Moolchand Gupta Vs. Jagannath Gupta and Co. (P) Ltd. - Court Judgment

Excerpt:
- [ a.n. ray, c.j.,; a. alagiriswami,; k.k. mathew,; p.n. bhagwati and; y.v. chand, jj.] art. 22(4)(a) of the constitution says that no law providing for preventive detention shall authorise the detention of a person for a period longer than three months unless an advisory board has reported before the expiry of three months that there is in its opinion sufficient cause for such detention. the proviso to the article provides that nothing in sub-clause (a) shall authorise the detention of any person "beyond the maximum period prescribed by any law made by parliament under sub-cl. (b) of cl. (7)" of art.22. by reason of art. 22 (4) (b) a person can be detained for a longer period than three months without the necessity of consulting an advisory board if "such person is detained in accordance with the provisions of any law made by parliament under sub-cls. (a) and (b) of cl. (7)" of art.22. and art. 22(7) says "(7) parliament may by law prescribe (a) the circumstances under which, and the class or classes of cases in which, a person may be detained for a period longer than three months under any law providing for preventive detention without obtaining the opinion of an advisory board in accordance with the provisions of sub- clause (a) of clause (4); (b) the maximum period for which any person may in any class or classes of cases be detained under any law providing for preventive detention; and (c) the procedure to be followed by an advisory board in an inquiry under sub-clause (a) of clause (4)." section 13 of the maintenance of internal security act, 1971 as amended by s. 6(d) of the defence of india act, 1971 enacts that the "maximum period for which any person may be detained in pursuance of any detention order which has been confirmed under s. 12 shall be twelve months from the date of detention or until the expiry of the defence of india act, 1971, whichever is later." pursuant to an order of detention passed by the government of west bengal the petitioners were detained under s. 13 of the maintenance of internal security act, 1971. in a petition under art. 32 of the constitution it was contended (i) that the parliament was bound to prescribe the maximum period of detention under art. 22(7) (b) of the constitution in order that the provision of art. 22 (4) (a) might operate and is s. 13 of the act, as amended, did not prescribe the maximum period of detention, the confirmation of detention orders in terms of sec. 13 of the act was bad; (ii) that since the determination of the period of detention, namely. the expiry of the defence of india act, 1971 is depending upon the requirement of the proclamation of emergency, the period fixed in sec. 13 is dot "the maximum period" as visualised by art. 22(7)(b); and (iii) that the parliament has abdicated its power and duty to fix the maximum period to the executive as the determination of the operation of the proclamation of emergency is a matter within the discretion of the president and he is, therefore, the authority to determine the retirement age of the defence of india act. held : (per ray c. j., mathew and chandrachud, jj :) (1) there is no provision in the constitution which either expressly or by necessary implication compels parliament to prescribe the maximum period of detention under art. 22 (7) (b). the proviso does not proprio vigore compel the parliament to fix the maximum period. nor does art. 22(7) (b). on the other hand it expressly says otherwise. [841 b] the language of art. 22 (4) (b) is in marked contrast with that of art. 22 (4) (a) read with the proviso. art. 22(4)(b) makes it obligatory upon parliament, if it wants to pass a law for detaining a person for a period of more than three months, without making a provision in that law for obtaining the opinion of an advisory board. l841 de] under entry 3 of list iii of the seventh schedule, both parliament and state legislatures have plenary power to pass laws for preventive detention as respects the subjects mentioned therein. a power to pass a law for detention carries with it the incidental power to provide for the period of such detention. therefore, both parliament and state legislatures have power under the entry to provide for detention of a person for a specified period without fixing a specified period. the purpose of art. 22(4) (a) is to put a curb on that power. what the proviso means is that even if the advisory board has reported before the expiration of three months that there is sufficient cause for detention, the period of detention beyond three months shall not exceed the maximum period that might be fixed by any law made by parliament under art. 22(7)(b). the proviso cannot mean that even if parliament does not pass a law fixing the maximum period tinder art. 22(7) (b), the state legislatures cannot pass a law which provides for detention of a person beyond three months. the period of such detention, viz., detention beyond the period of three months, would then be a matter within the plenary power of parliament or state legislatures, as the case may be, as such a power is incidental to the power to pass a law with respect to the topics covered by entry 3 of list iii. [839 h; 840 a-d] therefore, but, for the proviso to cl. (4)(a) of art. 22, the act as it provides for the opinion of the advisory board, can authorise detention of a person for any period, by virtue of the plenary character of the legislative power conferred by the entry. the proviso says in effect that if parliament fixed the maximum period under art. 22(7) (b), the power of parliament and state legislatures to fix the period of detention in a law passed under the entry would be curtailed to that, extent. [840 e-f] gopalan v. the state of. madras, [1950] s.c.r. 88, krishnan v. the state of madras. [1951] s.c.r. 621 and state of west bengal v. ashok dey and others, [1972] 1 s.c.c. 199, referred to. (2) (a) the meaning of the word 'maximum' is "the highest attainable magnitude or quantity (of something); a superior limit," the meaning of the word 'period' is "a course or extent of time; time of duration," therefore the words 'maximum period' mean the highest or the greatest course or extent or stretch of time, which may be measured in terms of years, months or days as well as in terms of the occurrence of an event or the continuance of the state of affairs. [842 g] (b) it is not necessary that the parliament should have fixed a period in terms of years, months or days in order that it might be the "maximum period" for the purpose of art. 22(7)(b). as the object of preventive detention is to prevent persons from acting in a manner prejudicial to the maintenance of internal security or public order or supplies or services essential to the community or other objects specified by entry 9 list 1, the power to detain must be adequate in point of duration to achieve the object. if the maximum period can be fixed only in terms of years, months or days, certainly it would have been open to parliament to fix a long period in s. 13 and justify it as "the maximum period". [843 d-e] (3) it is not correct to say that the parliament in fixing the duration of the maximum period of detention with reference to an event like the cessation of the period of emergency, has in any way, abdicated its power or function to fix the maximum period or delegated it to the president. there can be no doubt that it is parliament that has fixed the maximum period in s. 13 of the act. it cannot be presumed that the president will act unreasonably and continue the proclamation of emergency even after the emergency has ceased to exist. seeing that the maximum period of detention has been fixed by s. 13 and that the discretion to fix the period of detention in a particular case has to be exercised after taking into account a number of imponderable circumstances three is no substance in the argument that the power of government to determine the period of detention is discretionary or arbitrary. [844 de; f] suna ullah v. state of j. & k. a.i.r. 1972 s.c. 2431, referred to per alagiriswami, j : (a) an analysis of the provisions of cls. 4 and 7 of art. 22 clearly shows that a maximum period of detention should be laid down by parliament whether it is a case of detention after obtaining the opinion of an advisory board or without obtaining the opinion of an advisory board. it is clear from the provisions of cls. (4) and (7) that a law providing for preventive detention can authorise the detention of a person for a longer period than three months only if an advisory board has reported that there is sufficient cause for such detention, that even with the advice of an advisory board the detention cannot exceed the maximum period prescribed by law made by parliament under sub-cl. (b) of cl. (7) and that if a person is detained in accordance with the provisions of any law made by parliament under sub-cls. (a) and (b) of cl. (7) the detention can be for a period longer than three months. therefore, the parliamentary statute can provide for preventive detention without obtaining the opinion of an advisory board by laying down the circumstances under which, the class or classes of cases in which it can be done. in that case the maximum period for which a person can be detained should also be specified by the parliamentary law, that is, a person cannot be detained for a period exceeding three months without obtaining the opinion of an advisory board unless the concerned provision of law also provides for the maximum period for which such a person is to be detained. [851 e; 849fg] (b) the word "may" 'in art. 22(7) amounts to "shall". the power to dispense with the opinion of an advisory board is given only to parliament. when it makes a law under cls. (7) (a) and (b) of art. 22 that also would bind the state legislatures in so far as they enact any legislation with regard to preventive detention. though the state legislatures have the power with regard to preventive detention, they do not have the power to prescribe the circumstances under which and the class or classes of cases in which a person may be detained for a period longer than three months without obtaining the opinion of an advisory board. that power is completely that of parliament and any state legislation will also be subject to the maximum period prescribed by parliament under a legislation made under art. 22(7) (a) and (b). [849 h; 850 ab] a. k. gopalan v. the state of madras, [1950] s.c.r. 88, s. krishnan v. the state of madras. [1951] s.c.r. 621, and state- of west bengal v. ashok dey, [1972] 1 s.c.c. 199. distinguished. (2) (a) the power to prescribe a maximum period given to parliament (referred to in this proviso) is to prevent the state legislatures making laws with regard to preventive detention without any maximum limit. the constitution makers apparently did not want the state legislatures to have an unfettered power with regard to preventive detention even in the field allotted to them under entry 3 of list iii of seventh schedule. [850 d-e] (b) an harmonious construction of the whole of arts. 22(4) and (7) would thus necessitate that parliament should provide a maximum period of detention not merely in respect of laws relating to preventive detention made by state legislatures but also its own laws regarding preventive detention. if the proviso to sub-cl. (a) contemplates parliament making a law providing for the maximum period of detention which cannot be exceeded by any state law regarding preventive detention the reasonable construction would be to hold that it is obligatory on parliament to legislate under sub-cl. (b) fettering the hands in the matter of legislating with regard to the maximum period of detention. if the parliament can fix the maximum period it can also alter it. if legislation with regard to the provisions of a maximum period is merely optional there was no need for the proviso at all. the concept of a maximum period of detention runs through the whole of art. 22(4) and (7). this is because while parliament and state legis- latures make laws it is the executive that makes orders of detention and if no maximum period of detention is specified by law it would be open to the executive to keep persons in detention indefinitely. [850 h; 851 a-c] per bhagwati, j : (1) (a) parliament is under no obligation to make a law under sub-cl. (a) of cl. (7). it is only if the requirement of obtaining the opinion of the advisory board is intended to be dispensed with that the parliament must make a law under sub-cl. (a) of cl. (7). if the parliament does not make such a law, cl. (4) (b) will not come into operation and detention for a period longer than three months whether under parliamentary law or under state law, would be impermissible without obtaining the opinion of the advisory board. the language of cl. (4) (b) posits clearly and in no uncertain terms that there must be law both under sub-cls. (a) and (b) of cl. (7) in order that cl. (4) (b) may operate. if there is a law only under sub-cl. (a) of cl. (7) and no law under sub-cl. (b) of cl. (7), a person cannot be detained longer than three months without obtaining the opinion of the advisory board as contemplated under cl. (4) (b). the making of a law by the parliament under sub-cl. (a) of cl. (7) is, therefore, obligatory if the detention is to be for a longer period than three months without the intercession of the advisory board. [824 e-h] (b) it is clear on a combined reading of the proviso and the main provision in cl. (4) (a) that the proviso is an integral part of the main provision. it is intended to cut down the large amplitude of the power of detention conferred under the main provision. the scope and boundary of the power of detention under cl. (4) (a) can, therefore, be defined only by reading the proviso and the main provision as one single enactment. if the proviso does not operate the main provision also would not, for the main provision is intended to operate only with the limitation imposed by the proviso. the proviso is not used in its traditional ortho- dox sense. it is intended to enact a substantive provision laying down as outside limit to the period of detention. if there is no outside limit by reason of parliament not having prescribed the maximum period under cl. (7) (b), the provision enacted in cl. (4) (a) cannot operate and in that event detention cannot be continued beyond three months, even though the opinion of the advisory board may be obtained. the proviso clearly posits the existence of a law made by parliament under cl. (7) (b) and makes it an essential element in the operation of cl. (4) (a). [859 b-e] a. k. gopalan v. state of madras, [1950] s.c.r. 88, s. krishnan v. the state of madras, [1951] s.c.r. 621 and state of west bengal v. ashok dey, [1972] 1 s.c.c., 199, distinguished. (c) parliament is free to prescribe or not to prescribe the maximum period under cl. (7) (b). but if no maximum period is prescribed neither parliament nor the state legislature can authorise detention for a long period than three months either under sub-cl. (a) or sub-cl. (b) of cl. (4). if the parliament or the state legislature wishes to authorise detention for a period longer than three months it must conform to the provisions of either sub-cl. (a) or (b) of cl. (4) and that requires that the maximum period must be prescribed by parliament by law made under cl. (7) (b). [860 h] (2) the highest or the greatest extent or stretch of time may be determined by means of a fixed date or in terms of years, months or days or by reference to the occurrence of an event. but whatever be the mode of determination the maximum period must be a definite period. what is necessary is that the point of time at which the event would happen must be definite. [863 e] in the instant case since it cannot be predicated with any definiteness as to when the emergency would come to an end the period prescribed by s. 13 of the act cannot be said to be the "maximum period" within the meaning of cl. (7) (b). parliament has not prescribed the maximum period of detention as contemplated under cl. (7) (b) and so no person can be detained under the provisions of the act for a period longer than three months. [866 c] - it has a discretion to appoint or not to appoint inspectors for investigating the affairs of the company, the word used in the section being 'may'.before the government can take such action under section 235, certain pre-conditions including those specified in section 236, must be satisfied.r.s. sarkaria, j.1. this appeal by certificate is directed against a judgment, dated july 26, 1968, of the high court of judicature at calcutta. the facts leading to this appeal are as follows: jagannath gupta & co. (p) ltd; the respondent herein, (hereinafter referred to as the company) was incorporated in the year 1940 under the indian companies act as a private company limited by shares with its registered office in calcutta. its nominal capital was and still is rs. 25,00,0000 divided into 1000 ordinary shares of rs. 2,500/- each, with the entire capital paid up or credited as paid up. 2. prior to 1940, jagannath gupta used to carry on business under the name and style of 'jagannath gupta & co.', as karta of a joint hindu family business. subsequently, as a result of the family arrangement, the joint hindu family trading partnership was converted, into a contractual partnership under the name and style of jagannath gupta & co.'. it was thereafter converted into a private limited company in 1940 as aforesaid. 3. jagannath gupta and four sons: bidya bhushan gupta, padam chand gupta, moolchand gupta and bhim sen gupta. bidya bhushan gupta had a son, mahadev prasad who died in 1945 and a daughter, bimla who was married to uma shankar shroff. uma shankar shroff was adopted in may 1967 by the widow of mahadev prasad gupta. moolchand gupta had two sons; gopal krishan and inderjeet. bhim sen gupta had two sons; devi prasad and shukla. 4. the shares of the company were originally held by jagannath gupta, as follows: (a) jagannath gupta 495 shares (b) bidya bhushan gupta 125 shares (c) padam chand gupta 125 shares (d) moolchand gupta 125 shares (e) bhim sen gupta 120 shares (f) bhutan devi, wife of jagannath gupta 125 shares (g) krishna devi, wife of bhim sen gupta 5 shares5. the appellant is a share holder of the company, which was a domestic concern of the family of jagannath gupta. he is a holder of 125 fully paid-up shares from the very inception of the company. 6. it is alleged on behalf of the respondents, by bidya bhushan gupta, that during his life time, the said jagannath gupta at a meeting of the board of directors, presided over by him, initiated and passed a resolution, whereby he nominated his successors to or bequeathed or transferred his 495 shares in the event of his death as follows: (a) to padam chand gupta 125 shares (b) to bidya bhushan gupta 250 shares (c) to gopal krishna gupta (son of the appellant) 65 shares (d) to dabi prasad gupta (s/o bhim sen gupta) 55 shares7. another distinctive feature of the case is that the company was formed with 19 properties specified in schedule 'a' to the memorandum of articles of association. 8. on july 19, 1967, moolchand gupta filed a petition under sections 433, 434 and 439 of the companies act, 1956, in the high court of calcutta. this was registered as petition no. 158/67. a two fold prayer was made in the petition: (a) the company be wound up by the high court; (b) a professional liquidator be appointed. a petition was admitted on august 1, 1967 and directions were given for publication of the advertisements in the calcutta gazette and other papers. the petition was fixed for hearing on september 25, 1967 in the said high court. the allegations made in the petition were as under: 9. that the respondent's allegation that prior to his death, jagannath gupta had transferred/bequeathed his 495 shares as aforesaid, was wrong and the said minutes of the alleged meeting of the board of directors under the chairman-ship of jagannath gupta purporting to be held on september 6, 1946, are false and fabricated. this was also the stand taken by bhirn sen gupta in his affidavit filed before the high court. it is alto alleged that prior to the death of the said bhuran devi, bhim sen gupta had sold and/or transferred his 120 shares to this bhuran devi and the said 120 shares along with the 5 shares originally allotted to her, stood registered in the name of bhuran devi (since deceased). it was further stated that after the death of jagannath gupta and bhuran devi, bidhya bhushan gupta and padamchand gupta wrongfully and illegally took possession of the said shares and purported to divide the shares standing in the name of jagannath gupta, by alloting 250 shares to bidhya bhusnan gupta, 125 shares to padam chand gupta, 65 shares to gopal krishan gupta and 55 shares to debi prasad gupta. 10. according to the petitioner (moolchand gupta), the purported allotment and/or transfer of the said shares, is in contravention of the provisions of law and/or the articles of association of the company and in the deprivation of the legal rights of the petitioners to the said shares. his further stand was that bidya bhushan gupta is wrongfully and falsely contending that the share certificates are with him (moolchand gupta). he further contended that the said directors and/or the company have, in any event, failad, neglected and refused to deliver the share certificates in respect of the said 65 shares and 55 shares to gopal krishan gupta and debi prasad, gupta, respectively. 11. it was further pleaded that, at the material time bidya bhushan gupta and padam chand gupta were at the helm and control of the affairs and management of the company. between 1940 and 1966, all the properties of the company, except premises no. 8, murlidher sen lane, was sold or transferred at under value. it was further contended that the company has been continuously incurring losses and thus the substratum of the company has disappeared. the company had never declared any dividends and is continuously incurring losses. the affairs of the company are conducted in a manner oppressive to the appellant. 12. on september 4, 1967, the respondent filed a company application, being no. 229 of 1967 in the high court, for an order restraining the appellant herein from taking steps upon the said petition of advertising the same. an interim order was passed by the high court on september 4, 1967, staying the publication of the said advertisement till the disposal of the application. the appellant contested that application which came up for hearing before r.n. dutta, j. who concluding the hearing on february 1, 1968 and reserved the judgment. before the judgment was announced, certain facts came to the knowledge of the appellant. he brought those facts to the notice of the learned judge by filing an affidavit and charging the respondent with suppression of facts. bidya bhusan gupta replied by an affidavit, dated april 20, 1968.13. the learned judge dismissed the said company application (no. 229/67) by his order dated april 23, 1968 and declined to stay winding up proceedings. thereafter, the appellant proceeded to cause the advertisement to be published in the newspaper and the same were duly published, as directed by the high court. 14. the respondent, however, on may 27, 1968, preferred an appeal (no. 96/68) before a division bench of the high court which by its order dated july 26, 1968, allowed the appeal and granted stay of the proceedings in the said company petition (158/67). 15. after obtaining a certificate, under article 133(1)(a) and (b) of the constitution, from the high court, moolchand gupta has preferred this appeal against the aforesaid stay order passed by the division bench. 16. although, the high court, has, in the order under appeal, made extensive observations with regard to the merits of the petition for winding up of the company made by the appellant, the proceedings for winding up have been stayed by the high court on the ground that on a complaint of the appellant, moolchand gupta, a parallel investigation into the affairs of the company under the provisions of section 235 of the companies act, 1956 is pending. 17. after hearing the learned counsel on both sides, we are of opinion that the high court was in error in making the stay order, it did counsel for the appellant has taken us through the correspondence that although, the registrar and/or the company law board had made certain enquiries of an exploratory nature from the company, yet, no investigation contemplated under section 235 or 237 or any other provision of the companies act, has in fact been commenced. rather, it seems that on account of the winding up proceedings, the authorities have stayed their hands. 18. the learned counsel for the appellant has submitted that the central government has not appointed any inspector as envisaged by sections 235/237, and the matters are in a stale mate. the high court's order, it is maintained has led avenues for seeking redress are lying frozen. 19. it may be observed that under section 235, it is not obligatory for the central government to direct investigation. it has a discretion to appoint or not to appoint inspectors for investigating the affairs of the company, the word used in the section being 'may'. before the government can take such action under section 235, certain pre-conditions including those specified in section 236, must be satisfied. furthermore, unlike the power of the court in a proceeding for winding up of a company, the discretionary power of the central government to direct investigation is neither judicial nor quasijudicial. if follows therefrom that investigations on a complaint under section 235/237 may not be an adequate substitute for proceedings in court on a winding up petition. in other words, a petition under section 35/237/239 may not afford an equally efficacious and alternative remedy as a petition under section 439 to court for winding up of the company. 20. the intention of the legislature as discernible from section 243 of the companies act, seems to be that when the court is already seized of the matter, at the instance of party, the central government should refrain from taking the initiative. even where it appears to the central government from the report of the investigating inspectors appointed under section 235/237 that it is expedient to move the court for winding up of the company on the ground, that it is just and equitable to wind it up, or that an application for an order under section 397 or 398 be made, then also it must stay its hands from doing so if proceedings for winding up of the company are already being taken by the court. 21. it is however, true that in view of section 258 an investigation under sections 235, 237, etc. cannot be stopped merely because a company has passed a resolution for voluntary winding up. but, such is not the case here. 22. be that as it may, in the instant case, no inspectors had been appointed under sections 235 or 237 of the act and no parallel investigation by the central government or its authorities under the act into the affairs of the company was continuing. nor was it a case where the high court thought that for a proper and effectual adjudication of the petition pending before it, it was necessary to get the matter investigated through the agency of the central government. 23. in the circumstances, of the case, therefore, the high court should not have stayed the proceedings on the petition for winding up filed before it by moolchand gupta but should have dispose it of on merits. for the foregoing reasons, the appeal is allowed, the order of the high court is set aside and the case is sent back to the high court for disposal of the appellant's petition in accordance with the law. costs to abide the result.