mill of the Company was one of the 12 sick textile mills in Gujarat which had to be closed down during 1966 and 1968. We are not here directly concerned with the various causes which were responsible for this sudden reversal of the fortunes of this Company. Suffice it to say that on 31 May 1969 the Government of India passed an order appointing a committee for investigating into the affairs of the Company under the provisions of Section 15 of the Act. We shall hereafter refer to this Committee as the Investigating Committee. THE material portion of the order dated 31 May 1969 is reproduced as hereunder :- "S.O./15IDRA/69 :- Whereas the Central Government is of the opinion that there has been, or is likely to be substantial fall in the volume of production in respect of cotton textiles manufactured in the industrial undertaking known as the Petlad Keshav Mills Co. Ltd., Petlad (Gujarat) for which, having regard to the economic conditions prevailing there is no justification. Now, therefore in exercise of the powers conferred by Section 15 of the Industries (Development and Regulation) Act 1951 (65 of 1951), the Central Government hereby appoints, for the purpose of making full and complete investigation into the circumstances of the case, a body of persons consisting of : JUDGEMENT_380_1_1973Html1.htm In this connection it may be relevant to set out some extracts from the communication that was sent out on 11 June 1969 by the Government of India to the various members of the aforesaid Committee. THE communication which was in the nature of a supplemental order by the Government of India detailing the point of reference to the Investigating Committee was to the following effect : "Subject: Appointment of Investigation Committee for Petlad Keshav Mills Co. Ltd. Petlad (Gujarat) under the Industries (Development and Regulation) Act, 1951. _______ Sir, I am directed to enclose a copy of order dated 31st May, 1969, issued under Section 15 of the Industries (Development and Regulation) Act, 1951, setting up a committee to enquire into the affairs of Petlad Keshav Mills Co. Ltd., Petlad, Gujarat for your information and necessary action. THE investigation should also be directed to the following specific points: (a) Reasons for the present state of affairs. (b) Deficiencies, if any, in the existing machinery. (c) Immediate requirements, under separate heads of accounts, of working capital if any. (d) Requirement of long-term capital for modernisation/rehabilitation. (e) Financial result of : (i) Immediate working without further investment on capital account. (ii) Working after further investment on capital account. (f) Suggestion regarding source of funds required under (c) and (d) and security available for their repayment. I am further to request that 15 copies of the report may kindly be submitted to this Ministry at a very early date." In due course, the Investigating Committee completed its inquiry and submitted its report to the Government some time about January, 1970. On or about 24 November 1970 the Government of India passed an order under Sec. 18A of the Act authorising the Gujarat State Textile Corporation (hereinafter to be referred to as the Authorised Controller) to take over the management of the whole of the undertaking of the Company for a period of five years from the date of publication of that order in the Official Gazette. The relevant order is in the following terms : "S.O.-/18A/IDRA/70. Whereas the Central Government is of the opinion that the Keshav Mills Co. Ltd., Petlad, an industrial undertaking in respect of which an investigation has been made under Section 15 of the Industrial (Development and Regulation) Act, 1951 (65 of 1951) is being managed in a manner highly detrimental to public interest: Now, therefore, in exercise of the powers conferred by Section 18A of the said Act, the Central Government authorises the Gujarat State Textile Corporation (hereinafter referred to as Authorised Controller) to take over the management of the whole of the said undertaking namely, the Keshav Mills Co. Ltd., Petlad, subject to the following terms and conditions, namely : i) The Authorised Controller shall comply with all directions issued from time to time by the Central Government; ii) The Authorised Controller shall hold office for five years from the date of publication in the official gazette of this notified order; iii) The Central Government may terminate the appointment of the Authorised Controller earlier if it considers necessary to do so. This order will have effect for a period of five years commencing from the date of its publication in the official gazette." On 5 December 1970 one R. C. Bhatt, Assistant Secretary to the Authorised Controller went to the Company's office at Petlad and presented a letter from his principals authorising him to take over possession of the mill of the Company and requested the Company to hand over the keys of the office buildings, godowns and other departments as well as the office records, account books etc. to Bhatt. The Company handed over the keys of the Company's premises to R. C. Bhatt under protest. On 15 December 1970 the Company filed a writ petition before the High Court of Delhi under Articles 226 and 227 of the Constitution of India praying for "appellants reliefs". Though several grounds were taken in the writ petition, the main contention of the appellants before the Delhi High Court was that it was not competent for the Government of India to proceed under Sec. 18A against the Company without supplying before-hand a copy of the report of the Investigating Committee to the Company. The appellants complained that though the Investigating Committee had submitted a report to the Government of India in January, 1970 the Government did not furnish the management of the Company with the contents of the report. According to the appellants the Government should not only have supplied a copy of the report to the Company but should also have given a hearing to the Company before finally deciding upon taking over the Company's undertaking under Sec. 18A of the Act. This contention was pressed on behalf of the appellants in spite of the fact that an opportunity had been given by the Investigating Committee to the management and the employees of the Company for adducing evidence and making representations before the completion of the investigation. Reliance was placed on behalf of the appellants on a Bench decision of the Delhi High Court in Bharat Kumar Chinubhai v. Union of India, Civil Writ No. 560 of 1969, D/- 10-2-1970 (Delhi). The correctness of that decision was, however, seriously questioned on behalf of the respondent and the single Judge before whom the instant petition came up for hearing referred the matter to adjudication before a Full Bench of that High Court. The question of law that was referred for the decision of the Full Bench was framed by the learned Judge in the following manner: "Whether in view of Rule 5 of the Investigation of Industrial Undertaking (Procedure) Rules of 1967 providing for an opportunity of hearing before the Investigator and the absence of any specific provision either in the Act or in the Rules for supplying a copy of the Investigator's report to the management, the taking over of the industrial undertaking, without supplying a copy of the Investigator's report is vitiated?"
(3.) THE Full Bench of the Delhi High Court after hearing the parties answered the above question of law in the negative and since this was the only question argued before them, dismissed the petition. The whole dispute between the parties is in substance a question regarding the exact requirement of the rules of natural justice in the facts and situation of the case. There can be no question that whenever an order is made under Sec. 18A against a company it has farreaching consequences on the rights of that company, its share-holders, its employees and all persons who have contractual dealings and transactions with that company. It is also not seriously questioned that before passing an order of "take-over" under Sec. 18A it is incumbent on the Government to give at some stage a reasonable opportunity to the undertaking concerned for making suitable representations against the proposed take-over. In fact under the rule-making power conferred by Sec. 30 of the Act the Government of India has already made a rule viz. Rule 5 which provides for such an opportunity. Rule 5 runs as follows : "5. Opportunity for hearing: The Investigator shall, before completion of his investigation, give the Management and the employees of the undertaking or undertakings in respect of which the investigation is ordered, reasonable opportunity of being heard including opportunity to adduce any evidence." The only question that we have to decide now is whether after the undertaking has already been given such an opportunity at the time of investigation it is entitled to have a copy of the report and to make, if necessary, further representation about that report before a final decision is made by the Government about taking action under Sec. 18A of the Act. Our decision on this question will depend on our answers to the following questions : i) Is it necessary at all to observe the rules of natural justice before enforcing a decision under Sec. 18A of the Act? ii) What are the rules of natural justice in such a case? iii) (a) In the facts and circumstances of the present case, have the rules to be observed once during the investigation under Sec. 15 and then again after the investigation is complete and action on the report of the Investigating Committee taken under Sec. 18A? (b) Was it necessary to furnish a copy of the Investigating Committee's Report before passing the order of take-over? ;