Case Note & Summary
The case arose from the Central Government's exercise of powers under the Industries (Development and Regulation) Act, 1951 in respect of Hathisingh Manufacturing Company Ltd., an industrial undertaking manufacturing cotton textiles at Ahmedabad. The Central Government formed an opinion under Section 15(a)(i) that there had been or was likely to be a substantial fall in the volume of production in respect of cotton textiles manufactured in the undertaking for which, having regard to the economic conditions prevailing, there was no justification. Accordingly, it appointed a committee of three persons to make a full and complete investigation into the circumstances of the case. After the committee submitted its report, the Central Government formed the opinion that the undertaking was being managed in a manner highly detrimental to public interest and passed an order under Section 18A of the Act authorising Ambalal Shah to take over the management of the whole undertaking. The industrial undertaking and its proprietor filed a writ petition in the Gujarat High Court under Article 226 of the Constitution, seeking writs directing the authorised controller and the Union of India not to take over management on the basis of the Section 18A order. The principal ground was that on a proper construction of Section 18A(1)(b), the Central Government could make an order thereunder only where the investigation under Section 15 was initiated on the basis of the opinion mentioned in Section 15(b), i.e., that the undertaking was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest. It was also urged that the investigating committee had not directed its investigation into that question. The High Court accepted both contentions, set aside the Central Government's order dated 28 July 1960, and directed the respondents not to interfere with the management. The Central Government and the authorised controller appealed to the Supreme Court by special leave. The Supreme Court examined the wording of Section 18A(1)(b) and Section 15. It observed that Section 15 permitted investigation on any of five opinions, and Section 18A(1)(b) did not refer to any of those opinions nor to the initiation of the investigation; it only mentioned the making of an investigation under Section 15. The Court held that the phrase 'in respect of which an investigation has been made under Section 15' could not be cut down by a restricting phrase, and that the two conditions required by the section were satisfied: an investigation under Section 15 had been made, and the Central Government formed the opinion that the undertaking was being managed in a manner highly detrimental to the scheduled industry concerned or to public interest. The basis on which the investigation was initiated was immaterial. The Court also noted that if the legislature had intended a restricted meaning, it would have used additional words. It rejected the High Court's construction and its reliance on the absence of investigation into detrimental management. The Supreme Court allowed the appeal, set aside the High Court's order, and upheld the validity of the Central Government's order under Section 18A.
Headnote
A) Industrial Law - Takeover of Management - Scope of Section 18A(1)(b) - Industries (Development and Regulation) Act, 1951, Sections 15 and 18A(1)(b) - The Central Government ordered an investigation under Section 15 on the ground of substantial fall in production under Section 15(a)(i) and later passed a takeover order under Section 18A(1)(b) after the committee reported detrimental management. The High Court construed Section 18A(1)(b) as requiring the investigation to have been initiated on the Section 15(b) ground; the Supreme Court disagreed, holding the phrase 'in respect of which an investigation has been made under Section 15' is not restricted by the opinion that initiated the investigation. The Court held that the section requires only that an investigation under Section 15 has been made and that the Central Government forms the opinion of detrimental management; the basis of initiating the investigation is immaterial. Held that the Section 18A order was valid. (Paras 1-10) B) Constitutional Law - Judicial Review - Factual Investigation into Detrimental Management - Industries (Development and Regulation) Act, 1951, Section 18A(1)(b) - The respondents contended that the investigating committee did not direct its investigation into the question of detrimental management; the High Court accepted this. The Supreme Court, after construing the section, found that whether the investigation directed its attention to that question was not necessary for the validity of the Section 18A order because the section does not condition the order on the contents of the investigation report. The Court thus implicitly rejected the High Court's factual finding, and final order set aside High Court order. Held that the Section 18A order was valid. (Paras 1-10)
Issue of Consideration
Whether Section 18A(1)(b) of the Industries (Development and Regulation) Act, 1951 empowers the Central Government to order takeover of management only where the investigation under Section 15 was initiated on the ground mentioned in Section 15(b) (undertaking being managed in a manner highly detrimental to scheduled industry or public interest), or whether it is sufficient that an investigation under Section 15 was made for any of the five opinions in Section 15.
Final Decision
Appeal allowed; Gujarat High Court order set aside; Central Government's order under Section 18A dated 28-07-1960 held valid; Section 18A(1)(b) does not require that investigation under Section 15 be initiated on the ground in Section 15(b); it suffices that an investigation was made under Section 15 and Central Government forms opinion that undertaking is being managed detrimentally.
Law Points
- Section 18A(1)(b) of Industries (Development and Regulation) Act
- 1951 does not require that investigation under Section 15 be initiated on the ground of detrimental management
- it suffices that any investigation under Section 15 was made and Central Government forms opinion of detrimental management
- The phrase 'in respect of which an investigation has been made under Section 15' cannot be cut down by restricting phrase
- Basis of initiating investigation under Section 15 is immaterial to validity of Section 18A order
- Plain meaning of statute controls
