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PETITIONER: SHRI RAM KRISHNA DALMIA

       Vs.

RESPONDENT: SHRI JUSTICE S. R. TENDOLKAR & OTHERS(and connected appeal)

DATE OF JUDGMENT: 28/03/1958

BENCH: DAS, SUDHI RANJAN (CJ) BENCH: DAS, SUDHI RANJAN (CJ) AIYYAR, T.L. VENKATARAMA SINHA, BHUVNESHWAR P. DAS, S.K. SARKAR, A.K.

CITATION:  1958 AIR  538            1959 SCR  279

ACT:        Commission  of Inquiry-Legislation empowering Government  to        appoint Commission-Constitutionality-If  violates  guarantee        of   equality   before  the  law-Notification   setting   up        Commission  and conferring Powers there upon Legality  of-If        ultra  vires  the  Act Whether  Commission  usurps  judicial        functions-Commissions of Enquiry Act, 1952 (LX of 1952),  s.        3-Constitution  of   India,  Arts.  14  and  246  :  Seventh        Schedule, Entry 94, List I and Entry 45, List III.

HEADNOTE: In  exercise of the powers conferred upon it by S. 3 of  the Commissions of Enquiry Act, 1952, the Central Government  by a   notification  dated  December  11,  1956,  appointed   a Commission of Inquiry to inquire into and report in  respect of  certain companies mentioned in the Schedule attached  to the notification and in respect of the nature and extent  of the control and interest which certain persons named in  the notification exercised over these companies.  By  subsequent notifications the Central Government made all the provisions of  sub-ss.  (2),  (3),  (4) and (5) Of  s.  5  Of  the  Act applicable  to the Commission and fixed a period Of 2  years from  February  11,  1957, as the period  within  which  the Commission  was  to exercise its function and  to  make  its report.   The  four persons named filed  three  applications under  Art. 226 of the Constitution before the  Bombay  High Court  questioning  the  validity  of the  Act  and  of  the notification  and praying for writs for quashing  the  same. The  High Court dismissed the applications and ordered  that the  said notification was legal and valid except as to  the last  part of cl. 10 thereof which empowered the  Commission to recommend the action which should be taken as and by  way of securing redress or punishment or to act as a  preventive in  future cases.  The petitioners as well as the  Union  of India filed appeals : Held,  that the Act wag’ valid and intra vires and that  the notification was also valid excepting the words " as and  by way  of securing redress or punishment " in cl.  10  thereof which went beyond the Act.

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The  Act was enacted by Parliament under entry 94 of List  I and  entry  45 of List III of the Seventh  Schedule  of  the Constitution  which relate to inquiries for the purposes  of any  of  the  matters  in List I and in  Lists  11  and  III respectively.  The inquiry which may be set up by a law made under these entries is not limited, 280 in its scope and ambit, to future legislative purposes only. Such  a law may also be for administrative purposes and  the scope of the inquiry under such a law will cover all matters which  may  properly  be  regarded  as  ancillary  to   such inquiries. The Act does not delegate to the Government any arbitrary or uncontrolled  power  and  does not offend  Art.  14  Of  the Constitution.  The discretion given to the Government to set up a Commission of Inquiry is guided by the policy laid down in  the  Act that the executive action is to be  taken  only when  there  exists a definite matter of  public  importance into which an inquiry is necessary. Kathi  Raning Rawat v. State of Saurashtra, [1952] S. C.  R. 435, applied. The Commission is merely to investigate, record its findings and  make  its  recommendations which  are  not  enforceable proprio vigore.  The inquiry or report cannot be looked upon as judicial inquiry in the sense of its being an exercise of judicial  function  properly  so  called  and  consequently- Parliament or the Government cannot be said to have  usurped the functions of the judiciary. The notification was well within the powers conferred on the Government  by  s. 3 Of the Act and did not  go  beyond  the provisions of the Act.  The conduct of an individual  person or  company  or a group of individual persons  or  companies may,  in certain circumstances, become a definite matter  of public importance within the meaning Of s. 3(i) and call for an  inquiry.   Besides, s. 3 authorises  the  Government  to appoint a Commission. of Inquiry not only for the purpose of making   an  inquiry  into  a  definite  matter  of   public importance  but  also  for the purpose  of  performing  such functions as may be specified in the notification. It  has not been established that the petitioners and  their companies have been arbitrarily singled out for the  purpose of  hostile and discriminatory treatment and subjected to  a harassing  and oppressive inquiry.  In matters of this  kind the Government has of necessity to act upon the  information available to it.  It is the best judge of the reliability of the  source of the information and if it acts in good  faith and  honestly  comes  to the conclusion  that  the  act  and conduct  of  the  petitioners  and  the  affairs  of   their companies constitute a definite matter of public  importance the  Court will be slow to adjudge the action to be bad  and illegal.   The  bare  possibility that  the  powers  may  be misused  or  abused cannot Per se make the power  bad.   The power  having been entrusted to the Central  Government  and not  to any petty official, abuse of power cannot be  easily assumed. In determining whether there is any intelligible differentia on  the basis of, which the petitioners and their  companies have  been  grouped together it is permissible to  look  not only at the facts appearing in the notification but also the facts  brought to the notice of the Court  upon  affidavits. The facts in the present case 281 afford   sufficient   support   to   the   presumption    of constitutionality  of the notification and  the  petitioners have failed to discharge the onus which was on them to prove

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that other people or companies, similarly situated have been left  out and that the petitioners and their companies  have been singled out for discriminatory and hostile treatment. The  recommendations  of the Commission of  Inquiry  are  of great importance to the Government in order to enable it  to make  up its mind as to what legislative  or  administrative measures should be adopted to eradicate the evil found or to implement the beneficial objects it has in view.  There  can be   no  objection  to  the  Commission   recommending   the imposition  of  some form of punishment which will,  in  its opinion, be sufficiently deterrent to delinquents in future. But  the Commission cannot be asked to make  recommendations for taking any action " as and by way of securing redress or punishment " in respect of wrongs already done or  committed as this is the function of a Court of law. Even though the original notification appointing the Commis- sion did not fix the time within which the Commission was to complete its report the Government could validly do so by  a subsequent notification.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals ’Nos. 455 to 457 and 656 to 658 of 1957. Appeals from the judgment and order dated April 29, 1957, of the  Bombay High Court in Misc.  Applications Nos. 48 to  50 of 1957. G.   S. Pathak, S. K. Kapur, P. N. Bhagwati and Ganpat  Rai, for  the appellant in C. A. No. 455 of 1957 & respondent  in C. A. No. 656 of 1957. Sachin  Choudhry, R. J. Joshi, J. B.  Dadachanji,  Rameshwar Nath  and St N. Andley, for the appellants in C.  As.   Nos. 456 & 457 of 1957 and respondents in C.   As. Nos. 657 & 658 of 1957. C.   K. Daphtary, Solicitor-General for India, G. N.  Joshi, K.  H. Bhabha and R. H. Dhebar, for respondent No. 4  in  C. As.   Nos. 455 to 457 of 1957 and appellant in C. As.   Nos. 656 to 658 of 1957. 1958.  March 28.  The Judgment of the Court was delivered by DAS  C. J.-These six several appeals are directed against  a common judgment and order pronounced on 36 282 April 29, 1957, by a Division Bench of the Bombay High Court in  three several Miscellaneous Applications under Art.  226 of  the Constitution, namely, No. 48 of 1957 filed  by  Shri Ram Krishna Dalmia (the appellant in Civil Appeal No. 455 of 1957), No. 49 of 1957 by Shri Shriyans Prasad Jain and  Shri Sital Prasad Jain (the appellants in Civil Appeal No. 456 of 1957)  and No. 50 of 1957 by Shri Jai Dayal Dalmia and  Shri Shanti  Prasad Jain (the appellants in Civil Appeal No.  457 of   1957).    By  those  Miscellaneous   Applications   the petitioners  therein prayed for an appropriate direction  or order  under  Art.  226  for  quashing  and  ,setting  aside notification  No.  S. R. 0. 2993 dated ]December  11,  1956, issued by the Union of India in exercise of powers conferred on it by s. 3 of the Commissions of Enquiry Act (LX of 1952) and  for other reliefs.  Rules were issued and the Union  of India appeared and showed cause.  By the aforesaid  judgment and order the High Court discharged the rules and  dismissed the applications and ordered that the said notification  was legal  and  valid  except as to the last part  of  cl.  (10) thereof  from the words " and the action" to the words "  in future  cases " and directed the Commission not  to  proceed

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with  the  inquiry  to the extent that  it  related  to  the aforesaid  last part of cl. (10) of -the said  notification. The Union of India has filed three several appeals,  namely, Nos.   656,  657  and  658  of  1957,  in  the  said   three Miscellaneous Applications complaining against that part  of the  said judgment and order of the Bombay High Court  which adjudged the last part of el. (10) to be invalid. The  Commissions of Inquiry Act, 1952 (hereinafter  referred to  as  the Act), received the assent of  the  President  on August 14, 1952, and was thereafter brought into force by  a notification issued by the Central Government under s. 1 (3) of  the Act.  As its long title states, the Act is one "  to provide  for the appointment of Commissions of  Inquiry  and for vesting such Commissions with certain powers ". Sub-sec- tion (1) of s. 3, omitting the proviso not material for  our present  purpose, provides: The appropriate Government may, if it is of                             283 opinion  that  it  is necessary so to do, and  shall,  if  a resolution  in  this behalf is passed by the House  of  the, People  or, as the case may be, the Legislative Assembly  of the State, by notification in the Official Gazette,  appoint a Commission of Inquiry for the purpose of making an inquiry into any definite matter of public importance and performing such  functions and within such time as may be specified  in the notification, and the Commission so appointed shall make the Inquiry and perform the functions accordingly." Under sub-s. (2) of that section the Commission may  consist of one or more members and where the Commission consists  of more  than  one member one of them may be appointed  as  the Chairman  thereof.  Section 4 vests in  the  Commission  the powers  of a civil court while trying a suit under the  Code of  Civil  Procedure  in  respect  of  the  several  matters specified   therein,   namely,   summoning   and   enforcing attendance  of  any  person  and  examining  him  on   oath, requiring   discovery  and  production  of   any   document, receiving evidence on affidavits, requisitioning any  public record  or copy thereof from any court or  officer,  issuing commissions  for examination of witnesses or  documents  and any other matter which may be prescribed. Section 5 empowers the  appropriate  Government,  by  a  notification  in   the Official  Gazette,  to confer on the  Commission  additional powers  as provided in all or any of the sub-ss.  (2),  (3), (4)  and  (5) of that section.  Section 6 provides  that  no statement made by a person in the course of giving  evidence before  the  commission  shall subject him to,  or  be  used against  him in, any civil or criminal proceeding  except  a prosecution  for  giving false evidence  by  such  statement provided that the statement is ’made in reply to a  question which  he  is  required by the Commission to  answer  or  is relevant  to  the  subject  matter  of  the  inquiry.    The appropriate  Government may under s. 7 issue a  notification declaring that the Commission shall cease to exist from such date as may be specified therein.  By s. 8 the Commission is empowered,  subject  to  any  rules that  may  be  made,  to regulate  its own procedure including the time and place  of its 284 sittings  and may act notwithstanding the temporary  absence of  any  member or the existence of any  vacancy  among  its members.    Section   9  provides  for  indemnity   to   the appropriate  Government,  the members of the  Commission  or other  persons acting under their directions in  respect  of anything which is done or intended to be done in good  faith in  pursuance of the Act.  The rest of the sections aye  not

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material for the purpose of these appeals. In exercise of the powers conferred on it by s. 3 of the Act the  Central  Government published in the Gazette  of  India dated  December  11, 1956, a notification in  the  following terms:                     MINISTRY OF FINANCE               (Department of Economic Affairs)                            ORDER New Delhi, the 11th December, 1956 S.   R.  O. 2993-Whereas it has been made to appear  to  the Central Government that: (1)  a  large  number  of  companies  and  some  firms  were promoted and/or controlled by Sarvashri Ramakrishna  Dalmia, Jaidayal  Dalmia, Shanti Prasad Jain, Sriyans  Prasad  Jain, Shital Prasad Jain or some one or more of them and by others being  either relatives or employees of the said  person  or persons, closely connected with the said persons; (2)  large  amounts were subscribed by the investing  public in the shares of some of these companies; (3)  there  have  been gross irregularities  (which  may  in several  respects and materials amount to  illegalities)  in the  management of such companies including manipulation  of the accounts and unjustified transfers and use of funds  and assets; (4)  the moneys subscribed by the investing public were in a considerable  measure  used  not in  the  interests  of  the companies  concerned but contrary to their interest and  for the  ultimate  personal benefit of those in  control  and/or management; and (5)  the   investing  public  have  as  a  result   suffered considerable losses. 285 And  Whereas the Central Government is of the  opinion  that there should be a full inquiry into these matters which  are of  definite public importance both by reason of  the  grave consequences  which appear to have ensued to  the  investing public and also to determine such measures as may be  deemed necessary in order to prevent a recurrence thereof; Now,  therefore,  in  exercise of the  powers  conferred  by section  3  of  the Commissions of Inquiry Act  (No.  60  of 1952),  the Central Government hereby appoints a  Commission of Inquiry consisting of the following persons, namely : Shri  Justice  S. R. Tendolkar, Judge of the High  Court  at Bombay, Chairman. Shri  N.  R. Modi of Messrs A. F. Ferguson &  o.,  Chartered Accountants, Member. Shri S. C. Chaudhuri, Commissioner of Income-tax, Member. 1.The  Commission  shall inquire into and report on  and  in respect of: (1)  The  administration  of the affairs  of  the  companies specified in the schedule hereto; (2)  The  administration  of  the  affairs  of  such   other companies and firms as the Commission may during the  course of its enquiry find to be companies or firms connected  with the companies referred to in the schedule and whose  affairs ought  to  be investigated and inquired into  in  connection with  or arising out of the inquiry into the affairs of  the companies specified in the schedule hereto; (3)The  nature  and  extent  of  the  control,  direct   and indirect, exercised over such companies and firms or any  of them by the aforesaid Sarvashri Ram Krishna Dalmia, Jaidayal Dalmia,  Shanti  Prasad  Jain, Sriyans  Prasad  Jain,  their relatives, employees and persons connected with them; (4)The  total amount of the subscription obtained  from  the investing public -and the amount subscribed by the aforesaid

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persons  and the extent to which the funds and  assets  thus obtained   or   acquired   were   misused,   misapplied   or misappropriated; (5)  The extent and nature of the investments by 286 and/or loans to and/or the use of the funds or assets by and transfer of funds between the companies aforesaid; (6)The consequences or results of such investments,    loans transfers and/or use of funds and assets ; (7)The  reasons  or  motives  of  such  investments,   loans transfers  and use and whether there was  any  justification for  the same and whether the same were made bona  fide,  in the interests of the companies concerned ; (8)  The  extent  of the losses suffered  by  the  investing public,  how  far the losses were avoidable and  what  steps were  taken by those in control and/or management  to  avoid the losses; (9)  The  nature and extent, of the personal gains  made  by any  person  or persons or any group or  groups  of  persons whether  herein named or not by reason of or through his  or their  connection with or control over any such  company  or companies; (10) Any  irregularities  frauds  or breaches  of  trust  or action  in  disregard  of  honest  commercial  practices  or contravention  of any law (except contraventions in  respect of which criminal proceedings are pending in a Court of Law) in  respect  of the companies and firms  whose  affairs  are investigated  by  the  Commission  which  ma  come  to   the knowledge  of  the Commission and the action  which  in  the opinion  of the Commission should be taken as and by way  of securing redress or punishment or to act as a preventive  in future cases. (11) The measures which in the opinion of the Commission are necessary  in  order  to ensure in the future  the  due  and Proper  administration of the funds and assets of  companies and  firms  in  the  interests  of  the  investing   public.                                  SCHEDULE 1.   Dalmia Jain Airways Ltd. 2.   Dalmia  Jain  Aviation Ltd., (now known as  Asia  Udyog Ltd.) 3.   Lahore Electric Supply Company Ltd., (now known   as South Asia Industries Ltd.) 4. Sir Shapurji Broacha Mills Ltd. 287 5.   Madhowji Dharamsi Manufacturing Company Ltd. 6.   Allen Berry and Co. Ltd. 7.   Bharat Union Agencies Ltd. 8.   Dalmia Cement and Paper Marketing Company Ltd.,   (now known as Delhi Glass Works Ltd.) 9.   Vastra  Vyavasaya  Ltd.  Ordered  that  the  Order   be published  in the Gazette of India for  public  information. (No.  F. 107 (18INS/56)).                                      H.M. Patel                                      Secretary. It  should  be noted that the above   notification  did  not specify the time within which the Commission was to complete the inquiry and make its report. On  January 9, 1957, the Central Government  issued  another -notification  providing that all the provisions of  sub-ss. (2),  (3),  (4),  and  (5)  of s.  5  should  apply  to  the Commission.   As the notification of December 11, 1956,  did not specify the time within which the Commission was to make its  report,  the Central Government on February  11,  1957, issued  a third notification specifying two years from  that date  as  the time within which the  Commission  of  Inquiry

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should  exercise the functions conferred on it and make  its report.   On February 12, 1957, three several  Miscellaneous Applications  were filed under art. 226 of the  Constitution questioning  the  validity of the Act and  the  notification dated December 11, 1956, on diverse grounds and praying  for a writ or order for quashing the same. It  will be convenient to advert to a few  minor  objections urged  before us on behalf of the petitioners in support  of their  appeals before we come to deal with  their  principal and  major  contentions.  The first objection  is  that  the notification  has  gone beyond the Act.  It is  pointed  out that  the Act, by s. 3, empowers the appropriate  Government in certain eventualities to appoint a Commission of  Inquiry for  the  purpose  of making an inquiry  into  any  definite matter  of public importance and for no other purpose.   The contention is that the conduct of an individual person 288 or company cannot possibly be a matter of public  importance and far less a definite matter of that kind.  We are  unable to  accept  this argument as  correct.   Widespread  floods, famine and pestilence may quite easily be a definite  matter of  public importance urgently calling for an inquiry so  as to  enable  the  Government to  take  appropriate  steps  to prevent   their  recurrence  in  future.   The  conduct   of villagers  in  cutting the bunds for taking water  to  their fields  during  the dry season may cause floods  during  the rainy  season  and we can see no reason  why  such  unsocial conduct of villagers of certain villages thus causing floods should  not  be  regarded as a  definite  matter  of  public importance.  The failure of a big bank resulting in the loss of the life savings of a multitude of men of moderate  means is certainly a definite matter of public importance but  the conduct of the. persons in charge -and management of such  a bank which brought about its collapse is equally a  definite matter of public importance.  Widespread dacoities in parti- cular  parts of the country is, no doubt, a definite  matter of  public importance but we see no reason why the  conduct, activities  and  modes operandi of  particular  dacoits  and thugs notorious for their cruel depredations. should not  be regarded  as definite matters of public importance  urgently requiring  a  sifting inquiry.  It is needless  to  multiply instances.   In  each  case  the question  is:  is  there  a definite  matter  of public importance which  calls  for  an inquiry  ?  We  see no warrant for the  proposition  that  a definite  matter of public importance must necessarily  mean only  some matter involving the public benefit or  advantage in  the  abstract, e. g., public health, sanitation  or  the like or some public evil or prejudice, e. g., floods, famine or pestilence or the like.  Quite conceivably the conduct of an  individual  person or company or a group  of  individual persons or companies may assume such a dangerous  proportion and  may so prejudicially affect or threaten to  affect  the public well-being as to make such conduct a definite  matter of  public importance urgently calling for a  full  inquiry. Besides,  s. 3 itself authorises the appropriate  Government to appoint a Commission 289 of  Inquiry  not only for the purpose of making  an  inquiry into a definite matter of public importance but also for the purpose of performing such functions as, may be specified in the  notification.   Therefore,  the  notification  is  well within the powers conferred on the appropriate Government by s. 3 of the Act and it cannot be questioned on the ground of its going beyond the provisions of the Act. Learned counsel for the petitioners immediately replies that

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in  the  event of its being held that  the  notification  is within  the terms of the Act, the Act itself is ultra  vires the  Constitution.   The validity of the Act  is  called  in question in two ways.  In the first place it is said that it was beyond the legislative competency of Parliament to enact a law conferring such a wide sweep of powers.  It is pointed out  that  Parliament  enacted the Act in  exercise  of  the legislative  powers  conferred  on it by  Art.  246  of  the Constitution  read with entry 94 in List I and entry  45  in List  III of the Seventh Schedule to the Constitution.   The matters enumerated in entry 94 in List 1, omitting the words not necessary for our purpose, are " inquiries.........  for the purpose of any of the matters in this List ", and  those enumerated  in  entry  45 in List III,  again  omitting  the unnecessary  words,  are  "  inquiries............  for  the purposes of any of the matters specified in List II or  List 111.   " Confining himself to the entries in so far as  they relate to " inquiries ", learned counsel for the petitioners urges  that  Parliament  may  make a  law  with  respect  to inquiries  but  cannot  under  these  entries  make  a   law conferring any power to perform any function other than  the power  to hold an inquiry.  He concedes that,  according  to the  well recognised rule of construction of the  provisions of a Constitution, the legislative heads should be construed very  liberally  and  that  it  must  be  assumed  that  the Constitution intended to give to the appropriate legislature not  only  the  power  to  legislate  with  respect  to  the particular  legislative topic but also with respect  to  all matters ancillary thereto.  Indeed the very use of the words " with respect to in Art. 246 supports this principle 37 290 of liberal interpretation.  He, however, points out that the law, which the appropriate legislature is empowered to  make under  these entries must be with respect to  inquiries  for the purposes of any of the matters in the relevant lists and it  is urged that the words " for the purpose of "  make  it abundantly  clear that the law with respect to inquiries  to be  made under these two entries must be for the purpose  of future  legislation with respect to any of  the  legislative heads  in the relevant lists.  In other words, the  argument is that under these two entries the appropriate  legislature may  make a law authorising the constitution of a  Board  or Commission of Inquiry to inquire into and ascertain facts so as to enable such legislature to undertake legislation  with respect  to  any of the legislative topics in  the  relevant lists  to  secure  some public benefit or  advantage  or  to prevent  some evil or harm befalling the public and  thereby to  protect  the public from the same.  But  if  an  inquiry becomes  necessary for, say, administrative purposes, a  law with  respect to such an inquiry cannot be made under  these two entries.  And far less can a law be made with respect to an inquiry into any wrongs alleged to have been committed by an  individual person or company or a group of them for  the purpose   of  punishing  the  suspected  delinquent.    This argument  has found favour with the High Court, but we  are, with  great respect, unable to accept this view.   To  adopt this view will mean adding words to the two entries so as to read " inquiries for the purpose of future legislation  with respect to any of the matters in the List or Lists mentioned therein.   The  matter,  however, does  not  rest  here.   A careful perusal of the language used in entry 45 in List III does, in our view, clinch the matter.  Entry 45 in List III, which  is  the  Concurrent List, speaks, inter  alia,  of  " inquiries  for the purpose of any of the matters in List  II

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or  List  111.   Under  Art.  246  read  with  this   entry, Parliament as well as the Legislature of a State may make  a law  with respect to " inquiries for the purpose of  any  of the matters in List II." Parliament, under Art. 246, has  no power to make a law with respect to any of the 291 matters  enumerated in List 11.  Therefore, when  Parliament makes a law under Art. 246 read with., entry 45 in List  III with  respect to an inquiry for the purposes of any  of  the matters  in List 11, such law can never be one  for  inquiry for  the  purpose of future legislation by  Parliament  with respect  to  any  of  those matters  in  List  11.   Clearly Parliament can make a law for inquiry for the purpose of any of  the  matters  in List 11 and none  the  less  so  though Parliament cannot legislate with respect to such matters and though none of the State Legislatures wants to Legislate  on such matters.  In our opinion, therefore, the law to be made by  the  appropriate  legislature with respect  to  the  two legislative  entries referred to above may  cover  inquiries into  any  aspect of the matters enumerated in  any  of  the lists mentioned therein and is not confined to those matters as  mere heads of legislative topic.  Quite conceivably  the law with respect to inquiries for the purpose of any of  the matters in the lists may also be for administrative purposes and the scope of the inquiry under such a law will cover all matters which may properly be regarded as ancillary to  such inquiries.  The words " for the purposes of " indicate  that the  scope of the inquiry is not necessarily limited to  the particular  or  specific matters enumerated in  any  of  the entries  in the list concerned but may extend  to  inquiries into  collateral  matters  which may be  necessary  for  the purpose,  legislative  or  otherwise,  of  those  particular matters.  We are unable, therefore,to hold that the  Inquiry which  may be set up by a law made under these  two  entries is,  in  its scope or ambit, limited to  future  legislative purposes only. Learned counsel then takes us through the different heads of inquiry  enumerated in the notification and urges  that  the inquiry   is  neither  for  any  legislative  nor  for   any administrative  purpose,  but is a clear usurpation  of  the functions of the judiciary.  The argument is that Parliament in  authorising  the  appointment of a  Commission  and  the Government  in appointing this Commission have arrogated  to themselves judicial powers which do not, in the very nature 292 of things, belong to their respective domains which must  be purely  legislative  and  executive  respectively.   It   is contended that Parliament cannot convert itself into a court except  for the rare cases of dealing with breaches  of  its own  privileges  for which it may punish the  delinquent  by committal   for  contempt  or  of  proceedings  by  way   of impeachment.   It cannot, it is urged, undertake to  inquire or  investigate  into alleged individual wrongs  or  private disputes  nor can it bring the supposed culprit to  book  or gather materials for the purpose of initiating  proceedings, civil  or  criminal, against him, because  such  inquiry  or investigation  is clearly not in aid of legislation.  It  is argued that if a criminal prosecution is to be launched, the preliminary  investigation  must be held under the  Code  of Criminal  Procedure  and  it  should  not  be  open  to  any legislature to start investigation on its own and thereby to deprive the citizen of the normal protection afforded to him by the provisions of the Code of Criminal Procedure.   This line of reasoning also found favour with     the High  Court which,  after considering the provisions of the Act and  the

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eleven heads of inquiry enumerated in the notification, came to  the  conclusion  that  the  last  portion  of  el.  (10) beginning with the words " and the action " and ending  with the  words ’,in future cases" were ultra vires the  Act  and that  the  Government  was  not  competent  to  require  the Commission  to  hold  any inquiry or make  any  report  with regard  to the matters covered by that portion of cl.  (10), for  such inquiry or. report amounts to a usurpation of  the judicial  powers of the Union or the State as the  case  may be. While we find ourselves in partial agreement with the actual conclusion  of  the High Court on this point, we  are,  with great  respect,  unable  to accept  the  line  of  reasoning advanced  by learned counsel for the petitioners, which  has been  accepted by the High Court for more reasons than  one. In the first place neither Parliament nor the Government has itself undertaken any inquiry at all.  Parliament has made a law  with  respect  to  inquiry  and  has  left  it  to  the appropriate  Government  to set up a Commission  of  Inquiry under 293 certain  circumstances referred to in s. 3 of the Act.   The Central  Government,  in its turn, has, in exercise  of  the powers  conferred on it by the Act, set up this  Commission. It is, therefore, not correct to say that Parliament or  the Government  itself has undertaken to hold any  inquiry.   In the second place the conclusion that the last portion of cl. (10)  is  bad because it signifies that  Parliament  or  the Government  had  usurped  the  functions  of  the  judiciary appears  to  us, with respect, to be inconsistent  with  the conclusion  arrived at in a later part of the judgment  that as  the Commission can only make recommendations  which  are not  enforceable proprio vigore there can be no question  of usurpation of judicial functions.  As has been stated by the High  Court itself in the latter part of its  judgment,  the only power that the Commission has is to inquire and make  a report   and  embody  therein  its   recommendations.    The Commission  has  no power of adjudication in  the  sense  of passing  an order which can be enforced proprio  vigore.   A clear distinction must, on the authorities, be drawn between a  decision  which,  by itself, has no force  and  no  penal effect and a decision which becomes enforceable  immediately or which may become enforceable by some action being  taken. Therefore, as the Commission we are concerned with is merely to  investigate and record its findings and  recommendations without  having  any power to enforce them, the  inquiry  or report  cannot be looked upon as a judicial inquiry  in  the sense of its being an exercise of judicial function properly so  called  and consequently the question of  usurpation  by Parliament  or the Government of the powers of the  judicial organs  of the Union of India cannot arise on the  facts  of this  case  and  the elaborate discussion  of  the  American authorities founded on the categorical separation of  powers expressly  provided by and under the  American  Constitution appears  to  us,  with  respect,  wholly  inappropriate  and unnecessary  and we do not feel called upon, on the  present occasion,  to  express any opinion on the  question  whether even  in the absence of a specific provision for  separation of powers in our Constitution, such as there is 294 under  the  American  Constitution, some  such  division  of powers-legislative, executive and judicial-is,  nevertheless implicit in our Constitution.  In the view we have taken  it is  also not necessary for us to consider whether,  had  the Act conferred on the appropriate Government power to set  up

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a Commission of Inquiry with judicial powers, such law could not, subject, of course, to the other provisions of the Con- stitution,  be supported as a law made under some  entry  in List I or List III authorising the setting up of courts read with  these  two  entries, for a  legislation  may  well  be founded on several entries. Learned  Counsel  appearing  for the  petitioners,  who  are appellants  in Civil Appeals Nos. 456 and 457 of 1957,  goes as far as to say that while the Commission may find facts on which  the  Government  may  take  action,  legislative   or executive,  although he does not concede the latter kind  of action to be contemplated, the Commission cannot be asked to suggest  any measure, legislative or executive, to be  taken by the appropriate Government.  We are unable to accept  the proposition  so widely enunciated.  An  inquiry  necessarily involves  investigation  into  facts  and  necessitates  the collection  of  material  facts from  the  evidence  adduced before  or  brought  to the notice of  the  person  or  body conducting the inquiry and the recording of its findings  on those  facts  in  its  report  cannot  but  be  regarded  as ancillary  to  the inquiry itself, for the  inquiry  becomes useless  unless the findings of the inquiring body are  made available  to the Government which set up the  inquiry.   It is,  in our judgment, equally ancillary that the  person  or body  conducting the inquiry should express its own view  on the  facts  found  by  it  for  the  consideration  of   the appropriate  Government in order to enable it to  take  such measure  as  it may think fit to do.  The whole  purpose  of setting up of a Commission of Inquiry consisting of  experts will be frustrated and the elaborate process of inquiry will be deprived of its utility if the opinion and the advice  of the  expert body as to the measures the situation  disclosed calls for cannot be placed before the Government                 295 for consideration notwithstanding that doing so cannot be to the prejudice of anybody because it has no force of its own. In  our view the recommendations of a Commission of  Inquiry are of great importance to the Government in order to enable it   to  make  up  its  mind  as  to  what  legislative   or administrative  measures should be adopted to eradicate  the evil found or to implement the beneficial objects it has  in view.   From this point of view, there can -be no  objection even  to the Commission of Inquiry recommending the  imposi- tion of some. form of punishment which will, in its opinion, be  sufficiently  deterrent to delinquents in  future.   But seeing that the Commission of Inquiry has no judicial powers and  its  report  will  purely  be  recommendatory  and  not effective  proprio  vigore  and the statement  made  by  any person  before the Commission of Inquiry is, under s.  6  of the  Act,  wholly  inadmissible in evidence  in  any  future proceedings, civil or criminal, there can be no point in the Commission of Inquiry making recommendations for taking  any action  " as and by way of securing redress or punishment  " which,  in agreement with the High Court, we think,  refers, in  the  context, to wrongs already done or  committed,  for redress  or  punishment for such wrongs, if any, has  to  be imposed  by a court of law, properly constituted  exercising its  own  discretion on the facts and circumstances  of  the case and without being in any way influenced by the view  of any person or body, howsoever august or high powered it  may be.  Having regard to all these considerations it appears to us that only that portion of the last part of cl. (10) which calls upon the Commission of Inquiry to make recommendations about  the  action to be taken " as and by way  of  securing redress  or  punishment  ",  cannot be said  to  be  at  all

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necessary   for  or  ancillary  to  the  purposes   of   the Commission.  In our view the words in the latter part of the section,  namely,  " as and by way of  securing  redress  or punishment  ", clearly go outside the scope of the  Act  and such provision is not covered by the two legislative entries and  should, therefore, be deleted.  So deleted  the  latter portion  of cl. (10) would read and the action which in  the opinion of the Commission 296 should be taken  to act as a preventive in future cases ". Deletion of the words mentioned above from cl. (10)   raises the   question  of  severability.   We  find  ourselves   in substantial  agreement  with the reasons given by  the  High Court  on  this point and we hold that the efficacy  of  the notification  is in no way affected by the deletion  of  the offending  words mentioned above and there is no  reason  to think  that  the  Government  would  not  have  issued   the notification without those words.  Those words do not appear to  us to be inextricably wound up with the texture  of  the entire notification. The  principal ground urged in support of the contention  as to  the  invalidity of the Act and/or  the  notification  is founded on Art. 14 of the Constitution.  In Budhan  Choudhry v.   The  State of Bihar (1) a Constitution Bench  of  seven Judges  of  this Court at pages 1048-49 explained  the  true meaning and scope of Art. 14 as follows: " The provisions of Article 14 of the Constitution have come up  for discussion before this court in a number  of  cases, namely, Chiranjit Lal Choudhuri v. The Union of India (2)  , The  State, of Bombay v. F. N.Balsara(3),The state  of  west Bengal v. Anwar Ali Sarkar (4 ), Kathi Baning -Rawat v.  The State  of  Saurashtra(5) Lachmandas Kewalram  Ahuja  v.  The State  Of Bombay (6), Qasim Razvi v. The State of  Hyderabad (7) and Habeeb Mohamad v. The State of Hyderabad (8). it is, therefore,   not  necessary  to  enter  upon   any   lengthy discussion  as  to  the meaning, scope  and  effect  of  the article in question.  It is now well established that  while article  14  forbids class legislation, it does  not  forbid reasonable  classification for the purposes of  legislation. In   order,  however,  to  pass  the  test  of   permissible classification  two  conditions must  be  fulfilled,  filled namely,  (i) that the classification must be founded  on  an intelligible  differentia  which  distinguishes  persons  or things that are grouped together      (1) [1955] 1 S.C.R. 1045.(2) [1950] S.C.R. 869.      (3)  [1951] S.C.R. 682.(4) [1952] S.C.R. 284.      (5) [1952] S.C.R. 433.(6) [1952] S.C.R. 710.      (7) [1953] S.C.R. 581    (8) [1953] S.C.R. 661. 297 from  others  left  out of the group  and,  (ii)  that  that differentia  must  have a rational relation  to  the  object sought  to  be  achieved by the statute  in  question.   The classification  may be founded on different  bases,  namely, geographical, or according to objects or occupations or  the like.   What  is necessary is that there ’Must  be  a  nexus between  the basis of classification and the object  of  the Act under consideration.  It is also well established by the decisions   of   this  Court  that   article   14   condemns discrimination  not only by a substantive law but also by  a law of procedure." The principle enunciated above has been consistently adopted and applied in subsequent cases.  The decisions of      this Court further establish- (a)  that a law may be constitutional even though it relates to  a  single  individual if, on  account  of  some  special

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circumstances   or  reasons  applicable  to  him   and   not applicable to others, that single individual may be  treated as a class by himself; (b)  that  there  is always a presumption in favour  of  the constitutionality of an enactment and the burden is upon him who  attacks  it  to  show  that  there  has  been  a  clear transgression of the constitutional principles; (c)  that   it  must  be  presumed  that   the   legislature understands  and correctly appreciates the need of  its  own people, that its laws are directed to problems made manifest by  experience  and that its discriminations  are  based  on adequate grounds; (d)  that  the legislature is free to recognise  degrees  of harm  and may confine its restrictions to those cases  where the need is deemed to be the clearest ; (e)  that   in   order  to  sustain   the   presumption   of constitutionality  the  court may  take  into  consideration matters  of common knowledge, matters of common report,  the history  of  the times and may assume every state  of  facts which can be conceived existing at the time of  legislation; and (f)that  while  good  faith and knowledge  of  the  existing conditions on the part of a legislature are to be  presumed, if there is nothing on the face of the 38 298 law  or the surrounding circumstances brought to the  notice of  the court on which the classification may reasonably  be regarded  as  based, the  presumption  of  constitutionality cannot be carried to the extent of always holding that there must be some undisclosed and unknown reasons for  subjecting certain   individuals   or  corporations   to   hostile   or discriminating legislation. The  above  principles will have to be constantly  borne  in mind  by  the court when it is called upon  to  adjudge  the constitutionality   of  any  particular  law   attacked   as discriminatory and -violative of the equal protection of the laws. A close perusal of the decisions of this Court in which  the above  principles have been enunciated and applied  by  this Court  will also show that a statute which may come  up  for consideration on a question of its validity under Art. 14 of the  Constitution,  may  be placed in one or  other  of  the following five classes:- (i)  A statute may itself indicate the persons or things  to whom  its provisions are intended to apply and the basis  of the  classification of such persons or things may appear  on the  face  of  the  statute or  may  be  gathered  from  the surrounding circumstances known to or brought to the  notice of  the court.  In determining the validity or otherwise  of such  a  statute  the  court has  to  examine  whether  such classification  is  or can be reasonably regarded  as  based upon  some differentia which distinguishes such  persons  or things grouped together from those left out of the group and whether  such differentia has a reasonable relation  to  the object  sought  to  be achieved by the  statute,  no  matter whether the provisions of the statute are intended to  apply only  to a particular person or thing or only to  a  certain class of persons or things.  Where the court finds that  the classification  satisfies the tests, the court  will  uphold the validity of the law, as it did in Chiranjitlal  Chowdhri v.  The  Union of India (1), The State of Bombay  v.  F.  N. Balsara (2), Kedar Nath (1) [1950] S.C.R. 869. (2) [1951] S.C.R. 682,

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299 Bajoria v. The State of West Bengal (1), V. M. Syed Mohammad & Company v. The State of Andhra (2) and Budhan Choudhry  v. The State of Bihar (3). (ii)A   statute  may  direct  its  provisions  against   one individual person or thing or to several individual  persons or  things  but, no reasonable basis of  classification  may appear  on  the  face  of  it  or  be  deducible  from   the surrounding  circumstances, or matters of common  knowledge. In  such  a case the court will strike down the  law  as  an instance of naked discrimination, as it did in  Ameerunnissa Begum v. Mahboob Begum (4) and Ramprasad Narain Sahi v.  The State of Bihar (3). (iii)A  statute  may  not make  any  classification  of  the persons or things for the purpose of applying its provisions but  may  -leave it to the discretion of the  Government  to select and classify persons or things to whom its provisions are  to apply.  In determining the question of the  validity or  otherwise  of such a statute the court will  not  strike down  the  law out of hand only  because  no  Classification appears on its face or because a discretion is given to  the Government to make the selection or classification but  will go on to examine and ascertain if the statute has laid  down any principle or policy for the guidance of the exercise  of discretion by the Government in the matter of the  selection or  classification.   After  such scrutiny  the  court  will strike  down  the  statute  if it  does  not  lay  down  any principle  or policy for guiding the exercise of  discretion by   the   Government  in  the  matter   of   selection   or classification, on the ground that the statute provides  for the  delegation of arbitrary and uncontrolled power  to  the Government  so  as  to enable  it  to  discriminate  between persons or things similarly situate and that, therefore, the discrimination is inherent in the statute itself.  In such a case the court will strike down both the law as well as  the executive action taken under such law, as it did in State of West  Bengal v. Anwar, Ali Sarkar (6), Dwarka  Prasad  Laxmi Narain v. The State of Uttar Pradesh(7)      (1) [1954] S.C.R. 30.       (2) [1954] S.C.R. I 117.      (3) [1955] 1 S.C.R. 10045  (4) [1953] S.C.R. 44      (5) [1953] S.C. R. 1129.   (6) [1952] S.C.R. 284.      (7) [1954] S.C.R. 803. 300 and  Dhirendra  Krishna  Mandal v.  The  Superintendent  and Remembrancer of Legal Affairs (1). (iv) A statute may not make a classification of the  persons or things for the purpose of applying its provisions and may leave  it to the discretion of the Government to select  and classify the persons or things to whom its provisions are to apply  but  may  at  the same time  lay  down  a  policy  or principle for the guidance of the exercise of discretion  by the   Government  in  the  matter  of  such   selection   or classification,   the   court  will  uphold   the   law   as constitutional, as it did in Kathi Raning Rawat v. The State of Saurashtra (2). (v)  A statute may not make a classification of the  persons or things to whom their provisions are intended to apply and leave  it to the discretion of the Government to  select  or classify the persons or things for applying those provisions according  to the policy or the principle laid down  by  the statute itself for guidance of the exercise of discretion by the   Government  in  the  matter  of  such   selection   or classification.   If the Government in making the  selection or classification does not proceed on or follow such  policy or  principle,  it has been held by this Court,  e.  g.,  in

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Kathi  Raning Rawat v. The State of Saurashtra (2)  that  in such a case the executive action but not the statute  should be   condemned  as  unconstitutional In  the light of the foregoing discussions the  question  at once   arises:  In  what  category  does  the  Act  or   the notification  impugned  in these appeals fall  ? It will be apparent from its long title that the purpose  of the Act is to provide for the appointment of Commissions  of Inquiry  and  for  vesting  such  Commissions  with  certain powers.   Section 3 empowers the appropriate Government,  in certain  circumstances  therein  mentioned,  to  appoint   a Commission  of Inquiry for the purpose of making an  inquiry into any definite matter of public importance and performing such  functions within such time as may be specified in  the notification.    It   seems  clear-and  it  has   not   been controverted-that on a proper construction of this (1) [1955] 1 S.C.R. 234. (2) [1952] S.C.R. 435. 301 section,   the  functions  the  performance  of   which   is contemplated must be such as are ancillary to and in aid  of the  inquiry  itself  and  cannot  be  read  as  a  function independent of or unconnected with such inquiry.  That being the  position, as we conceive it to be, the question  arises as to the scope and ambit of the power which is conferred by it  on the appropriate Government.  The answer is  furnished by  the  statute  itself,  for  s.  3  indicates  that   the appropriate Government .can appoint a Commission of  Inquiry only for the purpose of making an inquiry into any  definite matter  of public importance and into no other  matter.   In other words the subject matter of the inquiry can only be  a definite  matter  of  public  importance.   The  appropriate Government, it follows, is not authorised by this section to appoint  a Commission for the purpose of holding an  inquiry into  any other matter.  Learned Solicitor-General,  in  the premises, submits that the section itself on the face of it, makes.  a classification so that this statute  falls  within the  first category mentioned above and contends  that  this classification  of  things  is  based  on  an   intelligible differentia  which has a reasonable relation to  the  object sought to be achieved by it, for a definite matter of public importance may well call for an inquiry by a Commission.  In the alternative the learned Solicitor-General urges that  in any case the section itself quite clearly indicates that the policy  of Parliament is to provide for the  appointment  of Commissions  of Inquiry to inquire into any definite  matter of  public importance and that as there is no knowing  when, where  or  how  any  such  matter  may  crop  up  Parliament considers  it  necessary  or expedient to leave  it  to  the appropriate  Government  to  take action  as  and  when  the appropriate  moment  will  arrive.   In  the  tempo  of  the prevailing  conditions in modern society events occur  which were  never foreseen and it is impossible for Parliament  or any  legislature to anticipate all events or to provide  for all eventualities and, therefore, it must leave the duty  of taking  the necessary action to the appropriate  Government. This  delegation of authority, however, is not  unguided  or uncontrolled, 302 for  the discretion given to the appropriate  Government  to set up a Commission of Inquiry must be guided by the  policy laid down, namely, that the executive action of setting up a Commission  of Inquiry must conform to the condition of  the section,  that is to say, that there must exist  a  definite matter.  of public importance into which an inquiry  is,  in

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the  opinion of the appropriate Government, necessary or  is required by a resolution in that behalf passed by the  House of the People or the Legislative Assembly of the State.   If the  preambles  or the provisions of  the  statutes  classed under  the first category mentioned above could be  read  as making   a   reasonable   classification   satisfying    the requirements  of Art. 14 and if the preamble to the  statute considered  in the case of Kathi Raning Rawat (1)  could  be construed  as laying down sufficiently clearly a  policy  or principle for the guidance of the executive, what  objection can  there  be to construing s. 3 of the Act now  under  our consideration as also making a reasonable classification  or at any rate as declaring with sufficient clarity the  policy of  Parliament and laying down a principle for the  guidance of  the  exercise of the powers  conferred  the  appropriate Government  so  as  to bring this statute at  least  in  the fourth category, if not also in the first category ? On  the authorities,  as  they  stand, it cannot  be  said  that  an arbitrary  and uncontrolled power has been delegated to  the appropriate  Government and that, therefore, the law  itself is bad. Learned  counsel for the petitioners next contends  that  if the  Act is good in the sense that has declared  its  policy and  laid  down  some  principle for  the  guidance  of  the Government in the exercise of the power conferred on it, the appropriate Government has failed to exercise its discretion property  on  the  basis of  a,  reasonable  classification. Article  14 protects all persons from discrimination by  the legislative as well as by the executive organ of the  State. "State"  is defined in Art. 12 as including  the  Government and  "law  "  is  defined  in  Art.  13  as  including   any notification  or  order’ It has to be  conceded,  therefore, that (1)  [1952] S.C.R. 435. 303 it  is open to the petitioners also to question the  consti- tutionality  of the notification.  The attack  against,  the notification  is  that  the  Government  has  not   properly implemented  the policy or followed the principle laid  down in  the Act and has consequently transgressed the bounds  of the  authority delegated to it.  It is pointed out  that  in March,  1946, one Shri Tricumdas Dwarkadas, a  solicitor  of Bombay,  had  been appointed an officer on Special  Duty  to indicate the lines on which the Indian Companies Act was  to be revised.  He made a report which was, however, incomplete in certain particulars.  Thereupon the Government  appointed Shri  Thiruvenkatachari, the Advocate-General of Madras,  to make   further  inquiry.   The  last   mentioned   gentleman submitted his report and on the basis of that report, it  is said,  a  memorandum  containing  tentative  proposals   was prepared  and circulated to elicit the opinions  of  various organisations.  On October 28, 1950, a Committee called  the Indian  Company Law Committee-popularly known as  the  Bhaba Committee-was  appointed.   That Committee  went  round  and collected materials and made its comprehensive report on the basis  of  which the new Indian Companies Act  has  recently been remodeled.  As nothing new has since then happened why, it  is  asked’,  should any further inquiry be  made  ?  The conclusion  is  pressed  upon  us that  there  can,  in  the circumstances,  be no definite matter of  public  importance which can possibly call for an inquiry.  We find no force in this argument.  In the first place the Bhaba Committee at p. 29 of its Report recommended that further inquiries may,  in future,  have to be made regarding some matters relating  to Companies  and, therefore, the necessity for  fresh  inquiry

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cannot  be  ruled out.  In the next  place  the  appropriate Government  is empowered to appoint a Commission of  Inquiry if, in its opinion, it is necessary so to do.  The preambles to  the notification recite that certain matters  enumerated under  five  heads had been made to appear  to  the  Central Government  in consequence of which the  Central  Government had  come  to  the conclusion that there should  be  a  full inquiry into those matters which, 304 in  its opinion, were definite matters of public  importance both  by reason of the grave consequences which appeared  to have ensued to the investing public and for determining such measures as might be deemed necessary in order to prevent  a recurrence  thereof.  Parliament in its wisdom has left  the matter  of the setting up of a Commission of Inquiry to  the discretion  of the appropriate Government and if the  appro- priate  Government  has formed the opinion that  a  definite matter  of  public importance has arisen and  calls  for  an inquiry the court will not lightly brush aside the opinion. Learned  counsel  for the petitioners argues  that  granting that  the  question as to the necessity for  constituting  a Commission  of  Inquiry  has been  left  to  the  subjective determination  of  the  appropriate  Government  the  actual setting  up of a Commission is conditioned by the  existence ’of some definite matter of public importance.  If there  be no  such definite matter of public importance  in  existence then  no question of necessity for appointing  a  Commission can arise.  Reference is then made to the first preamble  to the notification and it is pointed out that all the  matters alleged  to  have  been  made  to  appear  to  the   Central Government  relate  to some supposed act or conduct  of  the petitioners.   The contention is repeated that the  act  and conduct  of  individual  persons can never  be  regarded  as definite  matters  of public importance.  We are  unable  to accept  this  argument  as sound, for  as  we  have  already stated,  the act or conduct of individuals may  assume  such dangerous  proportions as may well affect the  public  well- being   and  thus  become  a  definite  matter   of   public importance.    We   do  not,  therefore,  agree   that   the notification  should  be struck down for the  absence  of  a definite matter of public importance calling for an inquiry. The  point which is next urged in support of  these  appeals and  which  has given us considerable anxiety  is  that  the petitioners  and  their  companies  have  been   arbitrarily singled  out for the purpose of hostile  and  discriminatory treatment  and  subjected  to  a  harassing  and  oppressive inquiry.  The provisions of Art. 14, 305 it is contended, protect every person against discrimination by  the  State,  namely,  against the law  as  well  as  the executive action and this protection extends to State action at  all its stages.  The petitioners’ grievance is that  the Government  had started discrimination even at the  earliest stage   when   it  conceived  the  idea   of   issuing   the notification.  Reference is made to the Memorandum filed  by the  Bombay  Shareholders’  Association  before  the   Bhaba Committee  showing that the same or similar allegations  had been  made  not  only  against  the  petitioners  and  their companies but against other businessmen and their  companies and  that although the petitioners and their  companies  and those other persons and their companies were thus  similarly situate, in that allegations had been made against both, the Government  arbitrarily applied the Act to  the  petitioners and  their companies and issued the notification  concerning them but left out the others from its operation.  It is true

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that  the notification primarily or even solely affects  the petitioners and their companies but it cannot be  overlooked that Parliament having left the selective application of the Act  to  the discretion of the appropriate  Government,  the latter must of necessity take its decision on the  materials available  to  it  and the opinion it  forms  thereon.   The appropriate Government cannot in such matters be expected to sit  down and hold a judicial inquiry into the truth of  the materials  brought before it, and examine the informants  on oath in the presence of the parties who are or may be likely to be affected by its decision.  In matters of this kind the appropriate  Government  has of necessity to  act  upon  the information  available to it.  It is the best judge of’  the reliability  of its source of information and if it acts  in good  faith  on  the materials brought  to  its  notice  and honestly comes to the conclusion that the act and conduct of the   petitioners  and  the  affairs  of   their   companies constitute  a definite matter of public  importance  calling for an inquiry with a view to devise measures for preventing the  recurrence  of  such evil, this  Court,  not  being  in possession of all the facts will, 39 306 we apprehend, be slow to adjudge the executive action to  be bad  and illegal.  We are not unmindful of the fact  that  a very  wide  discretionary power has been  conferred  on  the Government  and,  indeed, the contemplation that  such  wide powers  in the hands of the executive may in some  cases  be misused  or abused and turned into an engine  of  oppression has caused considerable anxiety in our mind.   Nevertheless, the  bare  possibility  that the powers may  be  misused  or abused cannot per se induce the court to deny the  existence of the powers.  It cannot be overlooked that Parliament  has confided  this discretion, not to any petty official but  to the   appropriate  Government  itself  to  take  action   in conformity  with the policy and principle laid down  in  the Act.   As  this Court ’has said in Matajog Dobey  v.  H.  C. Bhari  (1),  " a discretionary power is  not  necessarily  a discriminatory  power and that abuse of power is not  to  be easily  assumed  where  the  discretion  is  vested  in  the Government  and  not in a minor official.  " We  feel  sure, however, that if this law is administered by the  Government "  with an evil eye and an unequal hand " or for an  oblique or  unworthy  purpose the arms of this Court  will  be  long enough  to  reach it and to strike down such  abuse  with  a heavy  hand.  What, then, we inquire, are the salient  facts here  ?  The Central Government appointed  investigators  to scrutinise   the  affairs  of  three  of  the   petitioners’ concerns.  Those investigators had made their reports to the Central  Government.   The Central Government had  also  the Bhaba  Committee Report and all the Memoranda  filed  before that  Committee.   It may also have  had  other  information available to it and on those materials it formed its opinion that the act and conduct of the petitioners and the  affairs of  their companies constituted a definite matter of  public importance which required a full inquiry.  Up to this  stage there  is  no question of legal proof  of   the  allegations against  the  petitioners as in a court of  law.   The  only question  is:  do those allegations  if  honestly  believed, constitute  a definite matter of public importance ? We  are unable to say that they do not. (1)  [1955] S.C.R. 925, 932. 307 Reference is again made to the several matters enumerated in the  five  clauses  set out in the first,  preamble  to  the

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notification  and it is urged that those matters do  not  at all  disclose any intelligible differentia on the  basis  of which  the  petitioners and their companies can  be  grouped together  as  a class.  On the part of the  Union  of  India reference  is made to the affidavits affirmed by Shri H.  M. Patel,  the Principal Secretary to the Finance  Ministry  of the  Government of India purporting to set out in detail  as the  background thereof, the circumstances which led to  the issue  of the impugned notification and the matters  recited therein  and  the several reports referred to  in  the  said affidavit.   Learned  counsel for the petitioners  take  the objection  that reference cannot be made to  any  extraneous matter  and that the basis of classification must appear  on the  face of the notification itself and reliance is  placed on  certain  observations  in the  dissenting  judgments  in Chiranjitlal  Chowdhury’s  case (1) and in item (2)  of  the summary  given  by  Fazl Ali J. in his  judgment  in  F.  N. Balsara’s case (2). In Chiranjitlal Chowdhury’s case (1) the majority  of  the Court read the preamble to  the  Ordinance which was replaced by the Act which was under  consideration there  as  part  of the Act  and  considered  the  recitals, reinforced  as they were by the presumption of  validity  of the  Act,  as  prima  facie  sufficient  to  constitute   an intelligible basis for regarding the company concerned as  a class  by itself and held that the petitioner there had  not discharged the onus that was on him.  The dissenting Judges, after  pointing out that the petition and the affidavit  did not  give any indication as to the differentia on the  basis of  which the company had been singled out, went on  to  say that the statute also did not on the face of it indicate any basis  of classification.  This was included in cl.  (2)  of the summary set out in the judgment in F. N. Balsara’s  case (2).   Those  observations  cannot, therefore,  be  read  as meaning  that the classification must always appear  on  the face of the law itself and that reference cannot be made to (1) [1550] S.C.R. 869. (2) [1951] S.C.R. 682. 308 any   extraneous   materials.   In  fact   in   Chiranjitlal Chowdhury’s case (1) parliamentary proceedings, in so far as they  depicted the surrounding circumstances  and  furnished the  background, were referred to.  In Kathi Raning  Rawat’s case  (2) the hearing was adjourned in order to  enable  the respondent to put in an affidavit setting forth the material circumstances.    In  Kedarnath  Bajoria’s  case   (3)   the situation  brought  about by the war  conditions  was  taken notice  of The same may be said of the cases of  A.  Thanyal Kunju  Musaliar v. V. Venkitachulam Potti (4)  and  Pannalal Binjraj v. Union of India (5).  In our judgment,  therefore, there  can  be no objection to the matters  brought  to  the notice  of  the court by the affidavit of Shri H.  M.  Patel being  taken  into  consideration  along  with  the  matters specified in the notification in order to ascertain  whether there  was any valid basis for treating the petitioners  and their companies as a class by themselves. Learned counsel for the petitioners next urges that even  if the matters referred to in Shri H. M. Patel’s affidavits and those  appearing on the face of the notification  are  taken into   consideration   one  cannot  deduce   therefrom   any differentia   which   may  be  taken  to   distinguish   the petitioners and their companies from other persons and their companies.  The qualities and characteristics imputed to the petitioners  and their companies are not at all peculiar  or exclusive  to  them  but are to be found  equally  in  other persons and companies and yet they and their companies  have

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been  singled out for hostile and  discriminatory  treatment leaving out other persons and companies which are  similarly situate.   There is no force in this  argument.   Parliament has  confided the task of the selective application  of  the law  to the appropriate Government and it is, therefore  for the appropriate Government to exercise its discretion in the matter.   It  is to be expected-and, until the  contrary  is proved,  it is to be presumed-that the Government, which  is responsible  to Parliament, will act honestly, properly  and in conformity with the (1) [1950] S.C.R. 869.   (2) [1952] S.C.R. 435. (3) [1954] S.C. R. 30.    (4) [1955] 2 S.C.R. 1196.  (5) [1957] S.C.R. 233. 309 policy  and principle laid down by Parliament.  It may  well be that the Central Government thought that even if one,  or more   of  the  particular  qualities  and   characteristics attributed  to  the petitioners and their companies  may  be found in another person or company, the combination of those qualities and characteristics which it thought were  present in  the  petitioners  and their companies was  of  a  unique nature  and was not present in any other person or  company. In its appreciation of the material facts preparatory to the exercise  of  the discretion left to it  by  Parliament  the Central  Government may have thought that the evil was  more pronounced  in the petitioners and their concerns  than  any other person or concern and that the need for an inquiry was more  urgent  and clear in the case of the  petitioners  and their  companies  than in the case of any  other  person  or company.  What is the gist and substance of’ the allegations against the petitioners and their companies ? They are  that a  small  group  of persons had from  before  1946  acquired control  over  a number of companies  including  a  blanking company  and  an  insurance company ;  that  some  of  these companies were private companies and the others were  public companies  in  which the public  had  invested  considerable moneys  by buying, shares; that the financial years of  some of these companies were different from those of the  others; that  the funds of’ the limited companies were  utilised  in purchasing  shares in other companies having  large  reserve funds  with a view to get control over them and  to  utilise those  funds  for  acquiring shares in  other  companies  or otherwise  utilise those funds for the personal  benefit  of these  individuals; that the shares were acquired  on  blank transfer  deeds and were not registered in the names of  the companies  with  whose funds they were purchased  so  as  to permit the same shares to be shown in the balance sheets  of the  different companies having different  financial  years; that  after 1951 several of these companies were taken  into voluntary  liquidation or their assets were  transferred  to another company under some pretended scheme of’  arrangement or re-organisation; that after getting control of 310 a  company  they appointed some of  themselves  as  managing director  or selling agent on high remuneration and after  a while cancelled such appointment on paying fabulous  amounts as  and  by way of compensation; that funds of  one  company were  transferred  to another company to cover up  the  real financial position.  It is needless to add other allegations to  explain  the  matter.  The question  before  us  is  not whether the allegations made on the face of the notification and in the affidavits filed on behalf of the Union of  India are  true but whether the qualities and characteristics,  if honestly  believed  to be found in the petitioners,  are  so peculiar  or unique as to constitute a good and valid  basis

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on which the petitioners and their companies can be regarded as  a class by themselves.  We are not of opinion that  they do not.  It is not for us to say on this application and  we do  not  in fact say or even suggest  that  the  allegations about  the  petitioners and their concerns are at  all  well founded.   It is sufficient for our present purpose  to  say that  the  facts disclosed on the face of  the  notification itself  and the facts which have been brought to our  notice by   the  affidavits  afford  sufficient  support   to   the presumption of constitutionality of the notification.  There being  thus a presumption of validity in favour of  the  Act and  the notification, it is for the petitioners  to  allege and  prove  beyond  doubt that other  persons  or  companies similarly situate have been left out and the petitioners and their companies have been singled out for discriminatory and hostile  treatment.  The petitioners have, in  our  opinion, failed  to  discharge  that onus.   Indeed  nowhere  in  the petitions  is  there even an averment that there  are  other persons  or companies similarly situate as  the  petitioners and  their  companies.   It has to be  remembered  that  the allegations  set  forth in the memorandum submitted  by  the Bombay Shareholders’ Association to the Bhaba Committee have not been proved by legal evidence.  And further that  report itself contains matters which may be taken as calculated  to lend  support to the view that whether regard is had to  the combination  of a variety of evils or to their  degree,  the petitioners may quite conceivably 311 be  grouped as a class by themselves.  In our  judgment  the plea  of the infraction of the equal protection,  clause  of our Constitution cannot be sustained. The next contention is that the notification is bad, because the action of the Government in issuing it was mala fide and amounted  to an abuse of power.  Learned  counsel  appearing for the petitioner, who is the appellant in Civil Appeal No. 455  of  1957,  makes it clear that no  personal  motive  or illwill  against the petitioners is imputed to any one,  but he  points out that the Bhaba Committee had been set up  and the  Companies Act has been remodelled and,  therefore,  the present  Commission  was  not  set  up  for  any  legitimate purpose.   The main idea, according to learned counsel,  was to obtain information which the Government  could not get by following the ordinary procedure under the Code of  Criminal Procedure  and  this  ulterior  motive  clearly  makes   the governmental action mala fide.  This point has been  further emphasised by learned counsel appearing for the petitioners, who  are  appellants in Civil Appeals Nos. 456  and  457  of 1957.  He has drawn our attention to the affidavits filed by his  clients  and  contends that it was  well-known  to  the Government  that none of them was concerned in promoting  or managing any of the companies and their position being  thus well-known  to  the  Government,  their  inclusion  in   the notification  was  both outside the power conferred  by  the Government and also constituted a mala fide exercise of  the power conferred on it.  No substantial ground in support  of this  point  has  been  brought before us  and  we  are  not satisfied that the circumstances referred    to    in    the notification and the affidavits filed on     behalf  of  the Union of India, may not, if true,  be the basis of a further inquiry into the matter.      It will be for the  Commission to inquire into the allegations and come to its own findings and  make its report containing its recommendations.  It  is not  desirable  that  we should say anything  more  on  this point.   All  that we need say is that the  charge  of  mala fides has not been brought home to the Government.

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312 A  point  was  taken  that  the  original  notification  was defective  in that it did not fix the time within which  the Commission was to complete its report and that a  subsequent notification  fixing a time could not cure that defect.   We do not think there is any substance in this too.  The  third notification quoted above amended the original  notification by  fixing  a  time.   There  was  nothing  to  prevent  the Government  from issuing a fresh notification  appointing  a Commission and fixing a time.  If that could be done,  there was  no reason why the same result could not be achieved  by the  combined effect of two notifications.  In any case  the amending  notification  taken  together  with  the  original notification may be read as a fresh notification within  the meaning of s. 3 of the Act, operative at least from the date of the later notification. It  is  feebly  argued that the notification is  bad  as  it amounts  to a delegation of essential legislative  function. Assuming  that there is delegation of legislative  function, the  Act  having laid down its policy,  such  delegation  of power,  if any, is not vitiated at all, for the  legislation by the delegates will have to conform to the policy so  laid down  by  the  Act.   Lastly a  point  is  raised  that  the notification  is  bad  because it violates Art.  23  of  the Constitution.  It is frankly stated by the learned  counsel. that  this point is rather premature at this stage and  that he  desires  to reserve his client’s right to  raise  it  in future. No  other  point has been urged before us  and  for  reasons stated  above the appeals Nos. 455, 456 and 457 of 1957  are dismissed with costs.  Appeals Nos. 656, 657 and 658 of 1957 succeed  only in part, namely, to the extent that  only  the word-, " by way of redress or punishment " occurring in  the latter  portion  of  el. (10) will be deleted  so  that  the latter  portion of cl. (10) will read as: " and  the  action which   in   the  opinion  of  the  Commission   should   be taken..................  to  act as a preventive  in  future cases  "  as indicated above.  We make no order  as  to  the costs of these three appeals. C.   A. Nos. 455, 456 and 457 of 1957 dismissed. C.   A. Nos. 656, 657 and 658 of 1957 Partly allowed. 313