This lawsuit concerns the Act, which solely governs one corporation. The government shut down the company’s mills because of poor management. Later, in response to concerns raised by the company’s shareholders, the central government passed a Central Act to control how the business operated. The petition was submitted to challenge the legality of the Act and Ordinance on the grounds that they infringe upon the basic rights of the shareholders and the company.
chiranjit lal chowdhuri vs union of india Case Facts
- Chiranjit Lal Chowdhuri, a shareholder of Sholapur Spinning and Weaving Company Limited, which the Indian Companies Act controls, filed the petition in the current case. He held eight preference shares and three common shares that were pledged under the Bank of Baroda.
- The company’s mills were closed in August 1949, with the government citing poor management and the need to manufacture necessities as the reasons for the closure. Subsequently, the Sholapur and Weaving Company (Emergency Provisions) Act was passed by the Central Government to regulate the Company’s operations.
- This Act gave the government the authority to change the Indian Companies Act with regard to the firm, intervene with the mill’s operations, appoint new directors, and restrict shareholders’ ability to vote.
- The Petitioner (Shareholder) questioned the Act, which in some ways replicated and justified the Ordinance’s provisions. The petitioner contested the constitutionality of the Act and the Ordinance on the grounds that they violated Articles 14 and 19(1)(f) and 31 of the shareholder and company constitutions.
In addition, the petitioner requested a writ of mandamus against the Central Government, the Government of Bombay, and the Directors, prohibiting them from meddling in the Company’s management and declaring the Act and Ordinance to be illegal.
chiranjit lal chowdhuri vs union of india Issues
- Does the Sholapur and Weaving Company (Emergency Provisions) Act violate the Constitution’s Articles 14 and 19(1)(f) and 31?
- Is there any restriction on the petitioner’s ability to purchase private property owned by the company or a shareholder as a result of the challenged Act?
Contentions by the Parties
Petitioner:
- The Acts are solely relevant to this company, other firms are not. In addition, the Act rejects the equality and equal protection under the law that are promised by article 14 of the indian constitution. Consequently, this is against article 14 of the indian constitution. contesting the Sholapur and Weaving Company (Emergency Provisions) Act’s constitutionality.
- This action is detrimental to the company’s right to management. Instead of targeting other companies that violate the right to equality, the government has solely targeted one specific corporation.
- Control and acquisition of the mill owned by the Sholapur Spinning and Weaving Company limited is the main goal of the Sholapur and Weaving Company (Emergency Provisions) Act. The legislative body is not authorized to take this move.
- As a result, the Act unjustly interferes with the rights guaranteed by article 19(1)(f) of the indian constitution by restricting the rights of shareholders.
- The petitioner further said that the government’s control over the company’s property constituted a breach of article 31 of the indian constitution. The possession was unwarranted and came with no payment.
- Furthermore, because the Act did not fall under the seventh schedule’s primary list, it is outside the purview of the Parliament.
Respondent:
- The corporation was in an odd state, and the investigation found that mismanagement had occurred there. Therefore, the Central Government first laid the Ordinance and then this Act in order to regulate the situation, prevent future trouble, and ensure the smooth operation of the Company.
- Since the classification was reasonable, article 14 of the indian constitution was not broken.
- Article 31(1) of the Constitution defines an authority that is distinct from the rights specified in Article 31(2) of the Constitution. Property is not repossessed when the government appoints Directors to lead the Company’s management. Legislation pertaining to a single individual may be created if there are appropriate grounds and conditions.
chiranjit lal chowdhuri vs union of india Judgment
- Regarding the issue of whether Article 19(1)(f) and Article 31 of the Constitution were violated, the bench held that the petitioner’s rights had not been restricted.
- The five-judge panel rendered a 3:2 decision on the issue of whether Article 14 of the Constitution had been violated. Justice M. Patanjali Sastri and Justice S. R. Dass dissented from the majority, which was rendered by Hon’ble Chief Justice H. J. Kania, Justice Saiyid Fazal Ali, and Justice B. K. Mukherjee.
- The Sholapur and Weaving Company (Emergency Provisions) Act does not deny the petitioner, a shareholder, the ability to exercise his fundamental rights, the Honourable Court ruled.
- The petitioner retains the right to own shares and receive money from them, but the shareholders’ voting rights have only been denied. According to the majority, there is also no violation of the rights guaranteed by article 14 of the indian constitution and article 19(1)(f) of the indian constitution. Consequently, the appeal was dismissed.
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