Pattanaik, J. - (1.)These appeals by the Union of India are directed against the judgment of the Bombay High Court, Certificates under Articles 132(1) and 133 of the Constitution for leave to appeal to the Supreme Court having been granted by the High Court itself. By the impugned judgment, the Bombay High Court came to the conclusion that the action of the Union Government in taking over the managements of the three Cotton Mills, namely, The Elphinstone Spinning and Weaving Mills Company Ltd., Jam Manufacturing Mills and New City Mills of Bombay under the provisions of Textile Undertakings (Taking over of Management) Ordinance, 1983, (hereinafter referred to as "The Ordinance") and the Textile Undertakings (Taking over of Management) Act, 1983 (hereinafter referred to as "The Act"), infringed the fundamental right under Article 14 of the Constitution and, therefore, qua them it was invalid. The High Court also further came to hold that the Act infringed the petitioners' fundamental rights under Article 19(1)(g) and on that count qua the petitioner was equally invalid. In coming to the aforesaid conclusion the High Court after thorough discussion of the materials on record found that the Union Government failed to establish either directly or inferentially any mismanagement on the part of the three companies and failed to establish from the material on record that there was any nexus between the main object or purpose of the Act, viz., to take over management of only those mills whose financial condition before strike was wholly unsatisfactory by reason of mismanagement.
(2.)The short facts leading to the promulgation of the Ordinance and replacement of the same by the Act are the Textile Mills in and around Bombay had gone on strike with effect from 18-1-1982. On 15-2-1982 the Government of India declared its policy for nationalisation of all these Textile Industries. In October 1982, the Reserve Bank of India had called a meeting to discuss the situation arising out of the strike. Depending upon the economic conditions of different mills the mills had been classified into three groups. The continued Textile strike had deteriorated the financial condition of all the Textile Mills and the Mills were looking forward to the Financial Institutions and Nationalised Banks for financial aid to make the Mills viable. On 28th March, 1983, the Government of India wrote letters to the Nationalised Banks and IDBI to conduct a viability study of these Mills. The three Mills, with which we are concerned, in these appeals had been included in category III. On 20th September, 1983, the Government of India in the Ministry of Commerce had issued a Memorandum constituting a Task Force to collect data and submit a note for being placed before Economic Affairs Committee of the Union Cabinet to enable it to take a decision as to which of the Mills in category III would be Nationalised. The said Task Force submitted its report by the end of September, 1983. On 18th October, 1983, the Ordinance was promulgated and the management of 13 Textile Mills enumerated in the First Schedule to the Ordinance was taken over pending Nationalisation of the Undertakings. The Ordinance indicates that for reorganising and rehabilitating the Textile Mills to protect the interest of the workmen employed therein, and to augment the product and distribution at fair price of different varieties of cloth and yarn so as to subserve the interest of the general public, investment of very large sums of money was necessary and for such investment, the Central Government felt that the acquisition of the Mills would be necessary, but since acquisition would take some time and it was felt that it would be expedient in the public interest to take over the management of the Undertakings, pending acquisition, and that Parliament was not in Session, the President, on being satisfied that circumstances exists for taking immediate action, promulgated the Ordinance in exercise of powers conferred under Article 123(1) of the Constitution. The said Ordinance was replaced by the Act and the Act provided that the same shall be deemed to have come into force on 18th day of October, 1983. Immediately after the promulgation of the Ordinance the Management of the Mills, enumerated, in the First Schedule thereof, having been taken over by the Government, the three Mills referred to earlier filed three Writ Petitions in Bombay High Court challenging the applicability of the Ordinance so far as those Mills are concerned. After replacement of the Ordinance by the Act the Writ Petitions were amended and thus the validity of the Act was challenged qua the three Writ Petitioners. Though the challenge was on three counts, namely, violation of Article 14, violation of Article 19(1)(g) and violation of Article 300A, but at the time of hearing the challenge in relation to violation of Article 300A was not pressed and, therefore, the High Court considered the challenge, so far as it relates to violation of Articles 14 and 19(1)(g) of the Constitution. The High Court in the impugned judgment made elaborate discussion of the materials on record as well as interpreted the different provisions of the Constitution and came to hold that the act with its object of only taking over the management cannot be considered to be law for taking over the ownership and control of the property, as required under Article 39(b), but would squarely fall under Article 31A(1)(b) and, therefore, Article 31(c) will have no application. The High Court also came to the conclusion that to protect a legislation under Article 31(c), there must be a declaration in the legislation itself that the Act was enacted to give effect to the Directive Principles under Article 39(b) and (c), and in the case in hand, there being no such declaration either in the Ordinance and in the Act, Article 31(c) will have no application and, squarely the challenge on the ground of violation of Article 14 or 19 has to be examined. On examining Article 31A(1)(b) the High Court was of the opinion that two conditions must be satisfied for attracting Clause 1(b) of Article 31A, namely, that the taking over of the management of the property by the State would be for a limited period, and such taking over must be either in public interest or in order to secure the proper management of the property, since the taking over of management was not for any limited period and in fact such management had been taken over pending nationalisation, the provisions of Clause 1(b) of Article 31A would not get attracted. According to the High Court the expression "Pending Nationalisation" cannot be held to be for a limited period and the protection of Article 31A(1)(b) would be available only when there is a definite limit in the law for the period of management and, consequently the challenge on the anvil of violation of Articles 14 and 19(1)(g) has to be examined. The High Court then examined the factual aspect for considering the question as to whether there were any materials to put the three Mills in a class of Mills for which the taking over of the management was meant notwithstanding a declaration or recital in the Preamble itself, the same being "Mills whose financial condition had become wholly unsatisfactory by reason of mismanagement". The High Court then examined the different datas collected by the Government of India as well as several reports including the Task Force Report and ultimately came to the conclusion that even though the financial condition had become unsatisfactory but the Union Government has failed to establish that such unsatisfactory financial condition is by reason of mismanagement and, therefore, there was no nexus between the basis of the classification of the petitioner Mills with other mismanaged Mills and the said object and the purpose of the Act. In other words, the High Court came to the conclusion that inclusion of the three Mills in the Schedule appended to the Ordinance and the Act was arbitrary and, on the other hand, the figures given by the Union of India itself show that the financial position of the three Mills were far better than even the Mills which were in category II. Consequently, the High Court was of the opinion that the Government could not have, for taking over of the management of the petitioners' Mills, classified those Mills as Mills whose financial condition was bad due to mismanagement. The High Court, therefore, ultimately came to the conclusion that there has been a gross violation of Article 14 in clubbing the three Mills with other Mills in category three, enumerated in the Schedule appended to the Act and such inclusion violates the fundamental right guaranteed under Article 14 of the Constitution. The High Court also came to the conclusion that the impugned Act infringed the petitioners' right under Article 19(1)(g) and on that count qua petitioners was equally invalid. Having come to the aforesaid conclusion the Writ Petitions were allowed and the order of taking over of the management of three Mills was set aside. But the operation of the order had been stayed for 8 weeks and certain restrictions had been imposed and the High Court also granted Certificate under Articles 132(1) and 133 of the Constitution for Leave to Appeal to the Supreme Court. When the matter was listed before this Court the aforesaid interim order staying the operation of the judgment was continued and later on certain Misc. Applications being filed by different Mills certain orders have been passed by the Court with regard to the possession of certain assets, like, car, telephone connections etc. When the appeals were taken up for hearing in January, 1985, the same had been heard before a Three Judge Bench but after hearing for some time the Three Judge Bench felt that in view of the questions which arise for consideration, and in view of Clause (3) of Article 145 of the Constitution the cases should be heard by a Bench of not less than Five Hon'ble Judges and that is why these appeals were heard by us.
(3.)Mr. Salve, the learned Solicitor General, appearing for the appellant Union Government contended that the basic approach of the High Court in examining the constitutional validity of the Act is grossly erroneous and such approach has vitiated the ultimate conclusion. According to the learned Solicitor General, the financial condition of these Mills had become so bad that unless large sum of money from the public exchequer was pumped into it, the Mills were not in a position to run and that in turn would have made thousands of labourers idle. To overcome the aforesaid crisis and since large scale government money was going to be pumped into the Mills for making it viable, the Parliament itself thought it appropriate to take step for acquiring the Mills and pending finalisation of acquisition the Parliament thought it fit to take over the management which was absolutely necessary in the public interest. According to Mr. Salve this is apparent from the Bill introduced by the concerned Minister as well as the Act itself and in such a case the Court would not be justified in examining the datas which persuaded the Parliament to take the aforesaid decision to come to a conclusion that the said decision of the Parliament could not have been taken on the available materials. According to Mr. Salve the fact that the management of the Mills had been taken over until the Mills are acquired by enacting an Acquisition Act, for all practical purposes the taking over was for a limited period thereby attracting Clause (1)(b) of Article 31A and the High Court was in error in concluding that the taking over was not for a limited period and, as such, Clause (1)(b) of Article 31A will not get attracted. According to learned Solicitor General the Act in question was for a limited period and had been enacted in the public interest coming within the purview of Clause (1)(b) of Article 31A and, therefore, provisions of Article 14 or Article 19 cannot at all be attracted for assailing the validity of the action taken under the Act. The learned Solicitor General also further urged that the materials which were there before the Government before promulgation of the Ordinance and before the Parliament before enactment of the Act were sufficient for classifying the Mills into three categories and in fact by inclusion of the three Mills with which we are concerned in the present appeals with the group of 13, the Management of which was being taken over by the Act, by the stretch of imagination can be held to be discriminatory nor the conclusion of the High Court that there has been an infringement of Article 19(1)(g) of the Constitution is at all sustainable. The learned Solicitor General also placed reliance on the averments made by the Union of India in its counter-affidavit filed before the High Court to indicate how it was absolutely necessary to promulgate the Ordinance and how the Government took the decision after considering the reports submitted by the IDBI and other financial institutions as well as the report of the so-called Task Force. He also placed reliance on the Affidavit of Mr. Prabhat Kumar, the then Secretary Commerce explaining the Task Force Report and contended that the High Court was in error in basing its conclusion on the earlier Affidavit of one Mr. Singh. According to learned Solicitor General that while considering the constitutional validity of a statute, more particularly a statute on economic matter, certain well established principles evolved by the Courts as rules of guidance in discharge of its constitutional function of judicial review have to be borne in mind, and in the case in hand the impugned judgment of the High Court, on the face of it, indicates that those guiding principles have not been borne in mind. According to the learned Solicitor General one cardinal principle well accepted and recognized by Court is that the legislature understands and correctly appreciates the needs of its own people and its laws are_grounds and the presumption of constitutionality is indeed so strong that in order to sustain it 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. He further emphasised that the law relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. and the High Court totally overlooked the aforesaid approach and guidelines in basing its conclusion. According to the learned Solicitor General the preamble of the Act unequivocally indicates the Act to be a piece of legislation for taking over in the public interest of the management of the Textile Undertakings of the Companies specified in the First Schedule pending nationalisation of such undertakings. It no doubt, further stipulates that by reason of mismanagement of the affairs of the Textile Undertakings specified in the First Schedule their financial condition became wholly unsatisfactory but the financial condition of these Mills had become so precarious and unsatisfactory as was found from the reports of different financial institutions moulding IDBI that mismanagement is the natural inference and the preamble read as a whole would indicate that the Paramount thought it appropriate to take over the management of Textile Undertakings in the public interest pending nationalisation of such undertaking and in this view of the matter the High Court was hyper-technical in recording a finding that even though the financial condition become wholly unsatisfactory but the Government failed to establish the mismanagement of the undertaking which had brought the financial condition to such unsatisfactory stage and, therefore, by including the three Mills in question in the group of 13 there has been violation of Article 14. The learned Solicitor General also seriously commented upon the conclusion of the High Court and submitted that the High Court committed error in assuming mismanagement as fraud and such fraud has not been established by the Union Government. According to learned Solicitor General the High Court misunderstood the basis of the classification itself and taking an overall view of the financial position of these three Mills the conclusion is irresistible that these three Mills were rightly clubbed together with the group of 13 whose financial position was wholly unsatisfactory and government money was required to be pumped into it for making the Mills viable and for effective running of the Mills so that the large number of workers will not face the misery of closure of the Mills. The learned Solicitor General also urged that in view of the prevailing situation in the 13 Mills including the three with which we are concerned, in these appeals, the Parliament thought that only way to put the management on the wheels was to take over the management of the Mills which is permissible in the larger public interest as contained in Article 31A(1)(b) of the Constitution, and such Parliamentary wisdom cannot be scrutinised by the Court in a scale on the basis that certain reports might not have been placed before the Parliament or on the ground that factually the Mills were not mismanaged and yet had sustained heavy financial loss and thereby putting them along with the group of 13 constitutes an infraction of Article 14 of the Constitution. According to the learned Solicitor General the burden being on a person who attacks the constitutionality on the grounds of discrimination the said burden cannot be held to have been discharged by the Mills and the High Court committed serious error in annulling the taking over the management of the three Mills under the Act on the ground that Government failed to establish the relevant material before the Court. The learned Solicitor General also argued that Article 31(c) does apply to the legislation in question, and therefore, infraction of Article 14 or 19 should not have been gone into by the Court.