May I, KAMLA PRASAD KHET AN v. THE UNION OF INDIA

S. K. DAs J.-On November 8, 1955, the Ministry of Commerce and India, published a notified order, in exercise of the powers that Government by section ISA of the conferred on (Development and Regulation) Act, 1951, Industries hereinafter referred the Act, authorising one Shri Kedar Nath Khetan of Padrauna, called the to as s. K· Da.s J. 1957 Kt11r.fo Prasad KMtan v. Tltt Union of India S IC Dai .1· 1054 SUPREME COURT REPORTS [1957] to take over authorised Controller, the management of the Ishwari Khetan Sugar Mills Ltd., Lakshrniganj, Deoria, subject to certain conditions. The order as originally passed and published was to have effect for a period of one year only, commencing on the date of its publication in the official gazette. On November 7, 1956, there was an amendment of that order. The amendment was published in notification No. 338-A of even date and stated in effect that in stead and place of the words 'one year' occurring words 'two years' shall be substituted. the order, states result that both India and l before us in opposition Petitioner No. is one Kamlaprasad that he is a Director and share Khetan, who holder of the second petitioner, which is the Ishwari Khetan Sugar Mills Ltd. The Union of India was and is the only respondent. By an order dated Octo ber 1, 1956, this Court permitted the said authorised Controller to intervene, with the authorised Controller have Union of the petition. The sub been heard stantial case of the petitioners is that the order referred to above dated November 8, 1955, and the amending order dated November 7, 1956, are invalid in law and to be stated presently, bad on certain other grounds is not open the fundamental right of the petitioners interfere with the strength to hold and manage therefore the issue of appropriate writs or directions co quash those orders. the Central Government their property on the said invalid orders ; the petitioners Short and simple as the case of the petitioners appears to be at first sight, it is necessary to refer to a background of certain antecedent facts for a proper understanding and appreciation of the issues involved the parties. The the present dispute between Ishwari Khetan Sugar Mills Ltd., is a public limited Company, in which four branches of a family known as the Khetan familv held a large number of shares and only about one-fourth of the shares wae held by outsiders. The Company was managed by a firm of Managing Agents, family Directors. Four members of supervision by the Khetan subject 1957 Kamla Prasad K!rtlan v •. S. K. Das]. S.C.R. SUPREME COURT REPORTS 1055 T "due to the acumen concerns initiative, business appointed and Onkarmal Khetan constituted the Managing Agency firm, of which Kedar Nath Khetan (later authorised Controller) was one (now father of petitioner Karola Prasad Khetan, deceased), was another. The Managing Agents managed Mills, known as the Ishwari Kheian Sugar Mills Ltd., Lakshmiganj, and the Maheshwari Khetan Sugar Mills · l., Ramkola, District Deoria. We are concerned in. the present case with the Ishwari Khetan Sugar Mills Ltd. The Managing Agents were also partners in the firms of managing agents of certain other· companies, namely, Morarji Gokul Das Spinning and Weaving and Laxmidevi Sugar Mills Ltd., Mills, Bombay, Deoria. In the affidavit in opposition filed on behalf of that the Khetan the authorised Controller, it is stated family, trading famiily was in the beginning a mere imagination of Rai Bahadur Kedar Nath Khetan, various manufacturing several sugar factories grew up" ; and it was under his direction including the other members of Onkarmal Khetan, were put in charge of the day-t<> day routine administration of one business· or the other. There was a provision in . the Managing Agency agree firm of ment under which every member of Managing Agents was authorised to exercise all powers of to the case of the authorised Controller, trouble arose bet the members of the different branches of the family of Managing Agents sometime in 1950-51 when to light that Onkarmal Khetan had surrepti it came tiously withdrawn from· the large sums of money the various businesses in . which the mem accounts of bers of the Khetan family were interested as Managing Agents, and this led to certain ·· suits being instituted against · Onkarmal Khetan. The latter, · in his turn, retaliated by bringing suits for the appointment of a Receiver, or for restraining the holding of a general meeting of one of . the mills, and instituting certain other preceedings stated to be of an obstructive nature and calculated the working of the mills. the Managing Agents. According to create an impasse including family, 1957 Kam/a Pra.wlli Khttan v, 1"he Union of India S. tr. DaJ J. 1056 SUPREME COURT REPORTS [1957] the Company The petitioners on the contrary alleged that when the balance sheet of the lshwari Khetan Sugar Mills Ltd., for the financial year 1950-51 was published in June 1952, it \Vas discovered that some of the Directors including the. authorised Controller had utilised the funds of their personal gain and had committed breaches of certain provisions of the Indian Companies Act. This led to Suit No. 4 of 1952 brought by ·the petitioners against some of the Direc tors, including the authorised· Controller, for an order of permanent injunction restraining the said Directors from exercising any. powers .as Directors of petitioner No. 2 and also for a. declaration that a notice calling . twenty-fourth ordiriary general meeting of to be held on July 9, 1952, was illegal and · Company In that suit, an ex parte order of injunction invalid. was made against the Directors concerned on July 8, 1952. That order was, however, subsequently vacated as being without jurisdiction and a fresh order was made on June 3, 1953. In the affidavit filed on behalf of the authorised Controller, it has been stated that on legal advice obtained by suit to the effect that the ex parte order of injunction 1952, w~s without twenty-fourth . ordinary general meeting of the Com pany was held on July 9, 1952, and the shareholders unanimously passed a resolution that meeting approving and adopting the Directors' report and the audited balance sheet of the Company as on October 9, 1951. The fresh injunction which was passed by the Civil Judge, Deoria, on June 3, 1953, was confirmed by the High Court of Allahabad its order dated September 14, 1953. Feeling that the order of stay would completely dislocate the affairs of the Company, the shareholders themselves called an extraordinary general meeting which was held on November 9, 1953, and at that meeting the authorised Controller and certain other persons were re-elected as Directors of the condition that if the Court decided in Suit No. 4 of 1952 that the said Directors had not ceased to be Directors, resolution would be that extent. There the Company, subject temporary order of the defendants of jurisdiction, ineffectual July 8, S.C.R. SUPREME COURT REPORTS 1057 were several proceedings in the High Court of Allahabad in connection with Suit No. 4 of 1952, and in one of them the High Court was moved for an expeditious hearing of the suit, and such a direction was made by the High Court. Unfortunately, however, for reasons which need not be stated here, Suit No. 4 of 1952 is still awaiting trial and on July 31, 1956, petitioner No. 1 obtained an ex parte order from the said High Court adjourning the hearing of the suit. The case of that petitioner No. 1 supported by having majority of shareholders and cannot, therefore, legally represent the Company, is delaying the hearing of Suit No. 4 of 1952 on one ground or another. authorised Controller that he realised is not 1957 Kamla PrOJDl/ Khr:a. v. The U11io11 of India S. K. Das]. While all tussle, with allegations and counter allegations made by the parties, was going on in the arena of the Courts of law, certain other events happened to which a reference must now be made. The petitioners allege that the authorised Controller, finding that the majority of the shareholders and Directors were not in favour of his managing the Ishwari Khetan Sugar Mills Ltd. moved the Ministry of Food, through his grandson Durga Prasad Khetan and another gentle man related to him, for passing orders under ss. 15 and 17 of the Act. On November 8, 1952, a communication was received from the Ministry of Food and Agriculture, Government of India, wherein was stated :- inability failure of India consider their differences and the parties concerned "The Government of if on account of compose take timely and proper steps to arrange for normal working of the mills, the mills are not able to start work in time during the 1952-53 season, or are unable to work at all, it will in the production of sugar result in a substantial fall without due the conclusion that the mills are being managed in a manner likely to damage the interests of a substantial body of consumers besides cane growers and mill workers." justification. Such a result will The communication contluded with the statement that, the Government of in the circumstances stated above, investigation India would be constrained to order an 1957 Kamlo Prasad KMon v. . The Union of India S. K. Das J. 1058 SUPREME COURT REPORTS [1957] if necessary, the matter and, to undertake management of It may be stated here Ishwari Khetan Sugar Mills Ltd. and the Maheshwari Khetan Sugar Mills Ltd .. the communication was in respect of both the said mills. the operation of On December 18, 1952, the Central Government did actually pass an order under sub-s. ( 4) of s. 3 of the Essential Supplies (Temporary Powers) Act, 1946, under which the authorised Controller was empowered exercise certain functions of control in respect of the Ishwari Khetan Sugar Mills Ltd., the functions of control being stated in detail in notification No. S.R.O. 2073 of even date. On December 23, 1952, Onkarmal filed a writ petition to this Court against the aforesaid order of the Central Government and asked for an interim direction staying the order. This Court gave a direction expediting the hearing of the petition, and further directed that the accounts of the petitioner Company be audited periodically by a instance of Government or private auditor at Onkarmal. The writ petition itself could not, however, be heard in time and was late-r dismissed on May 14, 1954, as having become infructuous in . the meantime. On July 30, 1953, the ,Central Government passed an order under s. 15 of the Act in respect of several mills, including the Ishwari Khetan Sugar Mills Ltd. Under that order independent persons for . making a full and complete investigation industrial undertakings therein. Then, on referred November 14, 1953, the Central Government made an order under s. 18A of the Act, by which the authorised Controller was. appointed to take · over the management of the Ishwari Khetan Sugar Mills Ltd. It may be stated here that the Act was amended in 1953 by Act 26 of 1953. · By that amendment, s. 17 was omitted and a new chapter, viz., Chapter IIIA, was inserted. This new chapter contained s. 18A under which the Central Government passed its. order dated November 14, 1953. The order stated that it shall have effect for a period of one year. In December 1953 came the in . Dwarkadas Shrinit1as of . · decision of the circumstances of each of the Central Government appointed this Court 1967 Komla PrtJJati Khetan v. Tll4 U11ion of India S. K. DtJJ J. S.C.R. SUPREME COURT REPORTS 1059 Bombay v. The Sholapur Spinning & Weaving Co. Ltd. (1 ). That decision pronounced on Art. 31 (2) of the Consti tution . with . reference to the validity of the Sholapur (Emergency Provi Spinnifi)fS':tnd.; Weaving .· Company sions) Ordinance II of 1950 and ActXXVIII of 1950. As a result, presumably, of that decision, on May 21, 1954, all appointments the Central Government cancelled the provisions of the of authorised Controllers under Act, and on such cancellation the management of the industrial undertaking vested again in the owner of the undertaking. The case of the petitioners is that in spite of the cancellation the authorised Controller continued to remain in possession of the undertaking in question. On July 16, 1954, the Central Government again passed an order under sub-s. ( 4) of s. 3 of the (Temporary Powers) Act, 1946, Essential Supplies thereby again giving the authorised Controller Certain functions of control in respect of the Ishwari Khetan Sugar Mills -Ltd. On September 19, 1954, there was another investigation under s. 15 of the Act by a panel of officers and it is stated that they recommended that the Central Government should · take over the manage ment. of the Mills for a period of three years. On January 31, 1955, the present pedtioners filed a writ petition iii this Court in respect of the order passed by the Central Government on July 16, 1954. This is the writ petition which, after necessary amendments, is now under consideration before us, the amendments having reason of certain subsequent been necessitated by notifications made by the Central Government. These Nubsequent notifications are-( 1) the notifications made on November 8, 1955, by which the earlier order made on July 16, 1954, was cancelled and a fresh order made under s. 18A of the Act ; and (2) the amending order dated November 7, 1956-to both of which a reference has been made in the first paragraph of this judgment. the order · By the writ dated July 16, 1954, no petition which was originally directed against order stands in need of amendment. reason of these subsequent notifications, longer exists, and (1)[1954] S.C.R. 674. 1957 K amla Prasad Khttan v. Tire Union of India S. K. Da, ]. 1060 SUPREME COURT REPORTS [1957] The petitioners have prayed for an amendment of the original writ petition and also for permission to urge fresh grounds to challenge the validity of the two notified orders, one dated November 8, 1955, and the other dated November 7, 1956. By an order of Judge-in-Chambers 1957, petition for urging additional grounds was directed to be heard along with the main petition under Art. 32. But before that date, i.e., on November 5, 1956, when the stay application of the petitioners was heard, the following direction was given by this Court- for amendment and dated February 18, to urge fresh grounds "The hearing of the main petition under Art. 32 to be expedited ....................... .It will be open to the petitioners to challenge that the appointment of R, B. Kedar Nath Khetan, if again made, is also bad." In view of the aforesaid directions, we have treated the main petition under Art. 32 as a petition against latest order passed by the Central Government appointing the authorised Controller to take over the the undertaking, and we have also management of permitted the petitioners their petition. support of indicated Having background the preceding paragraphs the necessary dispute between the parties has to be considered, we proceed now to a consideration of the grounds on which the the orders dated petitioners challenge the validity of November 8, 1955, and November 7, 1956. necessary to clear the ground by stating at the very outset that learned counsel for the petitioners has not challenged the validity of s. 18A of the Act under which the impugned orders were made. We have already stated that Chapter !!IA of the Act was inserted by the Amending Act 26 of 1953. Article 31B of the the Constitution (First Constitution was enacted by Amendment Act, 1951, which states, inter alia, that none of the Acts and Regulations specified in the Ninth Schedule nor any of thereof shall be deemed to be void, or ever to have become void, on the ground that such Act, Regulation or provision is against which the provisions It 1957 K amla Prasad Khetan v. The Union of India S. K. Das]. S.C.R. SUPREME COURT REPORTS 1061 the Constitution III) of the Constitution. inconsistent with, or takes away or abridges any of the rights conferred by, any provisions of this Part ·The Ninth (meaning Part (Fourth Schedule was added to by Amendment) Act, 1955. Item No. 19 of the Ninth Schedule is now Chapter IIIA of the Act as inserted by the Industries (Development and Regulation) Amend ment Act, 1953. Learned Counsel for the petitioners has frankly conceded that in view of these amending provisions, he is not now in a position to challenge the validity of s. 18A of the Act. Therefore, the principal question for our considera tion is the validity of the impugned orders made under that section. Learned counsel for the petitioners has attacked the two orders on the following grounds : (1) the order of November 8, 1955, is not a lawful order, as it does not fulfil one of the essential require ments of s. 18A of the Act under which it purports to have been made ; (2) even assuming that the order was a good order when it was made, s. 18A of the Act does not authorise an extension of the peri0d during which the . order is to remain in force, in the manner in which the extension was made on November 7, 1956, and such extension did not compiy with one of the essential requirements of s. 21 · of the General Clauses Act, (No. X of 1897) ; · (3) in any event, the order is not a bona fide order in that the Central Government appointed the very person who was mismanaging the undertaking, who was one of the parties to a pending dispute, and against whom .an order of injunction had been passed by a · Court of competent jurisdiction. These three grounds we now propose to examine in the order in which we have set them out. (1) We must first read s. 18A of the Act so far as it is relevant for our purpose. The section states- "If the Central Government is of opinion that- ( a) ............. . (b) an industrial undertaking in respect of which investigation has been made under section 15 (whether or not any directions have been issued to the 19~7 Kamla Prmad Kht14n v. T/r• Union of lrulia S. K. Dos:f. 1062 SUPREME COURT REPORTS [1957] in pursuance of section 16, in a manner highly detrimental to public industry concerned or is being undertaking managed scheduled interest, the Central Government may, by notified order, authorise any person or body of persons to take over the management· of the whole or any part of the undertaking or to exercise in respect of the whole or any part of the undertaking such functions of conrtol as may be specified in the order. (2) Any notified order issued under sub-section (1) shall have effect for such period not exceeding five years as may be specified in the order : investigation under s. 15 of Provided that the Central Government, if it is of opinion that it is expedient in public interest so to do, may direct that any such notified order shall continue the expiry of the period of five to have effect after for such further period as may be years aforesaid specified the direction and where any such direction is issued; a copy thereof shall be laid, as soon as may be, before both Houses of Parliament." the application of that for The argument before us cl. (b) of sub-s. (I) of s. IBA, the two e~sential require ments are-(i) an Act and (ii) the opinion of the Central Government that in a is being managed industrial undertaking manner highly detrimental to the scheduled industry interest. Learned counsel for concerned or the petitioners has conceded the order dated November 8, 1955, was made, there was an investigation under s. 15 of the Act in respect of the industrial undertaking requirement was thus fulfilled. Learned counsel has, second however, very strongly the present case, requirement was not the authorised Controller himself was in charge because November 8, 1955 impugned order was made) with a small break of less than two months only between two dates, May 21, 1954, when all appointments under the Act were cancelled and July the Essential 16, 1954, when a fresh order under Supplies (Temporary Powers) Act, 1946 was made, and from December 18, 1952, submitted in question, and the undertaking that before to public fulfilled (when 1957 Kam/a Prasad Khetan v. The Union of India S.K.Das J. S.C.R. SUPREME COURT REPORTS 1063 even during this short period the case of the petitioners that the authorised Controller continued in posses~ sion. Founding himself on these circumstances, learned counsel it was the Central rationally and to be of opinion that the industrial under Government taking was in a manner highly detrimental to the public interest, before the impugned order was made. contends being managed petitioners impossible logically hinted regard the parties with rightly pointed out the dangers at which in 1952 must We are unable to accept this argument as correct. We have already referred to the legal tussle which was going on between management of the industrial undertaking in question. The Central Go\'l:rnment very their kttcr dated November 8, 1952, that the result of tk differences b::tween the partie:; wa~ Ekc!y to be a stoppage of the mill and a fall in the production of sugar with consequential detriment to the interests of industry concerned and the interests of a substantial body of consumers, cane growers and mill workers. In litigatio!l which was pending between the view of partie,:, likelihooLl of Centra I Govermcnt to exist~ as long as the management was not continued fully and completely the authorised Controller. In Dt'.cember 1952, the order passed under the Essential Supplies (Temporary Powers) Act, 1946 merely gave some functions. of control to the authorised Controller ; it did not vest the management in him. This distinction between exercising certain functions of control, however, drastic the functions may be, on an order made under sub-s. ( 4) of s. 3 of the Essential Supplies (Temporary Powers) Act and the taking over of the management of the whole of an undertaking. on an order under s. ISA of the Act is a real distinction which must be bOrne in mind, as it has a bearing on the argument advanced before us. Sub-section ( 4) of s. 3 of the Essential Supplies (Temporary Powers) Act, 1946; authorises the Controller to exercise, with respect to the whole or any part of the undertaking, such functions of control as may be provided by the order ; s. ISA of the Act is in wider terms and empowers the taken over by 8-61 S. C. India.'59 1957 Kam/a Prasad Khetan .. 7 he !Jn ion of India S. K. Da>]. 1064" SUPREME COURT REPORTS [1957) !SB of consideration, to pass an order investigation was ordered under Central Government to authorise any person or body of persons to take over the management of the whole or any part of the undertaking or to exercise in respect of the whole or any part of the undertaking such func the order. tions of control as may be specified Section the Act states the effect of a notified order under s. ISA; in sub-s. (!),els. (a) to (e), is stated the effect of taking over the management, and in sub is stated the effect of merely giving functions of s. (3) control-a distinction which is clear! y drawn in the It Is not difficult section itself. to conceive that in a particular industrial undertaking the mere giving of some functions of control may not be enough to meet the situation which has arisen and it may be necessary for the Central Government taking over the management of the whole of the undertaking. in December, In the case under our 1952, certain functions of control were vested authorised Gmtroller, but the management of the whole undertaking was not taken over. This continued 15 of Act on July 30, 1953. Then, on November 14, !953, the authorised Controller was directed take over industrial ·of the management of undertaking. This order was however cancelled on May 21, 1954, and under s. !SF of the Act, the effect of the cancellation was undertaking again in its owner the expression 'owner' meaning,. under s. 3 (f) elf the Act, the person who, or the ultimate contrd over the the authority which, has affairs of the undertaking and, where the said affairs are entrusted to a manager, managing director or managing agent, such manager, managing director or managing agent. Therefore, cancellation on May 21, 1954, was to vest the manage ment of the Ishwari Khetan Sugar Mills Ltd., in the Directors and Managing Agents who were quarrelling themselves. On behalf of the petitioners, it amongst has been pointed ou't remain erstwhile authorised Controller, continued in possession in spite of the cancellation order. In an affidavit filed on behalf of the Central Government, it that Kedar Nath Khetan, the management of legal effect of the whole to vest s. 1957 Kam/a Prasad Khetan v • The Union of I~dia S. K. Dns J. S.C.R. SUPREME COURT REPORTS 1065 . rised Controller. The affidavit is not necessary for us is stated that after the cancellation order, Kedar Nath Khetan, informed the erstwhile authorised Controller, the Government of India that he was continuing in management in a capacity other than that of autho- filed on behalf of that be states, however, the authorised Controller the Central Government directed him to hand over possession to the Directors and the time when he was again appointed on July 16, 1954, the management of the Company ·remained in the hands of the Directors who were in possession of the under taking. to pronounce on It It is abundantly clear from the these disputed facts. affidavits filed that peace amongst the Directors or in the family of the Managing Agents had not been restored bv the time the cancellation order was made on May Zl, 1954. Suit No. 4 of 1952 was still pend ing, and the tussle between the parties was going on. This was the position when another order was made um\er the Essential Supplies (Temporary Powers) Act, 1946, on July 16, 1954. This was followed by a second in\'estigation under s. 15 of the Act in September, 1954. Petitioner No. 1 was still pursuing what he conceived to be his legal remedy by filing a writ application the order elated July 16, 1954, in this Court and also in other proceedings arising out of Suit No. 4 of 1952, in In these circumstances, the Central Government made the impugned order dated November 8, 1955. Having regard to the circumstances just stated, it is, we think, idle to contend that the Central Government had no materials before it for . arriving at the opinion that the industrial undertaking was being managed in a manner interest. The Central highly detrimental Government might reasonably have felt that the order elated July 16, 1954, which vested certain functions of the situation control only, was not enough to meet It is worthy and a more drastic step was necessary. of note that Centr'll Government it is stated that the affairs of · the second industrial • undertaking were the affidavit filed on behalf of the High Court of Allahabad. investigated respect of to public a 137 1957 Kamla PraJad Khetan v. The Union of India S. K. Das J. 1066 SUPREME COURT REPORTS [1957] take over time under s. 15 of the Act in September I954, and the panel of officers who held investigation that Government should recommended management of the industrial undertaking for a period of three years. It is on that recommendation that the the impugned order on Central Government passed November B, 1955. We are unable for. the. petitioners that argument of learned counsel one of the essential requirements of cl. (b) of sub-s. ( 1) of s. IBA of the Act was not fulfilled before the order dated November B, 1955, was made. to accept Learned counsel for the petitioners has drawn our those statements in the affidavit filed on the under the authorised Controller. the Central Government which referred in management, after attention behalf of taken over by taking was In that affidavit, it is stated : improvement · "I say functioning the old management and that by virtue of India under the order issued by the s. 3( 4) of the Essential Government of Supplies (Temporary Powers) Act, 1946, the Govern supervisory ment of India had taken over only control and the said Kedar Nath Khetan had only powers the management. The issue directions management was with Government of India or the authorised Controller had no effective authorised Controller the under taking. I say that in view of the continued litigation referred to in detail in the affidavit of the intervener dated 25th October, 1956, it was apparent mill was. being managed in a manner highly detri-. mental ro the undertaking and that the interests of it was necessary to pass the order under s. IBA of the (Development and Regulation) Act, 1951. Industries I say taken over by Shri Kedar Nath Khetan, the Government has reason to believe improved and has saved further deterioration." that after the management was that the management has the management as could not manage In another parr of the same affidavit, it is stated that the mill earned a profit during 1953-54 and in 1954-55 also the mill was likely to make a net profit of 1957 Kam/a Prasad Khelan v. The Union of lndia S. K. Das]. S.C.R. SUPREME COURT REPORTS 1067 these statements from Rs. 84,321. We see nothing in which it can be inferred that the recorded opinion of the Central Government in the order dated November industrial undertaking . was being 8, 1955, to public managed in a manner highly detrimental interest contained a palpably statement. The the dispute inter se amongst crux of the matter was leading to the Directors and the Managing Agents, some of which protracted and harassing was. still pending ; trouble, and we think that the Central Government had enough materials for its opinion that the industrial in a undertaking manner highly .detrimental in question was being managed interest . to public the amending order of in these November 7, 1956. The amending order is terms: . (2) w c now the real cause of that was litigation', "In the said order in sub-clause (ii) of clause 1 the words 'one year', and clause 2 for the words ·'two years' shall be substituted." Section 21 of the General Clauses Act states : conferred, "Where, by any Central Act ·or Regulation, a rules, or bye-laws power to issue notifications, orders, includes a pov.:er, that power exercisable in the like manner and subject to the like sanction and conditions (if any), to add to, amend, vary or rules or rescind any . notific_ations, orders, bye-laws so issued." learned counsel for the petitioners The argument of that neither s. 18A of the Act nor s. 21 of the General Clauses Act save the ·. amending order of November 7, ··· 1956. There has been some argument before us with regard s. 1'8/\ of the Act, which we have quoted in extenso in an . earlier part of this . judgment. That proviso, it is contended by learned counsel for the petitioners, refers only to an . order which is initially made for a period five years, or, alternatively, which comes to an end on the expiry of a perioo of five years. According to the Central Government him, to continue the order after the expiry of a period of the proviso ·empowers the proviso .to sub-s. (2) of . 1957 Kanda Pra; ad Khdan v. Tke Union of India ii. K. Das]. 1068 SUPREME COURT REPORTS [1957] learned counsel for five years for such further period as may be specified the Central Government, in the direction given by and the only safeguard is that a copy of the direction is to be laid before both Houses of Parliament. The argument of the petitioners pro to state that the proviso has no application in the present case where the original order was made for a the amending order period of one year only and merely continued the view In which we. have . taken of the substantive provisions of sub-s. (I) of s. 18A of the Act and s. 21 of the General Clauses Act, we do not think it necessary to make any true scope and pronouncement with effect of is protected under s. 21 of the General amending order Clauses Act read with sub-sec. (I) of s. ISA of the Act. the aforesaid proviso. In our opinion, it for another year. regard . Act the words that the power that the amending order was made in Section 21 of the General Clauses Act says, inter alia, to issue an order under any Central to amend· the order ; but this includes a power power is subject to a very important qualification and 'exercisable the qualification is contained in the · like manner and subject to the like sanction and conditions (-if any)'. There is no dispute before the same the original order, that is, by means of a manner as for an notified order. As no sanction order under s. 18A, the only question before us whether the original order was made. conditions under which We have already stated what are the two essential requirements of an order under cl. (b) of sub-s. ( 1) of learned counsel s. !SA of the Act. The argument of two essential condi tions must be fulfilled again before any amendment of the order can be made ; this, he urges, is the true the expression 'subject to the like scope and effect of condiiions (if any)' occurring in s. 21 of the General Clauses Act. the amending order complied with the the petitioners is necessary We agree with learned counsel the petitioners the power to amend, which is included in the power 1957 Kam/a Prarad Khetan v, The Union of India S. K. Das]. S.C.R. SUPREME COURT REPORTS 1069 itself. to. make the order, is exercisable in the like manner and suh:cer to the like sanction and conditions (if any) as govern the lnaking of the original order ; this is stated It becomes necessary, however, by the section to understand clearly . the true nature of the conditions which have to be fulfifled before an order under cl. (b) of ;,ub-!;. (1) of s. 18A of the Act can be made. Once the true ·nature of those conditions is appreciated, there in the application is in our opinion little difficutl:y left of s. 21 of the General Clausl'.s Act. Now, · the condition in cl. (b) of sub-s. ( 1) of s. 18A of the Act is industrial undertaking must he one in respect that the of which an investigation has been ma<le under s. 15 the Act. Section 15 is in these terms : . "Where the Central Government is of the ·opinion . . that- · (a) ii1 respect of any sche<lulc<l industry or indus . trial undertaking or undertakings- (i) there has been, or is likely to be, a substantial fall in the value of production in respect of any article or class of articles relatable to industry or manu factured or produced in the industrial undertaking or undertakings, as for which, having the case may be, the economic cooditions prevailing, there is regard !10 justification ; or .that . (ii) there has been, or is likely to be, a marked the quality of any article or class of deterioration in industry or manufactured or articles relatable pro<luced in industrial undertaking or undertakings, as the case may be, which could have been or can be avoided ; or (iii) there has been or is likely to be a rise in the price of any article or class of articles relatable to that industry or manufactured or produced in the industrial undertaking or undertakings, as the case may be, for which there is no justification ; or (iv) it is necess'.lry take any such action as is provided in this Chapter for the purpose of conserving any resources of national importance which are utilised in the industry or the industrial undertaking or under takings, as the case may be ; or 1070 SUPREME COURT REPORTS [1957] 1957 Kam/a PrtJJad KNtan v •. The Union of India S. K. DtJJ ]. (b) any is being managed . industrial undertaking m a manner highly detrimental the scheduled industry concerned or to public interest ; the Central Government may make or cause to be made a full and complete investigation into the circumstances of the case by such person or body of persons as it may appoint for the purpose." stated is satisfied the section. The order for investtgation" in this case was made (b) of s. 15, and that clause again uses the under cl. is being 'industrial undertaking expression managed in a manner highly detrimental to the industry int.erest'-the same expression concerned or to public which occurs in cl. (b) of sub-s. ( 1) of s. 18A of the Act. the Act states, inter alia, that if, after Section 16 of investigation under making or causing to be made any s. 15, the Central Government that action under the section is desirable, it may then issue certain It may, directions which are that in a given case the management is so however, be to public industry concerned or <letrimental that mere directions under s. 16 are not enough; interest in that event, the Central Government may take over the management by an order passed under cl. (b) of sub-s. ( 1) of s. 18A of the Act. There may even be in spite of the directions, no sufficient a case where taken place and an order under improvement has sub-s. (1) of s. 18A of the Act becomes necessary. That the expression is why in cl. (b) of sub-s. 'whether or not any directions have been issued to the in pursuance of section 16.' The reason undertaking why the same expression 'is being managed in a manner highly detrimental etc.' occurs both in cl. (b) of s. 15 and cl. (b) of sub-s. ( 1) of s. 18A of the Act is this : an investigation is ordered when the conditions mentioned in s. 15 are fulfilled, one of in a industrial undertaking manner highly detrimental industry concerned or to public interest. On such an investiga the Central Government may issue tion being made, those directions may or may directions under s. 16 ; If they do not improve the not improve the situation. the conditions being is being managed to the scheduled ( 1) occurs 1957 Kam/a Prasad K!rttan v •. Tll' Union of India . S. K. Da, ]. · S.C.R. SUPREME COURT REPORTS 1071 to a period when the management of still being managed they must be situation, or if the mere giving of directions under s. 16 is not considered sufficient to meet the situation, the Central Government may pass an order under s. 18A; but one of the requisite conditions is that the Central Government roust be of opinion that the industrial undertaking in a manner the scheduled industry concerned highly detrimental If these ss. 15; 16 and 18A, or to public interest. then it together, as a;e read, becomes at once clear the condition as to the management of industrial undertaking in a manner highly detrimental to the scheduled industry concern ed or to public interest relates in its true scope and effect industrial undertaking in the hands of its owner ; that is, to a period before the management of the whole or any part of the undertaking is taken over. Similarly, to the exercise of functions of control, with regard which also is contemplated by s. 18A of the Act, the condition again relates to a period before the functions It would, in our opinion, be of control are taken over. illogical and against the terms of ss. 15, 16 and 18A of the Act . to hold that the condition as to mismanagement (using the word the purpose of brevity and convenience, the correct expression; in a manner highly detrimental namely, to the to public interest') can apply after the management has been taken over and during the period of its management by learned the authorised Controller. The contention of counsel for the petitioners is that whenever an amend ment is made, the test of mismanagement must again be fulfilled. Let us examine the full implications of this argument. If, after the management is taken over, the authorised Controller becomes seriously ill or dies in a few days when the period of the order has not expired, the Central Government may appoint another person and for that purpose make an If the argument of learned counsel for amendment. the petitioners is correct, then no amendment can be made unless 'mismanagement' for 'management scheduled test of mismanagement industry concerned or it necessary is again · 1072 SUPREME COURT REPORTS [1957) 1957 Kam/a Prasad Khetan v. The Union of India S. K. Das]. the hands of fulfilled ; but how can such a test be fulfilled when the management was the authorised Controller till he died, the authorised Controller being more or less in the position of an agent of the Central Government ? The argument of learned counsel for the petitioners, pushed result in an absurdity and no amendment will ever be possible. its logical extreme, will two conditions they are fulfilled, Learned counsel for the authorised Controller has on the contrary contended in cl. (b) of sub-s. ( 1) of s. 18A of the Act are not in nature and once static continue to have effect thereafter whatever may have happened in the meantime. The argument proceeds to state that if an investigation under s. 15 of the Act had once been made and if at some previous stage the industrial undertaking was mismanaged, conditions continue irrespective of whether the undertaking vests in the owner again for a time, and an amendment may be made at any time and even a fresh order can be made without the necessity ci a fresh investigation and a fresh mismanagement. to operate We consider that both these are extreme views. On a proper construction of ss. 15, 16 and IBA of the Act, the correct view appears to be what we have stated earlier, namely the two conditions, one as to an investi gation under s. 15 and the other as to mismanagement, relate to a period when the management of the industrial undertaking is legally vested in its owner, and s. IBA must be read, with reference to the two conditions stated in cl. (b) of sub-s. (I), as though the words 'while the undertaking is vested in its owner' are present in the clause. the management is once taken over by an order under s. IBA but the order is later cancelled and the inanagment again vests in the owner, the two conditions must be fulfilled again before an order under cl. (b) of sub-s. (I) of s. IBA of the Act can be made. That is what happened in the present case. The management was taken over on November 14, I953, but the order was cancelled on May 21, I954, the owner. An the management vested If, as in this case, 1957 Kam/a Prasad Khetan v. Tht Union of lndiw S. K.Das]. S.C.R. SUPREME COURT REPORTS 1073 in spite of 21 had been requirements . of s. investigation under s. 15 of the Act was again made in September, 1954, and the Central Government, being industrial undertaking was being satisfied mismanaged the order under the Essential Supplies (Temporary Powers) Act made on July 16, the impugned order on November 8, 1955. 1954, passed the amending order of November 7, 1956, So far as was concerned, the like conditions still continued to exist and there was no necessity for a fresh investiga- . tion etc., because the management had not since November 8, 1955, vested in the owner, and by their very nature the conditions continued to exist till the management went into the hands of the owner again. Having regard to the true nature of the conditions laid down in s. 18A of the Act, there was no violation of s. 21 of the General Clauses Act when the amendment was made on November 7, 1956, and, in our opinion, substantially complied with. The power to amend which is included in the power to make the order was exercised subject to like conditions . within the meaning of s. 21 of the General Clauses Act, the conditions being an investiga tion under s. 15 of the Act and management in a manner highly detrimental to public interest, both of which necessarily management of the industrial undertaking was legally vested in its owner; . and both had been fulfilled and continued to be so fulfilled when the amendment was It is to be remem\>ered that s. 21 of the General made. Clauses Act embodies a rule of construction, and that rule must have reference to the context and subject matter of the particular statute to which it is being applied ; example, the Act does not s. 18A of the cancellation of an prescribe any conditions order made under that section, but s. 18F does and the power of cancellation referred to in s. 21 of the General Clauses Act must have reference to s. 18F. Similarly, an order of amendment made becomes· an order under s. 18A and is subject to all the conditions mentioned therein, including the condition mentioned in sub-s. (2). A refernece wls made in this connection to a decision of this Court in jtrawboard Manufacturing Co. v. Gutta the period when related 138 1957 Kamla Prasad KMtan v. Thi Union of India S. K. DasJ. 1074 SUPREME COURT REPORTS [1957] to extend further held to April 30, 1950. Mill Workers' Union('). In that case, State Government of Uttar Pradesh had referred an industrial dispute to the Labour Commissioner on February 18, 1950, and directed that the award should be submitted not later than April 5, 1950. The award, however, was . made on April 13, and on April 26 the Governor issued a notification extending for making It was held by this the award up Court that the State Government had no authority whatever the adjudicator time and became functus officio on the expiry of the time fixed in the original order of reference and the award was, therefore, one made without jurisdiction and a nullity. It was that s. 14 of the U. P. General Clauses Act did not in terms or by necessary implica tion give any such power of extension of time to the State Government. State Government in that case that. the order of April 26, 1950, could be supported with reference to s. 21 of the U. P. General Clauses Act. But this Court rejected the argument and held that the power of amendment and modification conferred by s. 21 of the U. P. General Clauses Act could not be exercised so as to have retrospective operation. We do not that decision has any application in the principle of p~~sent ~ase. But as already stated by us, the pro v1s1on m s. 21 of the General Clauses Act embodies a rule of construction, and the implied power of amend therein embodied must be determined with the context and subject-matter of reference the principal statute. In the present case, provisions of that rule of construction applies, but it does so with the context and subject-matter of ss. 15, reference 16 and 18A of the Act. It was argued on behalf of (3) We now turn to the third and last question which has been agitated before us. Learned counsel for the petitioners has contended that the impugned orders are not bona fide orders. He has submitted that the authorised Controller was one of the parties to the dispute which litigation. to so much protracted (1) [1953] S.C.R. 439. 1957 Kam/a Prasad Khttan v. Tll4 Union of lnditl" S. K. DasJ. S.C.R. SUPREME COURT REPORTS 1075 relating against him. He has submitted He has pointed out that there was an order of injunc tion against him. He has also referred to certain other circumstances arising out of other activities of income-tax authorised Controller demarn; ls to be a Director by reason authorised Controller ceased of breaches of certain provisions of the Indian Com panies Act committed by him. These submissions have in the affidavit filed on been very seriously contested behalf of the authorised Controller. On the materials before us, it is neither possible nor desirable that Wt should make any pronouncement with regard to these It is sufficient to state that disputed questions of fact. the selection of a suitable person to be the authorised Controller rests with the Central Government and may be presumed that the Central Government knows best the needs of the particular industry and of its own subjects and the suitability of the person to be appoint ed as authorised Controller. Having regard to the facts and circumstances to which we have already made a reference, it cannot be said the appointment of Kedar Nath Khetan as the authorised Controller in this particular case was made for some ulterior purpose, that is, a· purpose other than the purpose of achieving the objects for which the impugned order was. passed. The primary concern of the Central Government was to see that the mills were managed in a manner which was not detrimental interest, and having to public the experience of Kedar Nath Khetan in the regard the Central industry to select him as the most suitable person Government to be appointed as the .authorised Controller, notwith standing that he was a party to the dispute. The test to be applied in cases of this nature, where lack of good faith in the Central Government is pleaded, not whether a better or more independent man was or might be available ; nor is it the duty of the Court to subject the selection made by the Central · Government test of propriety and to another and really no materials for suitability, for such a test. The test to be applied is whether the independent the Court has it was open in question, 1957 Kam/a Prasad Khetan v. 7'ht flnion of India S. K. DruJ. Sarkar], 1076 SUPREME COURT REPORTS (1957] appointment was made for some ulterior purpose, some purpose other than the object for which the law, under which the impugned order is made, was enacted. In our view, failed satisfy that test in the present case. the petitioners have completely For the reasons given above, we hold that the order made on November 8. 1955. and the amending order dated November 7, 1956, are both valid in law, and the petitioners have not made out any case of a violation of their fundamental right. In conclusion, it may be stated that on behalf of the authoris.ed Controller a preliminary objection was also taken that petitioner No. l was not legally competent to represent petitioner No. 2. Having regard to our decision on merits, it is unnecessary to say anything this preliminary objection. more about It was stated the Bar this preliminary objection has also been taken in Suit No. 4 of 1952. As that suit is still pending, we have thought it fit to refrain from. express ing any opinion on the preliminary objection. is dismissed with costs The result is that there is no merit in the petition in favour of the res pondent, the Union of India. The authorised Controller, iptervened at his own risk, must bear his own costs. SARKAR J.-I have had the privilege of reading the judgment just delivered by my brother S. K. Das. I regret that on one of the questions that arise in this matter I have come to entertain a different opinion. In this judgment I will say a few words on that ques tion only. With the rest of the judgment of S. K. Das J. I am in entire agreement. He has dealt with the facts I do not propose to state them myself. fully and therefore The Central Government had by an order published in the Official Gazette of November 8, 1955, and made in exercise of the power conferred by s. 18A of the Industries 1951 (LXV of 1951), authorised Kedar Nath Khetan who has been allowed to intervene in these proceedings to take (Development & Regulation) Act, S.C.R. SUPREME COURT REPORTS 1077 over the management of Ishwari Khetan Sugar Mills Limited, an industrial concern then in the management of its directors. The order provided that it was to have effect for a period of one year commencing on the date of its publication in the Official Gazette. By another order made ·on November 7, 1956, the Central Govern ment directed that in the order of November 8, 1955, 'two years' should be substituted. The effect of this latter order that Kedar Nath Khetan was to be in management of the Mills up to November 7, 1957. The question the order of November 7, 1956 was a valid whether order. The latter order is onlv an amendment of the earlier order. Had the Centrai Government then any power so to amend ? the words "one year" the words Section 18A does not expressly confer any power to amend an order once it is made under it. Section 21 of the General Clauses Act, however, provides that a in certain circum power of amendment shall exist is whether s. 21 stances. The only question therefore of the General Clauses Act justifies the amendment made in this case. Section 21 is in these terms : 1957 Kam/a Prasad Khetan v. The Union of India Sarkar]. • (if any), "Where, by any (Central Act) or Regulation, a power to (issue notifications), orders, rules or bye-laws is conferred then that power includeS' a power, exercis able in the like manner and subject to the like sanction to add to , amend, vary or and conditions resci1nd any (notifications), orders, rules or bye-laws so (issued)." this section a Notification or an Order once Under issued can be amended only "in the like manner and subject to the like sanction and conditions (if any)". the power of amendment can be This means exercised only in the same manner and subject to the same sanction and conditions, if any were imposed, in which the power to make the order could be exercised under the main Act. Was the order of NQvember 7, 1956, then made in the same manner and subject to the same sanction and conditions under which an order under s. 18A of th~ main Act could be made? Under s. 18A the power to authorfae a person to take the management of an undertaking can be 1957 K amla Prasad Khetan v. The Union qf Indio Sarkar J. 1078 SUPREME COURT REPORTS [1957J exercised only by a notified order, is to say an order notified in the Official Gazette. This is the manner of the exercise of the power. The amending Order had been made in the same manner. This requirement of s. 21 of the General. Clauses Act, therefore, was fulfilled in this case. Section 18A does not provide for any sanction being obtained before it. The amending Order, therefore, power conferred by did not need any sanction, and no question of satisfying requirement The sanction arises. the last requirement specified difficulty has arisen as in s. 21, namely, 'subject the words that indicated by to like conditions'. Section ISA of the main Act so far as relev3nt for the present purpose is in these terms : the exercise of "If the Central Government 1s of opinion that ................... . (a) ................................ .. (b) an industrial undertaking in respect of which an invtstigation has been made under s. 15 .......... is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest, the Central Government may, by a notified order, authorise any person or .............. to take over the management of .......... the undertaking .............. " is being managed Learned counsel for the petitioner formulated his argument this way. He said that the right to IBA arises only on exercise the power conferred by s. two conditions being fulfilled, namely, (a) the existence of an industrial undertaking in respect of which an investigation had been made under s. 15, and (b) the Central Government being of opinion that such an in a manner highly undertaking detrimental to It the second condition was was said that in not present when earlier order was made and I agree that the second condition was not present when the amending order was made. The reason this. Section 18A contemplates the taking over of manage' ment of an undertaking by a person authorised by the state of Government. industry or this case the order for amendment of therefore, contemplates a thc; refore it is to public interest. invalid. It, 1957 Kam!a Prasad Khetan v. The Union of India Sarhlr j. S.C.R. SUPREME COURT REPORTS 1079 It in which the management is not in such a affairs person. that it contemplates management follows in a manner highly detrimental the industry or public interest by a person other than that appointed In this case at the by the Government under the Act. date of the amendment the management was in the person appointed by the Government by its earlier order of November 7, 1955, and, therefore, the Govern ment could not at the date of the amending order have been of opinion that the management was by a person other than that appointed by it and such management was in a mann.er highly detrimental to the industry or to public. interest. In my view, howevtr, when s. 21 of the General the power to amend exercisable Clauses Act makes subject to the like conditions as in the main Act, it does not contemplate those conditions upon the fulfil ment of which the right to issue the order arises under the main Act. If this were so, the power of amendment conferred by s. 21 would have been wholly redundant If the conditions upon the fulfilment and unnecessary. of which the right to exercise the power arose under the main Act existed, then the Government could have instead of amending the order made a fresh order under s. 14 of the General Clauses Act, if necessary, rescinding the earlier · order. Therefore, it seems to me that the provision s. 21 of the General Clauses Act that the power of amendment shall be exercisable subject to like conditions does not refer to conditions upon existence of which the right to exercise the power arises the conditions referred to in s. 21 are the conditions to which the order issued under the main Act must be made subject. Thus, in this case sub-s. 2 of s. 18A provides that "any notified order issued under sub-section (1) shall have effect for such period not exceeding five years as may be specified in the order". The effect of this sub-section is that the order made under s. 18A must be subject to the condition that it cannot ha,•e effect for a longer period than 5 years. When, therefore, an order once made under s. 18A is sought to be amended with the the main Act. In my view Jramla Prasad Tibetan .v. Thi Union qf lwdia &.rluJr ]. 1080 SUPREME COURT REPORTS (1957] aid derived from s. 21 of the General Clauses Act, the amendment must observe the condition laid down in sub-s. (2) of s. 18A. Such amendment is subject to the conditions in the main Act. The amendment cannot, therefore, extend the operation of the order beyond the period of five years mentioned in the main Act. In the present case the amending order of November 7, 1956, complied with this condition and, therefore, it was properly made in compliance with the provisions of s. 2.1 of the General Clauses Act. For this reason, in my view the argument of the learned Counsel for the petitioner that the amending order was invalid must fail. I, S. K. Das J. the orJer proposed by therefore, agree with Petition dismissed. GIPN-54-61 S. C. India/59-9-12-59 ·1,000.