P.D. Shamdasani vs Central Bank Of India Ltd

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Petition No. 328 of 1951

Decision Date: 21 December, 1951

Coram: M. Patanjali Sastri, Mehr Chand Mahajan, B.K. Mukherjea, N. Chandrasekhara Aiyar

In this matter the Supreme Court of India considered an application filed on 21 December 1951 by P.D. Shamdasani against the Central Bank of India Limited. The judgment was authored by Justice M. Patanjali Sastri, who presided as Chief Justice, and the bench was joined by Justices Mehr Chand Mahajan, B.K. Mukherjea, and N. Chandrasekhara Aiyar. The case is reported at 1952 AIR 59 and 1952 SCR 391, and it has been cited subsequently in several decisions including R 1954 SC 92, F 1956 SC 108, D 1959 SC 725, and RF 1976 SC 1207. The petition invoked the Constitution of India, specifically Articles 19(1)(f), 31(1) and 32, raising the issue of infringement of property rights by a private individual and the maintainability of a petition under Article 32 for such a grievance.

The headnote of the judgment explained that Article 19(1)(f) is intended to protect the freedom to acquire, hold and dispose of property against State action, except where the State is legitimately exercising its power to regulate private rights in the public interest. Similarly, Article 31(1) provides a safeguard against deprivation of property by the State, unless due process established by law is followed. The Court noted that these constitutional provisions do not extend to violations of property rights committed by private persons. Consequently, a party whose property rights are infringed by a private individual must seek redress under ordinary law rather than by filing a petition under Article 32. The petition, numbered 328 of 1951, was presented in original jurisdiction and sought writs of certiorari, prohibition and mandamus. The petitioner appeared in person, while the respondent was represented by the Solicitor-General of India, C.K. Daphtary, assisted by J.B. Dadachanji. The Court’s opinion was delivered on 21 December 1951 by Justice Patanjali Sastri, Chief Justice.

The substantive facts presented to the Court concerned the petitioner’s holding of five shares in the capital of the Central Bank of India Limited, a company incorporated under the Indian Companies Act, 1882, with its registered office in Bombay. The Bank asserted a lien on those shares to recover a debt owed by the petitioner and consequently transferred the shares to a third party. The transfer was recorded in the Bank’s registers in 1937. Dissatisfied with the Bank’s action, the petitioner initiated a series of proceedings before the Bombay High Court, invoking both original and appellate jurisdiction to challenge the validity of the alleged sale and transfer. The most recent proceeding was a suit filed in 1951. On 2 March 1951 the High Court dismissed the suit under Order 7, Rule 11(d) of the Code of Civil Procedure, holding that the petitioner's claim was barred by limitation. The petitioner now seeks the reversal of the adverse orders issued in the earlier proceedings and requests that the High Court be directed to treat the suit as undefended and to render judgment against the respondent, or to make any other order it deems appropriate in relation to the suit.

The petitioner prayed that every adverse order issued in the earlier proceedings be set aside and that the High Court be instructed to list the suit “as undefended” and to pronounce judgment against the respondent, or alternatively to pass any other order that the court deemed appropriate in relation to the suit. It is necessary to point out that, although the order rejecting the petitioner’s plaint was appealable, the petitioner chose not to file an appeal. The petitioner’s reason for refraining from appeal was an extraordinary allegation that any appeal filed could not be heard by the judges of that court because all of them were disqualified, either on account of a personal interest in the Bank or because of prejudice against the petitioner. The Court is of the view that the petitioner has misunderstood the proper remedy available to him and therefore the petition must fail on a preliminary ground.

The Court further observed that neither Article 19(1)(f) nor Article 31(1) of the Constitution, when properly construed, was intended to prohibit wrongful acts committed by private individuals or to provide protection against purely private conduct. Article 19 embodies the right to freedom, and by its clause (1) guarantees citizens certain fundamental freedoms, including the freedom “to acquire, hold and dispose of property,” subject to the power of the State to impose reasonable restrictions as prescribed in clauses (2) to (6). The language, structure, and placement of Article 19 in Part III clearly indicate that the provision is meant to shield those freedoms from State action, except where the State is legitimately exercising its power to regulate private rights in the public interest. Consequently, violations of property rights by individuals fall outside the scope of Article 19. The same limitation applies to Article 31(1). The petitioner contended that clause (1) should be read independently of the remaining provisions of the article and that, if read in isolation, its wording is broad enough to encompass infringements of property rights by private persons. He emphasized that the word “State” is absent in clause (1) whereas it appears in clause (2) of the same article and in many other Part III provisions. Citing entries 33 of the Union List, 36 of the State List and 42 of the Concurrent List of the Seventh Schedule, the petitioner argued that, while these entries, read with Article 246, empower Parliament and State legislatures to enact laws concerning acquisition or requisition of property for Union or State purposes, they confer no power to legislate on “deprivation of property” by the State. Accordingly, he asserted that the term “deprivation” in clause (1) must refer solely to deprivation by individuals. Sub-section (1) of Section 299 of the Government of India Act, 1935, which corresponded to clause (1) of Article 19, was, as the petitioner noted, omitted in the draft of Article 19 (later numbered Article 81) and later restored in the final enactment, a fact he claimed demonstrated that clause (1) was intended to operate as a distinct provision separate from clause (2).

The Court noted that clause (1) of the provision had been omitted from the draft article 19, which was later renumbered as article 81 and retained only a modified version of the provision contained in sub-section (2) relating to compulsory acquisition of property for public purposes. Subsequently, clause (1) was restored and the article was enacted in its present form in accordance with the recommendations of the Drafting Committee’s Report, a circumstance that the petitioner claimed demonstrated that clause (1) was intended to function as a distinct provision separate from clause (2). The Court found no merit in any of these arguments.

In support of the contention that clause (1) should be interpreted in isolation from the remainder of the article, the petitioner relied on certain observations of a learned brother Das in the decision of Chiranjit Lal v. Union of India, where it was expressed that clause (1) enunciated the general principle that no person should be deprived of his property except by authority of law and placed no condition for the payment of compensation, while clause (2) dealt with deprivation of property brought about by acquisition or taking possession and required compensation. The Court considered that it was unnecessary for the present petition to examine that question in detail. Even assuming that clause (1) must be read and construed apart from clause (2), the Court observed that it is a declaration of the fundamental right to private property in the same negative form in which article 21 declares the fundamental right to life and liberty. Article 21 contains no express reference to the State, but it would be erroneous to suggest that it was intended to protect life and personal liberty against violation by private individuals, because the words “except by procedure established by law” plainly exclude such a suggestion. In a similar vein, the words “save by authority of law” in clause (1) of article 31 indicate a prohibition of unauthorised governmental action against private property, since no private individual can be authorised by law to deprive another of his property.

The Court further rejected the argument based on the entries in the Seventh Schedule Lists as fallacious. It is not correct to contend that, merely because there is no specific entry in the Lists referring to “deprivation of property” as such, the legislatures lack competence to enact a law authorising deprivation of property. Such a law could be made, for example, under entry 1 of List II, entry 1 of List III, or other appropriate entries. Article 31(1) itself contemplates a law authorising deprivation of property, and to deny the existence of the requisite legislative power is futile. Moreover, the legislative history of the article does not lend any support to the petitioner’s contention.

In its analysis, the Court observed that the legislative history of the provision did not lend any support to the petitioner’s argument. The Court noted that Section 299(1) of the Government of India Act, 1935, had never been interpreted as prohibiting the deprivation of property by private persons. Consequently, the reinstatement of that provision, in exactly the same wording, within Article 31 after its removal from the original draft of Article 19, could not be read as giving any assistance to the petitioner’s claim. The Court further explained that the petitioner’s case was based on a fundamental misunderstanding. The petitioner treated Article 19(1)(f) and Article 31(1)—both of which constitute important constitutional safeguards against State interference with private property—as if they were intended to protect against infringements committed by private individuals, and thus presumed that remedies for such private wrongs should be sought under ordinary law. Because the petition rested on this erroneous premise, the Court found it unnecessary to address the additional objections to the petition’s maintainability that had been raised by the Solicitor-General on behalf of the bank. Accordingly, the Court dismissed the petition, made no order as to costs, and recorded that the petition was dismissed. The respondent’s agent was identified as Rajinder Narain.