Vishnu Dayal Jhunjhunwala & Anr. v. Union Of India And Others

Judgment

CIVIL APPELLATE JURISDICTION : : Civil Appeal No. 481° of -

532 Se _ SUPREME COURT REPORTS [1984] 3s.0m.

~ AMARENDRA NATH SEN, J. Whether the order of the 5 Central

“Government taking over the management of the Sugar Mill of the... ; Appellant. under Rule 125A of the Defence of India Rules and . appointing an authorised Controller of the. said Mill thereunder is:

valid, is the principal question which falls for determination in this ; appeal by certificate. ,

' The main contention of Mr. S. T. Deasi, learned Counsel for ' the appellant, is that on a proper construction of Rule 125A of the Defence of. Indid Rules (hereinafter referred ‘to as the Rules) oO the. order taking over the management of the Sugar-Mill under this.rule is invalid, as on the date of the order the Sugar Mili was:

closed and the appellant had.no intention of te-opéning the same. It has not been disputed that if the order of the take. over of. the mana ement is held to be valid the appellent will not be entitled to any relief and the appeal must fail.

We may: observe that the. question whether the Mill was .

- closed or not on the date the order. taking over the management

. and appointing an authorised Controller under Rule 125 was- passed, is in serious dispute. However, for the purpose of decid-

.. ing the question raised in-this appeal it does not become necessary ° to go into any dispute with regard to the facts. We propose to. proceed on. the basis that the Mill had temained ‘closed and the ©

_ appellant had shut it down ‘permanently on the date the order came. ~~ to be passed, as, in our opinion, the order in question, even if the same be held to have been passed at the time when the Mill was ‘ lying’ so..closed, must be held to be perfectly vaild on 4 proper ‘interpretation of Rule 125A: Asin out opinion, on a proper

'. interpretation of Rule 125A, the order. in question is lawful and justified even if we accept the submission of Mr. Desai that the

Mill was factually so closed, it does not beconie necessary for us to advert to the facts of this particular case. “The real question is one.

of interpretation of Rule 125A.

_ Rule 125A. was introduced by an ‘amendment and inserted by: 7 “G. S.R. 1813 dated 28th December, 1962, The provisions ‘of this - Rule relevant for the purpose of this appeal are contained in sub+ |

_tules (1) and (2). which provide as. follows :— s “125A (). In ‘this rule . unless the context otherwise vo requires, ‘undertaking’ means =

(a) any undertaking Ginctuaing a an undertaking vested i din)

a.

V.D, JHUNJAUNWALA Y. UNION (A.N. Sen, Jy 533, .

or controlled or managed by, a local authority) which is engaged in the production, generation, supply,- , distribution or provision of water, transport, fuel, light electricity or other power, or any other thing . or service which is notified by the Government : as. 7 essential to the life of the community ; :

- (b) ‘any system of public conservancy and sanitation and “any hospital or dispensary ; A and also includes. any. part or. property of an . undertaking. mo,

‘(2) If it appears to the Central Government or the State Government that- for. maintaining supplies and services essential to the life of the community, it is necessary to take over. the - manage ment of any, undertaking, ' ‘that Government may, by notified order, authorise any. “Person or body of persons to take over the management of any undertaking’ specified in the order and thereupon ~ such undertaking shall be managed i in accordance with the provisions of that order ; .

Provided -that powers- under this: sub-rule shall he exercised by the State Government in respect of a com-. pany to which the Companies Act 1956 applies.

"Mr. Desai referring to sub-rule (1) (a) of Rule 125A of the.

Rules has argued-that the Mill of the Appellant: was not-an undertaking within the meaning: of. this Rule, as the Mill on the date of

“the order: was. not engaged in. production, generation, supply, distribution, or provision of water, transport, fuel, light, electricity .

‘or other -power or any other thing or service which is notified by the Government as essential to the life of the community because °

‘the Mill had been lying closed. It is his argument that an order _ under Rule 125A can only be validly passed in respect of an under- . ~ taking within the meaning of the Rule and in terms of the defini- tion of ‘undertaking’ in the rule, an undertaking to which this ~ rule may apply, must be one which is engaged in the production generation, supply, distribution or provision of water, transport. fuel, light, electricity or other power or “any other thing or service .

584 oo SUPREME court REPORTS

. ® (19681 74 1T.R B65

{1984 3 s. Cc. R.

which ‘is notified by the Goverriment as essential to the life of the community. ‘He. contends that the Mill, had been closed and.had not . been functioning . and therefore, the Mill was not engaged i in the production, generation, supply or distribution of. any sugar or any- ‘other: thing or service essential to the life of the community, It is his contention .that as the appellant had long before the pas-’ sing of the order and even before sugar was declared to. be an essential commodity, completely. stopped. the running of the Mill -, with no intention to: start it again, the. Mill had-ceased to be engaged i in the manufacture or production of sugar and there was_- 'stherefore, no undertaking within. the meaping. of Rule 125A and the order passed under: Rule. 1254 which was not attracted must. ; ‘be held. to be. bad. and invalid. He has submitted That an ‘order "under Rule 125A can ‘only be. passed in respect of an undertakin g which is actually engaged i in the activity of production at the time ‘the order is passed. . In. support of the submissions’ made, Mr. Desai has’ referred - to the decision of this Court in’ R. C Cooper v. Union. of India and also to the decision of the, Delhi High Court jn the case. of, National Projects Construction Corporation Ltd-v.

. Comnmissioner of Wealth Tax. Delhi®.

--On behalf of the. Union. of India, it has been submitted that

7 stoppage of production and non-f ‘unctioning of the Mill even with © an intent to close it down permanently. does not, in any way, ° affect the power to take ovér, the ‘management under Rule J25A | and the jurisdiction and authority to pass an order even in respect of an undertaking closed and. intended to. be permanently shut ot “down; can validly be exercised under rule 125A. The submission . is that merely because an undertaking has been shut down with no . ". intention of béing. reopened it will not on that ground only cease - . to be an undertaking ' within’ the meaning of the rule.” The learned ‘counsel. argues that: for a proper appreciation of the true import - and meaning of the word’ ‘undertaking’ and for understanding the

~ true! scope and effect of rulé 125A, it is necessary to refer to rule.

125. It is his argument that in the light of the provision contained in rule 125, rule 125A which was introduced by way of amend- ‘ment to confer further power of take over of the management of an undertaking will have to bé understood and construed ; and on+

_ proper interpretation it is clear that in n the larger public in interest. .

—_—— rt . y (i) [1970] 38. C. R. 530 ee _*

, id ra

- - prohibiting the production, manufacture, supply and distri- ra bution, use. and consumption of articles or thing and. trade 7 and - commerce therein - or for: ‘preventing. any corrupt’ Sure "-parctice’ or abuse of ‘authority ” in r-Teapect of, any. such met wt,

Va D. TiuNitoNWALA vr ‘UNION (a. N. Sen, J. Ly 535 :

0 the power and “authority conferred “under rule 125A can undoubt-~ os _ | ‘edly be exercised in respect of an. undertaking which may not be foes functioning and may. have even been closed with intent: of: snot ©.

on reopening the s same:.

: The relevant provisions of rule 125 read : _

; «195, "General control of industry, ete. —w, In this : rule, unless the context otherwise Tequires,— mS

@). any. reference to’ any article or thing shall be const = -

Be ued as including a reference to electrical energy ; 3. *s ee . . a o. the | “expression - ‘undertakiag? means any adertaking ° by way of any industry, trade or business and includes: | |

- the occupation of: hanJling, loading or unloading ¢ of : ge goods i in the’ course of transport, .

Q) if the Central Government or. the | State Govern: ot ; ; . “ment is of. opinion | that: it is necessary or expedient so to . ey

-do for securing | the. defence. of: India ‘and civil defence, -

“the: efficient ‘conduct of military. operations: or the mainte- © oe

': .pance or.increase of.-supplies and _ Services essential to

“the life of the community or for securing- ‘the : equitable er

° ~ distribution. and availability of any article or * thing at: a ~ ‘fair prices, . it may,.'by order, provide for regulating or matter, pe Ba

3) Without | prejudice | to the “generality” “ar ‘the he powers. conferred by. ‘sub-rule. Dy an order made. there. . “under may provide - Te :

; (a) ‘for regulating by 5 decd, permit or otherwise the. ’ the :Production, — manufacture, * treatment, keeping -- oS . storage, ‘movement, transport, ‘distribution, disposal, : vo a ~, acquisition,” use ‘or consumption of articles or F things Be

‘o of any description whatsoever 5

(a)

- thing which in the opinion of the Government are, . - or, if not regulated or prohibited, are likely to -be, ‘detrimental to. any of the purposes Specified 1 in sub-

(b)

. requiring articles or things ordinarily kept for sale. to :

for regulating or prohibiting any. class of commercial a or financial transactions in respect of any article or tule (2).

for prohibiting the. with holding from sale, either .

generally or to specified persons or classes of persons, of’ articles or things ordinarily kept for sale and for be sold either generally or to specified pérsons or class

. or classes of persons or in specified circumstances ;

(0)

@. the maximum price, if any, fixed by order under. ; clause (e) or by or under any. other law forthe __ - ' time being in force,’ for. the grade or variety of

(d

— for requiring any person holding in gtock any article or thing to sell the whole ora specified part of the. --stock to the Gov ernment or to an officer or agent of . . the Government orto such other person. or class- “or classess of persons and in such circumstances as ~ may be specified in the order and if the order relates to food-grains, at such prices.as_ may be’ specifi ed in’ the order having regard to;— |

' food-grains to which the order . this clause apphes ; and .

_ Gi)’ the price “for that grade or variety of foodgtains prevailing or likely.to prevail during the post.

harvest period i in _ the. area to Which the order applies ; ;

‘for. securing . ‘the pioduétion or manufacture of speci- fied articles, or things in specified quantities and. for effecting modification in the pattern of production or

' manufacture of such articles or things ;

(ad)

for securing the production, manufacture supply or sale according to the prescribed standards and, speci-

. fications, of any article or thing appearing to .the , Government essential to any of the Purposes specified in sub-rule (2) ;

- V.D. JHUNJHUNWALA Y. UNION (AN. Sen, J) ; $37

(ddd) for. the minimum and maximum stock of any article

_ or thing appearing to the Government essential to any the pur-poses specified in sub-rule (2), to.be held by any ‘consumer or by any producer, manufacturer, distributor, dealer or other person ;,

“(e) for controlling the prices or rates at which articles or things of any description whatsoever may be sold or hired or for. relaxing any maximum or minimum

-. limits otherwise imposed on such prices or rates ; ,

(f) for controlling the rates at which any vessel regis- ° tered in India may be hired and the rates at which persons or goods may be carried in or on any. such . vessel ;

(g)- for requiring any employers oF class or classes of employers to supply to all or ‘any class of their employees ot to any class of dependants of such “employees such articles or things in such quantities and at such price as may be specified in the order -and to provide such accommodation and other “facilities for taking meals at or near. the place ‘of employment as may be so specified ;

(h) for controlling the recruitment and employment of

~~ labour in such areas as may be specified in the order with a view to securing that efficient workers are’ available for undertakings which, in the opinion of the. Government, are essential undertakings ;

-(i) for regulating the carrying on of any undertaking ’ engaged in or capable of doing, work appearing “to the Government essential to any of the above mentioned purposes, and, in particular :

(i) for requiring work to be done by an undertaking ; ; .

ii) for determining the order of priority in which, ’ and the period or periods within which work shall . be done by an undertakin g3

(iii) for controlling or fixing the charges which _ may be made by undertaking in respect ‘of the doing of any work by it ;

54g

| SUPREME COURT REPORTS - - , [1984] 3 S.0.R.

‘(iv) for requiring, regulating or "prohibiting the engagement in the undertaking of any employees or class or r classes of employees ; ; *

_(v). for requiring. the undertaking to provide.

_ adequate safeguards against sabotage ;

Oo for requiring - persons engaged in the production,

-{k)

manufacture, supply or distribution of or trade and commerce in any article or thing, to maintain and

: produce for inspection such books, accounts and records relating to. their bussiness. and to. furnish © such information relating thereto and to employ such accounting and auditing staff as may be specified in

_the order ;

» for collecting any information or ‘statistics. with a view to regulating or probibiting any of the aforesaid vt matters ; ;

Gi)

a for. requiring persons carrying on any industry, trade : “or business or employed in -connection with any ” undertaking to produce to such authority as may be | ‘specified in. the order, any books, account or other documents, relating thereto; and for requiring such .

persons to furnish such authority as may be specified in- the. order such estimates returns or other informa- ©

_ « tion relating to any industry. trade or business or any undertaking -as may be specified in the order or

‘demanded thereunder ;.

(an) for the grant or issue of licences;. permits or other

‘documents, the charging of: fees therefor, the deposit

- of such sum, if: any as may be specified “in. the order as security for the due performance of. the conditions of any such licence, permit or other document,

‘the forfeiture @f the sum to deposited for any part thereof for contravention of any such conditions, and —

’ the: _ adjudication of such forfeiture by such authority

“V.D. JHUNJHUNWALA v. UNION (4.Ni Sen, J) 539 | ‘as may be specified in the order ;

x ok ORR RR ROR eR kK Oe Rok ke Oe Ae RR OR RR OH RR ROR Rk ok KR ke eR RR OR Rk Ok Rk

(4). Ifit appears to the Central Government or the State Government that: in the interests of the defence of India and civil defence; or the efficient conduct of — _ military: operations, or for maintaining supplies and ser- | - vices essential to the life of the community, it is necessary to exercise control over the whole or any part ofan * existing undertaking, that Government may by order authorise any’ person (hereinafter referred’ fo as an auth- ° rised controller) to exercise, with respect-to the undertak-~ ing or. any part thereof specified. in the order, such. functions of control as may be provided by the order ; and so long as an order made under this sub-rule is in force. - with respect to any undertaking ‘or part of an under- ° taking.

(a) the authorised controller shall exercise his functions

.in accordance with any instructions given to him by | the Central Government or the State Government, so, however, that he shall not have power to .give any

' directions inconsistent with the provisions of any

Act or other instrument determining the functioning

.: of the undertakers except in so far as may be specifically provided By the order ; and

(b) the undertaking or part shall be. catried on in accor- ‘dance with any directions given by the authorised controller in accordance with the provisions of the order, and any person having any function of management in relation to the undertaking. or part shall comply with any such directions ;

(5). The Central Government, so far as it appears to “it to be necessary or expedient for securing the defence of, ~ India and civil defence or the efficient conduct of military

“operatiotis, or ‘for maintaining supplies’ and ' services essential. to the life of the community, may direct the. employmént of persons . ‘subject to the Army Act, 1950 or the Air Force Act, 1950, or the Navy Act, 1957— .

. (a): in any ‘public utility service as defined in section 2 of -

_ the Industrial Disputes Act. 1947, or me, &) in any undertaking or part thereof,

(i) which is being - ‘carried on ‘by. the Central or a i State Government, or —

(i) which in the opinion of the Centéal ‘Government s is engaged in any: trade or ‘business essential to . the life of the community, or :

(iii) with respect to which an order made under sub-- — rule: @i is in force.

- and thereupon. ‘it shall be the. duty of: every person $0 sub-

__ ject to obey any command given by. any superior ‘officer va

‘in relation to such employment: ‘and ‘every such command . . shall be deemed to be’ a lawful command within the’ ‘ meaning ‘and for ‘the’ purpose. of the Army: Act,1950, or Air Force Act, 1950, or the Navy Act, 1957, as the case — may be. _

©). A direction under sub-rule (5) may be made with or without the consent of the person carrying.on © ‘the undertaking “or part thereof to which the direction . relates but if. made without his consent shall. be communi: - ‘cated to such person who sh&l thereupon be deemed to have . contravened’ an’ order made under: this: rule:if he. ‘obstructs: or fails to facilitate the employment of persons «

_ Subject to the Army Act, 1950,.or the Air Force ‘Act, 1950 .or the Navy. Act, 1957, in. pursuance of the direction.’ an

> Sub-role (2) of rule 125° makes it clear that for securing the

| defence of India and civil defence, efficient conduct of ‘ilitary operations. or the maintenance or increase of supplies and services essential to the life of the community or for seeking equitable distri-

-bution’ and availability of arly article’ or thing at fair prices very’ |

“wide powers which are indicated in sub- -section(3) without prejudice

$400 - "SUPREME GouRT REPORTS [1984] 3 s.c.k. > to the generality of the powers conferred by this sub-section have | vb. DHONTUNWALA y. UNION (AN. Sen, ) 54h

-. Provided for. regulating or prokibiting production; manufacture; . supply and distribution, use and consumption of articles or things and trade ang commerce and for preventing any corrupt practice or abuse 6f-authority in respect’ of any such matter. Rule 125(1)(6) which defines an undertaking-. makes it clear that the expression —

‘undertaking’ means: any undertaking. by way of any industry, - trade or business and includes the occupation of handling, loading or unloading of goods in the coutse of transport. Sub-rule 3(i) of — - .

rule 125 makes provision for regulating the carrying on of an

‘undertaking engaged in, - or capable ef doing work appearing to the Government essential to any of the purposes mentioned above in sub-rule (3) and.in particular (i) for requiring work ‘to be done by an undertaking. and (ii) for determining the order of: priority 3 in which, and the period or periods within which the work shall be

_ done by an undertaking. It has” to be noted that‘the expression - undertaking has been given a very wide meaning in rule 125(1)(o)

’ and is not limited to any undertaking which is functioning, or is

_ a going concern. Sub-rule 3(i) confers powers and jurisdiction for. regulating the carrying on of any undertaking ‘not ‘only engaged in but also capable of doing, work appearing to the Government essential and this provision makes this position abundantly clear,

In the larger interest of the country and particulatly for the purpose specifically mentioned in rule 125, power of general control -of very wide amplitude is. conferred’ under rule 125 and thereis - - nothing to indicate in the said rule that ‘the powers conferred under rule 125 cannot be exercised Over any undertaking which has stopped functioning. Indeed, such.a construction is clearly”

- unwarranted on a plain reading - of . the séction which cleagy pro- . - yides that such powers can be exercised ‘not only in respect of an “undertaking engaged but also capable of doing the ‘kind of activity contemplated in the rule. Such a narrow construction is likely to defeat the very purpose for which. the rule has been enacted. Although rule 125 confers very wide’ powers for general control of

_ an undertaking, there is no provision in the said rule to take over the management of any undertaking. Orders and directions under tule 125 to exercise general control over an undertaking were not . _ considered to be sufficient and the authority felt that further power .

to take over the management: of’ an’ undertakIng in appropriate

Gases was necessary, when such general control may not prove effective particularly. in respect of certain undertakings. Rule

125A by way of amendment was, therefore, inserted to confer ie i }

SAR ~ SUPREME court REPORTS ae lis 84 3 SCR ote further p power tof taking over ‘the management of particular under Se .

*. ‘Takings and‘ of appointing authorised - ‘controllers for running such | See undertakings. The” meaning - of the? «word ‘undertaking’ intrule So. 125A has to be understood in this background and context. Rule. --"

oo 125A makes it clear that.the rule*125A ‘is not * intended to apply to. °" -, each and every. undertaking{within the meaning of rule 125. Special. = “Provision is made in rule 125A in respect of particular undertakings. ., or , ".: Only Rule 125A ‘describes and “particularisés: the undertakings to . Which this rule. will be- applicable. _The ‘provision in thisrule ane that “‘in this rule unless’ the’ context otherwise. requires an. “undercane CGE : taking’ means any undertaking (including ‘ an undertaking vested in’ -- = | “or controlled or managed by, a “local authority) which is engaged aes - in the production; generation, supply, distribution or Provision ‘of |. "water, transfer, fuel, light, electricity. or other. power ‘or any other |” “+. thing or, service which is notified by the Government as essential to. a ~ the life of the: community”, is. “merely: descriptive of the tinderta- Lo, oS Dd. .. ing to which this rule is applicable. The words. ‘‘which _ is engaged - coe “os. inthe production. + #49? merely describes the kind of undertaking eth, 7 a by. referring to the nature of. the (activity ‘of the. ‘undertaking for: . "bringing it- within the _ purview. of rule 125A and they have no-pM do - bearing on thie question ‘whether, the activities - are in. the process. aa | E “cof being carried on or have been: ‘stopped. : : The expression any." a undertaking which is . “engaged -. in’ has ‘been ‘used | to describe the =" _. Mature of. business of. the undertaking and i is ‘merely descriptive of “the undertaking to - which this rule will” -apply-. ‘The take over of - the management ‘of an undertaking | to which rule - 125A is applica- >.> “ple may become | all ‘the -more . necessary in larger public. interest... . F _ and for effectively serving the purposes for which this rule has been - : “hone incorporated, particularly ‘when~ an* undertaking ‘engaged i in any .- 7 _ +o tL kind of. activity. coming within ™ the purview of this rule stops. . | Me “functioning, to ‘enable~ tee . undertaking to function. for achieving’. - eo. the purposes for which ‘these: “provisions - -have been made. The. “7” # construction’ contended for by Mr. Desai will be inconsistent, with WG ."' “the provisions of the rule “and. will: defeat the purposes which this. " ““gule seeks to serve. - The. decisions relied on by Mr. Desai are of--:. “7 no assistance as the expressions ‘undertaking’ and. ‘engaged’ : which a ‘game to be considered’ in these cases, “were used i in n different status me - andj in n entirely different context. . Be, lee Wwe must, therefore” held that the teking « over rof the manage- Me Sate ment of tke suger mill : Of the. _-Appellent and, the apoointmént of

V.D. JHUNJHUNWALA y, UNION (4.N, Sem J) 343 - the authorised controller were perfectly valid and lawful and the

_ act done by the authorised controller in the course of management

“by virtue of the provisions of these rules must be held to be binding on the appellant.

The appeal, therefore, fails and i is dismissed with no order 2 as , to costs.

A ppeal dismissed,