R.F.NARIMAN, J. - (1.) THESE petitions raise questions as to the constitutional validity of the Kerala Cashew Factories (Acquisition) Act, 1974 (hereinafter referred to as "the said Act"), which has been placed in the 9th Schedule to the Constitution of India, being entry 148 thereof. This Act came into force on 19th November, 1974 and Section 3 thereof enabled the State Government to acquire in public interest cashew factories under certain circumstances. Section 3 is set out hereunder: "3. Order of Acquisition: - (1) The Government may, if they are satisfied - (a) that the occupier of a cashew factory does not conform to the provisions of law relating to safety, conditions of service or fixation and payment of wages to the workers of the factory; or (b) that raw cashewnuts allotted to a cashew factory by the Cashew Corporation of India are not being processed in the factory to which allotment has been made or that such nuts are being transferred to any other cashew factory; or (c) that there has been large scale unemployment, other than by way of lay off or retrenchment, of the workers of a cashew factory by order published in the Gazette declare that the cashew factory shall stand transferred to, and vest in the Government. Provided that before making a declaration under this sub -section in respect of a cashew factory, the Government shall give the occupier of the factory and the owner of the factory where he is not the occupier, a notice of their intention to take action under this sub -section and the grounds therefore and consider the objections that may be preferred in pursuance of such notice. Explanation. - For the purposes of this sub -section, the expressions "lay off " and "retrenchment" shall have the meanings respectively assigned to them in the Industrial Disputes Act, 1947 (Central Act 14 of 1947). (2) The notice referred to in the proviso to sub -section (1) shall also be published in two newspapers published in the State of Kerala, and such publication shall be deemed to be sufficient notice to the occupier, to the owner where he is not the occupier and to all other persons interested in the cashew factory. (3) On the making of a declaration under sub -section (1), the cashew factory to which the declaration relates, together with all machinery, other accessories and other movable properties as were immediately before the appointed day in the ownership, possession power or control of the occupier in relation to the factory and all books of accounts, registers and other documents relating thereto shall stand transferred to, and vest in, the Government."
(2.) IDENTICAL notices were sent between 1984 and 1986 to 10 cashew factories under Section 3 of the Acquisition Act, and the said factories were acquired under the Act pursuant to those notices. Similar notices stating identical grounds were sent to 36 other cashew factories in 1988 by which the said factories were also acquired under the said Act. A specimen notice is set out hereinbelow. "No.31033/K3/84/Id 19.9.1985 JUDGEMENT_12_LAWS(SC)2_2015.htm
(3.) THE 10 cashew factories that were acquired filed writ petitions in the High Court in the year 1985 -1986, which were dismissed by a common judgment dated 20.1.1994. Meanwhile, the 36 factories approached the Supreme Court directly in writ petitions filed under Article 32 of the Constitution. These writ petitions were disposed of by a judgment dated 12.5.1994 reported in Indian Nut Products v. Union of India , 1994 4 SCC 269 in the following terms: - "8. It appears that in the notice, there is only reference to Section 3(1) of the Act, without disclosing whether the Government was satisfied in respect of the existence of any of the situations under clause (a), (b) or (c) thereof. No details have been mentioned in the said notice. Towards the end of the said notice, under the heading "Grounds" it has been stated that the factory was lying closed and that there was no possibility of it to start functioning within a period of ten days or in the immediate future and, therefore the Government was of the opinion that the said situation "will lead to a large scale unemployment ...". It need not be impressed that an order under Section 3(1) on the ground specified in clause (c) of sub -section (1) can be issued by the State Government only when the State Government is satisfied that "there has been large scale unemployment, other than by way of lay off or retrenchment, of the workers of a cashew nut factory". The grounds do not even state that there has been any unemployment much less large scale unemployment. The grounds simply state that the factory was lying closed and there was no possibility of its starting functioning within a period of ten days or in the immediate future, which will lead to large scale unemployment. No details have been mentioned in the said notice as to from what date each of the factories was lying closed. We are not able to appreciate as to how by a common notice all the 36 cashew factories could be summoned to show cause without giving particulars of conditions existing in different factories. The learned counsel, who appeared on behalf of the State, could not point out, as to how different occupiers or the owners of the factories could have filed objections to such common notice which did not refer to any conditions pertaining to their factories. 9. There is no dispute that the cashew nut factories do not work throughout the year but work for varying periods depending upon the supply of raw nuts etc. As such the particulars of the alleged closure of each of the factories were required to be furnished to the individual owner to meet the case against him. The object of the Act is to safeguard the interests of the workers in the cashew factories and it is to safeguard their interests that the power has been vested in the State Government to issue orders for the transfer of the factories. The transfer or vesting of the factories has to be in accordance with the procedure prescribed in the Act. As already pointed out above, the proviso to sub -section (1) not only requires a notice to be given to the occupier or the owner of the factory in respect of the intention of the Government to take action under the said sub - section, but also requires to furnish the grounds on which such action is considered necessary. In the present case, according to us, the notice does not comply with and conform to the requirement of the proviso to sub - section (1) of Section 3. 10. It is well -settled that if a statute requires an authority to exercise power, when such authority is satisfied that conditions exist for exercise of that power, the satisfaction has to be based on the existence of grounds mentioned in the statute. The grounds must be made out on the basis of the relevant material. If the existence of the conditions required for the exercise of the power is challenged, the courts are entitled to examine whether those conditions existed when the order was made. A person aggrieved by such action can question the satisfaction by showing that it was wholly based on irrelevant grounds and hence amounted to no satisfaction at all. In other words, the existence of the circumstances in question is open to judicial review. 11. It cannot be disputed that serious consequences follow on the basis of the order passed by the Government on grounds mentioned in clauses (a), (b) and (c). Hence it is all the more necessary that the Government furnishes the full particulars on the basis of which the Government claims to be satisfied that there is a case for taking over the factory. As already pointed out above, there is not even an assertion in the notice that there has been any unemployment much less large scale unemployment. The ground simply says that the Government was of the opinion that the closure of the factory "will lead to a large scale unemployment". We are of the view, that in the facts and circumstances of the present case, the notice issued to the petitioners with the so -called grounds was not in accordance with the requirement of the provisions of sub -section (1) of Section 3 of the Act. The notices issued to different petitioners are, therefore, declared to be null and void. Consequent thereto, the order dated 6 -7 -1988 is also quashed. 12. However, it is made clear that it shall be open to the Government to exercise the power conferred on it by sub -section (1) of Section 3, whenever it is satisfied on the basis of the relevant material, that any of the three conditions mentioned therein exists in individual factories, by following the procedure prescribed therein. 13. In order to work out the equities and the rights and liabilities which have arisen between the date of the transfer of the factories and passing of this order, we direct: (i) The possession of the factories shall be handed over to the respective owners within two weeks from the date of this order. As and when possession is given, an inventory of all the materials shall be made. (ii) The daily workers other than the members of the staff engaged by the Kerala State Cashew Development Corporation Ltd., or the State Government, as the case may be, shall be retained by the factory owners and shall not be retrenched except in accordance with law. So far as the members of the staff are concerned, it shall not be the obligation of the factory owners to retain them, in view of the interim order passed by this Court on 19 -7 - 1988. (iii) The petitioners shall pay the same salary and emoluments which were being paid by the State Government while the factories were with the State Government. (iv) Any claim for compensation in respect of any damage or loss caused to the machinery, equipments, building etc. during the period of occupation by the Kerala State Cashew Development Corporation Ltd., shall be assessed by the District Judge, Quilon. Similarly, any claim in respect of any amount for an additional construction made or additional machinery installed by the Kerala State Cashew Development Corporation Ltd., shall be determined by the District Judge, Quilon, on proper application being filed before it. (v) The Kerala State Cashew Development Corporation Ltd., shall be entitled to remove any machinery or materials installed by it within one week of preparation of the inventory; and (vi) Any disciplinary enquiry pending against any of the workmen may be continued by the owner of the factory concerned, if he chooses to do so." Based on the fact that the notice was identical also in the case of the 10 factories, by a judgment dated 10.3.1995, this Court followed the judgment in the Indian Nut Products case in the following terms: JUDGEMENT_12_LAWS(SC)2_12015.htm ;