Shri Ram Krishna Dalmia vs Shri Justice S. R. Tendolkar and Others

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

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 455 to 457 and 656 to 658 of 1957

Decision Date: 28 March 1958

Coram: Bhuvneshwar P. Sinha, S.K. Das, A.K. Sarkar

In this case the matter was titled Shri Ram Krishna Dalmia versus Shri Justice S. R. Tendolkar and others, and the judgment was delivered on 28 March 1958 by a bench of the Supreme Court of India consisting of Justice Bhuvneshwar P. Sinha, Justice S. K. Das and Justice A. K. Sarkar, with the chief justice noted as Justice Das, Sudhi Ranjan. The citation of the decision appears as 1958 AIR 538 and 1959 SCR 279. The dispute concerned the constitutionality of the Commissions of Enquiry Act, 1952 (Act LX of 1952) and of a government notification that empowered the Central Government to appoint a Commission of Inquiry. The central issue was whether the Act and the notification violated the guarantee of equality before the law under Article 14 of the Constitution, whether the notification was ultra vires the Act, and whether the Commission usurped judicial functions.

According to the record, the Central Government, by a notification dated 11 December 1956, exercised the powers conferred by Section 3 of the Commissions of Enquiry Act, 1952, and appointed a Commission of Inquiry to investigate certain companies listed in the Schedule annexed to that notification and to examine the nature and extent of control exercised by particular persons over those companies. By later notifications the Government extended to the Commission all the provisions of sub‑sections (2), (3), (4) and (5) of Section 5 of the Act and fixed a two‑year period commencing on 11 February 1957 within which the Commission was required to perform its functions and to submit its report.

The four persons named in the notification filed three separate applications before the Bombay High Court under Article 226 of the Constitution, challenging the validity of both the Act and the notification and seeking writs for quashing them. The High Court dismissed the applications and held that the notification was legal and valid, except for the last part of Clause 10, which authorised 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.” Both the petitioners and the Union of India appealed against that decision.

The Supreme Court held that the Commissions of Enquiry Act, 1952 was a valid piece of legislation and lay within the legislative competence of Parliament; consequently the Act was intra vires. The Court also affirmed the validity of the notification apart from the words “as and by way of securing redress or punishment” contained in Clause 10, finding that those words exceeded the authority conferred by the Act. The Court noted that the Act had been enacted by Parliament under entry 94 of List I and entry 45 of List III of the Seventh Schedule of the Constitution, entries that relate respectively to inquiries concerning matters enumerated in List I and to matters in Lists II and III. The inquiry that may be instituted under a law made under these entries is not confined to a narrow ambit; it may extend to any matter that can properly be regarded as ancillary to the inquiry, and the scope of such an inquiry is therefore broad. The Act does not delegate any arbitrary or uncontrolled power to the Government, and consequently it does not offend Article 14 of the Constitution. The discretion given to the Government to establish a Commission of Inquiry is guided by the policy that executive action should be taken only when a definite matter of public importance exists that necessitates an inquiry. The Court applied the principles laid down in Kathi Raning Rawat v. State of Saurashtra, [1952] S.C.R. 435. The Commission’s role is limited to investigating, recording its findings and making recommendations, which are not enforceable in themselves. The inquiry or report of the Commission cannot be characterised as a judicial inquiry in the sense of exercising judicial functions, and therefore Parliament or the Government cannot be said to have usurped judicial functions. The inquiry which may be set up by a law made under these entries is not limited, in its scope and

In this case the Court observed that the scope of an inquiry under the Act was not limited to future legislative purposes only. Such a law could also be employed for administrative purposes and the scope of the inquiry under such a law would include all matters that could properly be regarded as ancillary to those inquiries. The Court held that the Act did not delegate any arbitrary or uncontrolled power to the Government and that it did not offend Article 14 of the Constitution. The discretion given to the Government to constitute a Commission of Inquiry was guided by the policy laid down in the Act that executive action should be taken only when there existed a definite matter of public importance requiring an inquiry. The Court relied on Kathi Raning Rawat v. State of Saurashtra, [1952] S.C.R. 435. The Court explained that the Commission was merely to investigate, to record its findings and to make recommendations, and that those recommendations were not enforceable per se. The Court further stated that the inquiry or the report could not be regarded as a judicial inquiry in the sense of an exercise of judicial function, and consequently Parliament or the Government could not be said to have usurped the functions of the judiciary. The Court concluded that the notification was well within the powers conferred on the Government by section 3 of the Act and that it did not exceed the provisions of the Act. The Court noted that the conduct of an individual person or company or a group of persons or companies could, in certain circumstances, become a definite matter of public importance within the meaning of section 3(i) and could call for an inquiry. Section 3 also authorised the Government to appoint a Commission of Inquiry not only for the purpose of investigating a definite matter of public importance but also for performing such functions as may be specified in the notification. The Court found that it had not been established that the petitioners and their companies had been arbitrarily singled out for hostile or discriminatory treatment or that they had been subjected to a harassing and oppressive inquiry. The Court observed that in matters of this kind the Government necessarily acted upon the information available to it, that it was the best judge of the reliability of the source of that information, and that if the Government acted in good faith and honestly concluded that the acts and conduct of the petitioners and the affairs of their companies constituted a definite matter of public importance, the Court would be slow to hold the action illegal. The Court warned that the mere possibility that the powers might be misused or abused could not, by itself, render the power bad. Because the power had been entrusted to the Central Government and not to a petty official, abuse could not be easily presumed. In determining whether there was any intelligible differentia on the basis of which the petitioners and their companies had been grouped, the Court stated that it was permissible to consider not only the facts appearing in the notification but also the facts brought before the Court by way of affidavits. The Court noted that the facts in the present case afforded

The Court observed that the material placed before it gave sufficient support to the presumption that the notification was constitutional. The petitioners were unable to meet the burden of proof that similarly situated persons or companies had been excluded and that the petitioners and their enterprises had been specially targeted for discriminatory or hostile treatment. The Court further noted that the recommendations made by the Commission of Inquiry were of considerable importance to the Government because they assisted the Government in deciding what legislative or administrative steps should be taken to eliminate the wrongdoing identified or to achieve the beneficial objectives that the Government intended. The Court said there was no objection to the Commission proposing the imposition of some form of punishment that, in its view, would be sufficiently deterrent to prevent future offences. However, the Court held that the Commission could not be asked to recommend actions aimed at securing redress or punishment for past wrongs, because such functions belong to a court of law. The Court also clarified that although the original notification establishing the Commission did not specify a deadline for submitting its report, the Government was competent to set a time limit by issuing a subsequent notification.

The judgment concerned civil appeals numbered 455 to 457 and 656 to 658 of 1957, which were appeals from a judgment and order dated 29 April 1957 of the Bombay High Court in Miscellaneous Applications numbered 48 to 50 of 1957. Counsel for the appellant in Civil Appeal No. 455 of 1957 and respondent in Civil Appeal No. 656 of 1957 appeared, as did counsel for the appellants in Civil Appeals Nos. 456 and 457 of 1957 and respondents in Civil Appeals Nos. 657 and 658 of 1957. Counsel for respondent No. 4 in Civil Appeals Nos. 455 to 457 of 1957 and appellant in Civil Appeals Nos. 656 to 658 of 1957, including the Solicitor‑General for India, also appeared. The judgment was delivered on 28 March 1958 by Justice D.A.S. Chandra of the Supreme Court. The six separate appeals were directed against a common judgment and order pronounced on 29 April 1957 by a Division Bench of the Bombay High Court in three separate miscellaneous applications filed under Article 226 of the Constitution. The first application, numbered 48 of 1957, was filed by Shri Ram Krishna Dalmia, who was the appellant in Civil Appeal No. 455 of 1957. The second application, numbered 49 of 1957, was filed by Shri Shriyans Prasad Jain and Shri Sital Prasad Jain, who were the appellants in Civil Appeal No. 456 of 1957. The third application, numbered 50 of 1957, was filed by Shri Jai Dayal Dalmia and Shri Shanti Prasad Jain, who were the appellants in Civil Appeal No. 457 of 1957. By means of those miscellaneous applications, the petitioners sought an appropriate direction or order under Article 226 for the quashing and setting aside of Notification No. S.R.O. 2993 dated 11 December (the year being 1956).

In 1956 the Union of India issued a notification exercising the authority granted to it by section 3 of the Commissions of Enquiry Act, 1952, and also sought other reliefs. Subsequent rules were framed and the Union of India appeared before the court and filed a show‑cause submission. The Bombay High Court, by the judgment and order under consideration, set aside those rules, dismissed the applications, and held that the notification was lawful and valid except for the final portion of clause (10). The court specified that the exception covered the words from “and the action” up to “in future cases”. Moreover, the court directed the Commission of Inquiry not to proceed with any investigation to the extent that it related to that excluded portion of clause (10). Dissatisfied with this part of the decision, the Union of India instituted three separate appeals identified as Nos. 656, 657 and 658 of 1957, each arising from one of the three miscellaneous applications, and each challenged the finding that the last segment of clause (10) was invalid. For context, the Commissions of Inquiry Act, 1952—hereafter referred to as the Act—had received the President’s assent on 14 August 1952 and was subsequently brought into force by a Central Government notification issued under section 1(3) of the Act. The long title of the Act declares its purpose to be “to provide for the appointment of Commissions of Inquiry and for vesting such Commissions with certain powers.” Section 3(1), ignoring the proviso which is not material to the present discussion, provides that the appropriate Government may, if it believes it necessary, and shall, if a resolution to that effect is passed by the House of the People or, as the case may be, the Legislative Assembly of a State, appoint a Commission of Inquiry by publishing a notification in the Official Gazette. The notification must specify the definite matter of public importance to be investigated, the functions to be performed, and the time frame for the inquiry, and the appointed Commission is required to carry out the inquiry and fulfil the prescribed functions. Under subsection (2) of the same section the Commission may comprise one or more members, and where there is more than one member, one may be designated as the Chairman. Section 4 vests the Commission with powers equivalent to those of a civil court when trying a suit under the Code of Civil Procedure, including the authority to summon and enforce the attendance of any person, examine that person on oath, compel the discovery and production of documents, receive evidence on affidavits, requisition any public record or a copy thereof from any court or officer, issue commissions for the examination of witnesses or documents, and any other matters that may be prescribed. Section 5 further empowers the appropriate Government, by means of a notification in the Official Gazette, to confer on the Commission additional powers as may be provided in any of the sub‑sections (2), (3), (4) or (5) of section 3.

The Court explained that subsections (2), (3), (4) and (5) of the relevant section granted the Commission the powers enumerated in those provisions. Section 6 stipulated that any statement made by a person while giving evidence before the Commission could not be used against him in any civil or criminal proceeding, except in a prosecution for perjury, provided that the statement was given in answer to a question that the Commission required him to answer or was relevant to the subject matter of the inquiry. Under section 7 the appropriate Government could, by a notification in the Official Gazette, declare that the Commission would cease to exist from a date specified in that notification. Section 8 empowered the Commission, subject to any rules that might be made, to regulate its own procedure, including the time and place of its sittings, and to continue functioning notwithstanding the temporary absence of any member or the existence of any vacancy among its members. Section 9 provided indemnity to the appropriate Government, to the members of the Commission, and to other persons acting under their directions for any act done or intended to be done in good faith in pursuance of the Act. The Court noted that the remaining sections of the Act were not material for the purpose of the appeals. In exercise of the powers conferred on it by section 3 of the Act, the Central Government published a notification in the Gazette of India dated 11 December 1956. The notification read as follows: “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 by one or more of them and by others who were either relatives or employees of the said persons or closely connected with them; (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 material respects 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 monies subscribed by the investing public were, to a considerable extent, not used in the interests of the companies concerned but were employed contrary to their interests and for the ultimate personal benefit of those in control and/or management; and (5) the investing public have consequently suffered considerable losses. 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 because of the grave consequences that appear to have ensued to the investing public and in order to determine such measures as may be deemed necessary to prevent a recurrence thereof; Now, therefore, in exercise of the powers conferred.”

By invoking section 3 of the Commissions of Inquiry Act (No 60 of 1952), the Central Government appointed a Commission of Inquiry composed of three distinguished individuals. The Chairman of the Commission was Shri Justice S R Tendolkar, who served as a Judge of the High Court at Bombay. The first Member was Shri N R Modi, a partner of Messrs A F Ferguson & Co., who practiced as a Chartered Accountant. The second Member was Shri S C Chaudhuri, who held the office of Commissioner of Income‑Tax. The Government’s appointment conferred upon the Commission the authority to investigate and report on matters specified in the following schedule.

The Commission was directed to examine the administration of the affairs of the companies listed in the schedule and to extend its inquiry to any other companies or firms that, during the investigation, appeared to be connected with those listed and whose affairs warranted scrutiny. It was to determine the nature and extent of both direct and indirect control exercised over the identified companies and firms by Shri Ram Krishna Dalmia, Jaidayal Dalmia, Shanti Prasad Jain, Sriyans Prasad Jain, their relatives, employees, and persons associated with them. The Commission was to ascertain the total subscriptions obtained from the investing public, the portion of those subscriptions contributed by the aforementioned persons, and the degree to which the resulting funds and assets were misused, misapplied, or misappropriated. It was also tasked with investigating the extent and nature of investments, loans, and inter‑company transfers of funds or assets among the concerned entities, as well as the consequences of such financial movements. Further, the Commission was to explore the motives behind these investments, loans, and transfers, assess whether any justification existed, and determine if they were undertaken in good faith and in the interest of the companies involved. The inquiry was to measure the losses suffered by the investing public, evaluate whether those losses could have been avoided, and examine the steps taken by those in control or management to prevent them. Additionally, the Commission was to identify any personal gains realized by any individual or group, whether named or unnamed, arising from their connection with or control over the companies. It was also required to uncover any irregularities, frauds, breaches of trust, or actions disregarding honest commercial practices, as well as any violations of law, except where criminal proceedings were already pending, and to recommend appropriate actions for redress, punishment, or prevention of future occurrences. Finally, the Commission was to suggest measures it considered necessary to ensure proper administration of funds and assets of companies and firms in the future, thereby protecting the interests of the investing public.

The Court noted that the objective was to secure, for the future, the due and proper administration of the funds and assets of companies and firms so that the investing public would be protected. In pursuance of that objective, the Schedule listed nine entities whose affairs were to be examined: Dalmia Jain Airways Ltd.; Dalmia Jain Aviation Ltd., presently known as Asia Udyog Ltd.; Lahore Electric Supply Company Ltd., now called South Asia Industries Ltd.; Sir Shapurji Broacha Mills Ltd.; Madhowji Dharamsi Manufacturing Company Ltd.; Allen Berry and Co. Ltd.; Bharat Union Agencies Ltd.; Dalmia Cement and Paper Marketing Company Ltd., which presently operates as Delhi Glass Works Ltd.; and Vastra Vyavasaya Ltd. The order further directed that the order be published in the Gazette of India for public information, and it was signed by H. M. Patel, Secretary. The Court observed that the notification issued on 11 December 1956 did not specify any time‑frame within which the Commission of Inquiry was required to complete its investigation and file its report. Consequently, on 9 January 1957, the Central Government issued a further notification stating that all the provisions of sub‑sections (2), (3), (4) and (5) of section 5 would apply to the Commission. Because the earlier notification remained silent on a deadline, the Government issued a third notification on 11 February 1957, fixing a period of two years from that date for the Commission to exercise its functions and submit its report. On the following day, 12 February 1957, three miscellaneous applications were filed under article 226 of the Constitution challenging the validity of the Act and the 11 December 1956 notification on various grounds and seeking a writ or order to set them aside. The Court found it appropriate to first address a few minor objections raised on behalf of the petitioners before turning to their principal and more substantive contentions. The first objection asserted that the notification exceeded the authority conferred by the Act. It was pointed out that section 3 of the Act empowers the appropriate Government, in certain circumstances, to appoint a Commission of Inquiry solely for the purpose of investigating any definite matter of public importance. The petitioners argued that the conduct of an individual person or a company could not constitute a matter of public importance, let alone a definite matter of that kind. The Court could not accept this argument. It observed that phenomena such as widespread floods, famine or pestilence readily qualify as definite matters of public importance that demand prompt inquiry so that the Government may take preventative action. Similarly, the Court remarked that the practice of villagers cutting bunds to draw water for their fields during the dry season, which may precipitate flooding during the monsoon, also represents unsocial conduct that should be treated as a definite matter of public importance. The Court then began its discussion of the failure of a large bank, noting that such a failure, which led to the loss of life‑savings of many moderate‑means investors, similarly fell within the ambit of a definite matter of public importance, before the excerpt concludes.

The Court observed that the loss of life savings of a large number of persons of moderate means constituted a definite matter of public importance. It added that the conduct of the persons in charge and the management of the bank whose failure caused that loss was equally a definite matter of public importance. The Court noted that widespread dacoities in particular parts of the country also qualified as a definite matter of public importance. However, the Court found no reason why the conduct, activities, and methods of operation of notorious dacoits and thugs should not be regarded as definite matters of public importance requiring an urgent and thorough inquiry. The Court stated that it was unnecessary to multiply examples, because each case required the determination of whether a definite matter of public importance existed that justified an inquiry. The Court rejected the proposition that a definite matter of public importance must be limited to abstract public benefits such as health, sanitation, or to public evils such as floods, famine, or pestilence. The Court reasoned that the conduct of an individual, a company, or a group could attain a dangerous magnitude and threaten public well‑being, thereby becoming a definite matter of public importance demanding a full inquiry. The Court further observed that section 3 of the Act authorised the appropriate Government not only to inquire into a definite matter of public importance but also to perform any functions that might be specified in the notification. Accordingly, the Court held that the notification was within the powers conferred on the appropriate Government by section 3 of the Act and could not be challenged on the ground of exceeding the Act’s provisions. Counsel for the petitioners promptly responded that if the notification was held to be within the terms of the Act, then the Act itself was ultra vires the Constitution. The petitioners raised two points of challenge to the validity of the Act, first asserting that Parliament had exceeded its legislative competence by granting such a wide sweep of powers. The petitioners pointed out that Parliament had enacted the Act under the legislative powers of article 246 of the Constitution, read with entry 94 in List I and entry 45 in List III of the Seventh Schedule. They noted that entry 94 in List I enumerated “inquiries … for the purpose of any of the matters in this List,” and entry 45 in List III enumerated “inquiries … for the purposes of any of the matters specified in List II or List III.”

The petitioner’s counsel argued that Parliament could legislate on matters described as “inquiries” in the constitutional entries, but that it could not, under those entries, enact a law that granted any power beyond the conduct of an inquiry. He acknowledged the well‑known rule that constitutional heads of power must be interpreted liberally, meaning that the Constitution was intended to give the appropriate legislature not only the authority to legislate on the specified topic but also on all matters ancillary to it. He further noted that the phrase “with respect to” in Article 246 supported such a liberal construction. Nevertheless, he contended that any law made under the relevant entries had to relate to inquiries “for the purpose of” any of the matters listed in the appropriate schedules, and that the expression “for the purpose of” clearly limited the law to inquiries that served the purpose of future legislation on the subjects enumerated in those lists. In other words, he maintained that under the two entries the legislature could only create a Board or Commission of Inquiry to gather facts that would enable the legislature to enact future legislation on any legislative topic in the relevant lists, aimed at securing public benefit, preventing harm, or protecting the public. He asserted that if an inquiry were needed for purely administrative reasons, a law authorising such an inquiry could not be made under those entries, and, even more, a law authorising an inquiry into alleged wrongdoing by an individual, a company, or a group for the purpose of punishment could not be made under the entries. This line of argument had been accepted by the High Court, but the present Court could not concur. To accept the High Court’s view would require inserting the words “for the purpose of future legislation with respect to any of the matters in the List or Lists mentioned therein” into the two entries, an addition the Court found untenable. Moreover, a close reading of the language of entry 45 in List III, which is part of the Concurrent List, settled the issue. Entry 45, inter alia, speaks of “inquiries for the purpose of any of the matters in List II or List III.” Under Article 246 read with this entry, both Parliament and a State Legislature may make a law concerning such inquiries.

The Court observed that Article 246 allows Parliament to enact legislation concerning “inquiries for the purpose of any of the matters in List II.” However, Parliament does not possess authority to legislate on any matter that is enumerated in List XI. Consequently, when Parliament enacts a law pursuant to Article 246 read with entry 45 of List III that concerns an inquiry into any of the matters listed in List XI, such a law cannot be characterised as an inquiry for the purpose of future parliamentary legislation on those List XI matters. The Court clarified that Parliament may indeed pass a law authorising an inquiry into any of the matters in List XI even though it lacks the power to legislate directly on those matters and even though no State legislature wishes to legislate on them. In the Court’s view, the legislation that may be framed by the appropriate legislature under the two entries in question may extend to inquiries into every aspect of the matters enumerated in any of the lists, and the scope is not limited merely to the headings of the legislative topics. It is also possible that such legislation may authorise inquiries for administrative purposes, and the ambit of such inquiries would include all matters that can properly be regarded as ancillary to the inquiry. The phrase “for the purposes of” therefore does not restrict the inquiry to the precise matters listed in the entry, but permits investigation into collateral matters necessary for the legislative or any other purpose of those particular matters. Accordingly, the Court could not hold that an inquiry set up under a law made pursuant to those two entries is confined solely to future legislative purposes.

Subsequently, counsel for the respondent examined the various heads of inquiry specified in the notification and argued that the inquiry is neither legislative nor administrative, but constitutes an unlawful usurpation of judicial functions. The argument presented was that Parliament, by authorising the creation of a Commission, and the Government, by appointing that Commission, have assumed judicial powers that, by their very nature, belong exclusively to the judicial branch, while Parliament’s role is purely legislative and the Government’s role is purely executive. It was further contended that Parliament may become a court only in the exceptional circumstances of addressing breaches of its own privileges, where it may punish contempt or conduct impeachment proceedings. Outside those narrow situations, Parliament cannot undertake investigations into alleged individual wrongs or private disputes, nor can it bring a purported wrongdoer to trial or collect evidence for the purpose of initiating criminal or civil proceedings, because such investigative activity is not undertaken in aid of legislation.

The petitioners contended that the purpose of initiating any civil or criminal proceedings against a person could not be derived from the inquiry contemplated in the Act, because such an inquiry was not intended to aid legislation. They argued that a criminal prosecution, if contemplated, must begin with a preliminary investigation conducted under the provisions of the Code of Criminal Procedure, and that no legislative body should be permitted to commence an investigation on its own. According to this view, allowing a legislature to start an investigation would deprive a citizen of the protections ordinarily afforded by the Code of Criminal Procedure. The High Court, after examining the provisions of the Act and the eleven heads of inquiry listed in the notification, reached the conclusion that the final portion of clause (10)—the words beginning with “and the action” and ending with “in future cases”—exceeded the authority of the Act. The Court held that the Government was not empowered to require the Commission to conduct any inquiry or to prepare any report concerning the matters covered by that part of clause (10), because such a requirement would amount to a usurpation of the judicial powers of the Union or the State, as appropriate. While we agree in part with the High Court’s ultimate conclusion on this point, we cannot accept the reasoning put forward by the petitioners’ counsel, which the High Court had adopted for multiple reasons. First, neither Parliament nor the Government actually undertook any inquiry. Parliament merely enacted legislation that provided for an inquiry and left it to the appropriate Government to establish a Commission of Inquiry in the circumstances specified in section 3 of the Act. Subsequently, the Central Government, exercising the powers conferred on it by the Act, constituted the Commission. Thus it is inaccurate to state that Parliament or the Government themselves have undertaken to hold an inquiry. Second, the judgment’s conclusion that the latter part of clause (10) is invalid because it suggests that Parliament or the Government have encroached on judicial functions seems inconsistent with another part of the same judgment, which observes that the Commission can only make recommendations that are not enforceable proprio vigore, and therefore there is no usurpation of judicial functions. As the High Court itself recognised later in its opinion, the sole authority of the Commission is to inquire, to compile a report, and to embed within that report its recommendations. The Commission possesses no adjudicatory power that would enable it to issue an order enforceable proprio vigore. Established authority requires a clear distinction between a decision that carries no inherent force or penal effect and a decision that becomes immediately enforceable.

Consequently, because the Commission under consideration is limited to investigating, recording findings, and making non‑binding recommendations, its inquiry or report cannot be characterised as a judicial inquiry in the sense of exercising a judicial function. Accordingly, the allegation that Parliament or the Government have usurped the judicial powers of the Union of India does not arise on the facts of this case. The extensive discussion of American authorities, which relies on a strict separation of powers mandated by the American Constitution, is therefore deemed wholly inappropriate and unnecessary in this context. Moreover, we do not feel compelled, on the present occasion, to opine on whether, in the absence of an explicit separation‑of‑powers provision in our Constitution similar to that in the American Constitution, an implicit division of legislative, executive, and judicial powers exists within our constitutional framework.

The Court noted that the Commission under review was created solely to examine matters, to record its findings and to formulate recommendations, and that it possessed no power to give effect to those recommendations. Consequently, the Court held that the inquiry conducted by the Commission could not be characterized as a judicial inquiry, because it did not involve the performance of a judicial function that is properly described as such. In view of this limitation, the Court concluded that there was no possibility that Parliament or the Government had encroached upon the judicial powers of the Union of India in the present case. The Court further observed that the extensive discussion of American authorities, which rely on a strict separation of powers enshrined in the United States Constitution, was wholly inappropriate and unnecessary. The Court also declined to express an opinion on whether, despite the absence of an explicit provision on the separation of powers in the Indian Constitution, a similar division of legislative, executive and judicial functions might be implicitly present. Moreover, the Court found it unnecessary to consider a hypothetical scenario in which the Act might have granted the appropriate Government the power to establish a Commission of Inquiry endowed with judicial authority, and whether such a law could be sustained under any entry in List I or List III of the Constitution, since the legislation could conceivably be founded on multiple entries.

Counsel for the petitioners, who were also appellants in Civil Appeals Nos. 456 and 457 of 1957, argued that although the Commission might discover facts upon which the Government could act either legislatively or executively, it should not be required to suggest any specific legislative or executive measures for the appropriate Government to adopt. The Court could not accept this broad proposition. It affirmed that an inquiry necessarily entails the investigation of facts and the collection of material evidence before the person or body conducting the inquiry. The findings recorded in the inquiry’s report are inseparable from the inquiry itself, because the inquiry would be futile if its findings were not made available to the Government that instituted it. Equally, the Court held that it is essential for the enquiring body to express its own opinion on the facts it uncovers, so that the appropriate Government may consider those views when deciding what action, if any, to take. The Court warned that if the expert Commission were denied the opportunity to present its opinion and advice on the measures required to address the situation it uncovered, the whole purpose of establishing a Commission of Inquiry composed of experts would be frustrated and the elaborate process of inquiry would be rendered ineffective.

In this case the Court observed that it would be useless for the Government to receive the opinion and advice of the expert body concerning the measures that the situation uncovered requires, if such advice could not be placed before the Government for its consideration, even though the advice itself carried no binding force. The Court held that the recommendations of a Commission of Inquiry are highly significant to the Government because they help the Government decide what legislative or administrative actions should be adopted to eliminate the evil discovered or to achieve the beneficial objectives it seeks. Accordingly, there was no objection to the Commission of Inquiry suggesting any form of punishment that it thought would be sufficiently deterrent to future offenders. However, the Court noted that the Commission of Inquiry possessed no judicial authority and that its report was purely recommendatory, not operative in itself, and that any statement made before the Commission was, under section six of the Act, entirely inadmissible as evidence in any later civil or criminal proceeding. Therefore, the Court found no merit in the Commission of Inquiry recommending actions “as and by way of securing redress or punishment,” a phrase which, in the Court’s agreement with the High Court, referred to remedies for wrongs already committed. Such redress or punishment must be imposed by a properly constituted court exercising its own discretion based on the facts, without influence from any other person or body, however distinguished. Considering these points, the Court concluded that only the portion of clause ten that directed the Commission to make recommendations about preventive action in future cases was necessary and ancillary to its purpose. The words “as and by way of securing redress or punishment” went beyond the scope of the Act and were not covered by the two legislative entries, and therefore should be deleted. The Court agreed with the High Court that removing this latter portion would not affect the validity of the notification, as the offending words were not inseparably linked to the rest of the notification and their removal did not impair its efficacy.

The Court observed that the Government would not have issued the notification if the disputed words had not been included, yet those words did not appear to be so integral to the substance of the entire notification that they could not be removed without affecting its overall character. The principal ground relied upon to claim that either the Act or the notification was invalid was based on Article 14 of the Constitution. To explain the true meaning and scope of Article 14, the Court referred to the judgment in Budhan Choudhry v. The State of Bihar (1) where a Constitution Bench of seven Judges, at pages 1048‑49, set out the doctrine. The Court noted that the provisions of Article 14 have been considered in many earlier 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). The Court therefore found it unnecessary to engage in a lengthy discussion about the meaning, scope and effect of Article 14, as the position was already well settled. The settled position, as the Court reiterated, is that while Article 14 prohibits class legislation, it does not forbid a reasonable classification made for legislative purposes. For such a classification to be permissible, two conditions must be satisfied. First, the classification must be based on an intelligible differentia that distinguishes the persons or things placed in the same group from those that are left out. Second, that differentia must have a rational nexus with the objective that the statute seeks to achieve. The Court explained that the basis of classification may be founded on various criteria such as geography, objects, occupations or similar factors, but there must be a clear connection between the basis of classification and the purpose of the Act under consideration. Moreover, the Court emphasized that Article 14 condemns discrimination not only in substantive law but also in procedural law. The principle articulated in Budhan Choudhry has been consistently applied in subsequent decisions. Those later decisions have further clarified that a law may be constitutional even if it applies to a single individual, provided that special circumstances or reasons exist that justify treating that individual as a class of his own. The Court also reminded that there is a presumption in favour of the constitutionality of any enactment, and the burden of proving a clear violation of constitutional principles rests on the party challenging the law. Finally, the Court noted that, as a general rule, the legislature is presumed to understand and appreciate the needs of its people, to address problems that have become evident through experience, and to base any discrimination on adequate grounds.

The Court observed that the legislature is presumed to understand and correctly appreciate the needs of its own people, that its enactments are aimed at problems manifested by experience, and that any distinctions it draws are founded upon adequate reasons. It further held that the legislature may recognise varying degrees of harm and may limit its restrictions to those situations where the necessity is most evident. In order to preserve the presumption of constitutionality, the Court may consider matters of common knowledge, reports that are generally known, the historical context of the period, and may assume any factual situation that could have existed at the time the law was made. Moreover, while the Court presumes that the legislature acts in good faith and is aware of the prevailing conditions, this presumption cannot survive where the face of the law or the surrounding circumstances presented to the Court reveal no reasonable basis for the classification. In such circumstances the Court cannot simply assume the presence of undisclosed or unknown reasons for subjecting particular individuals or corporations to hostile or discriminatory legislation.

The Court stressed that these principles must constantly guide the judiciary whenever it is called upon to determine the constitutionality of a law alleged to be discriminatory and violative of the equal protection clause. A careful examination of the Court’s decisions, in which these principles have been articulated and applied, shows that a statute questioned under article fourteen may fall into one of five categories. First, a statute may expressly identify the persons or things to which its provisions apply, and the basis of the classification may appear on the face of the statute or may be inferred from the surrounding circumstances known to or brought before the Court. In evaluating the validity of such a statute, the Court must ascertain whether the classification rests on a differentiating factor that distinguishes the group involved from those excluded, and whether that differentiating factor bears a reasonable relation to the purpose sought to be achieved by the statute, irrespective of whether the provisions target a particular individual, a specific thing, or a broader class. Where the Court finds that the classification satisfies these tests, it 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, Bajoria v. The State of West Bengal (1), and V. M. Syed Mohammad & Company v. The State of Andhra (2) and Budhan Choudhry v. The State of Bihar (3). The remaining categories, which deal with statutes lacking a discernible classification or delegating classification to governmental discretion, are addressed in the subsequent discussion.

The Court observed that a statute may expressly target a single individual or a limited number of individuals, yet lack any discernible classification on its face or in its surrounding circumstances. When no reasonable basis for classification can be found either on the face of the law or from commonly known facts, the Court will deem the provision void as naked discrimination. The Court cited the decisions in Ameerunnissa Begum v. Mahboob Begum (4) and Ramprasad Narain Sahi v. The State of Bihar (3) as authorities where such statutes were struck down. The Court also explained that a statute may refrain from enumerating any classification but instead vest discretion in the Government to determine to whom its provisions will apply. In reviewing the validity of such a statute, the Court will not automatically invalidate it merely because it contains no explicit classification nor because it grants discretionary power. Instead, the Court examines whether the statute provides a guiding principle or policy that directs the Government’s exercise of its discretionary authority in selecting persons or things. If, after careful scrutiny, the statute is found to lack any such guiding principle or policy, the Court will declare the law unconstitutional for delegating arbitrary and uncontrolled power. In such circumstances, the Court will invalidate both the statutory provision and any executive action taken under that provision, as demonstrated in State of West Bengal v. Anwar Ali Sarkar (6) and Dwarka Prasad Laxmi Narain v. The State of Uttar Pradesh (7). The Court further listed the decisions in State of West Bengal v. Anwar Ali Sarkar (6), Dwarka Prasad Laxmi Narain v. The State of Uttar Pradesh (7) and Dhirendra Krishna Mandal v. The Superintendent and Remembrancer of Legal Affairs (1) as additional examples where statutes were struck down for lacking guiding principles.

The Court added that when a statute leaves the selection of persons or things to governmental discretion but simultaneously prescribes a clear policy or principle to guide that discretion, the law may be upheld as constitutional. The Court illustrated this approach by referring to the judgment in Kathi Raning Rawat v. The State of Saurashtra (2), where the statute was sustained because it contained an explicit guiding principle. The Court then noted that a statute may also refrain from any classification entirely and delegate the entire selection process to the Government without providing any guiding principle. In such a scenario, the Court reiterated that the statute itself would be invalidated as it would permit arbitrary discrimination, even though the executive action taken under it might also be struck down. The analysis of these various categories of statutes leads the Court to inquire into the specific nature of the Act or notification that is the subject of the present appeals. The Court observed that the long title of the impugned Act reveals its purpose to establish Commissions of Inquiry and to grant them certain powers. Section three of the Act authorizes the appropriate authority to appoint such commissions, indicating a purposeful classification within the statute.

The Court explained that a statute may specify the persons or things to which its provisions are meant to apply, while leaving it to the Government’s discretion to select or classify those persons or things, provided that the Government follows the policy or principle set out in the statute to guide its exercise of discretion. The Court noted that if the Government, in making a selection or classification, fails to act according to that policy or principle, the Court had previously held, for example in Kathi Raning Rawat v. The State of Saurashtra (2), that only the executive action—not the statute itself—should be declared unconstitutional. In light of these observations, the Court turned to the immediate issue: under which category does the Act or the impugned notification fall? It observed that the long title of the Act made clear that its purpose was to provide for the appointment of Commissions of Inquiry and to vest those Commissions with certain powers. Section 3 of the Act authorized the appropriate Government, in the circumstances specified therein, to appoint a Commission of Inquiry for the purpose of investigating any definite matter of public importance and to perform such functions within a time frame that might be fixed by a notification. The Court found that, on a proper construction of this provision—citing the authorities (1) [1955] 1 S.C.R. 234 and (2) [1952] S.C.R. 435—the functions contemplated must be ancillary to and in aid of the inquiry itself and cannot be read as independent or unrelated functions. Consequently, the Court considered the scope and ambit of the power conferred by Section 3 on the appropriate Government. The statute itself answered that question: Section 3 permits the Government to appoint a Commission of Inquiry only for the purpose of inquiring into a definite matter of public importance and not for any other matter. In other words, the subject matter of any inquiry must be a definite matter of public importance, and the Government is not authorised by Section 3 to appoint a Commission to investigate any other issue. The learned Solicitor‑General submitted that, on its face, the section creates a classification that places the statute within the first category previously discussed. He argued that this classification rests on an intelligible differentia that bears a reasonable relation to the object of the statute, because a definite matter of public importance may legitimately require an inquiry by a Commission. Alternatively, the Solicitor‑General contended that, irrespective of classification, the section plainly reflects Parliament’s policy to provide for the appointment of Commissions of Inquiry.

In this case, the Court observed that Parliament, recognizing the impossibility of predicting every future event, intentionally left it to the appropriate Government to establish a Commission of Inquiry whenever a definite matter of public importance arises, because the timing, location, and nature of such matters cannot be predetermined. The Court explained that modern society presents unforeseen events, and therefore the legislature cannot anticipate all possible contingencies; consequently, the duty of taking necessary action must be delegated to the appropriate Government. However, this delegation is not without guidance, as the Court held that the discretion granted to the appropriate Government must be exercised in conformity with the policy expressed in the statute, namely that a Commission may be constituted only when a definite matter of public importance exists and the Government, in its judgment, deems an inquiry necessary or when a resolution of the House of the People or a State Legislative Assembly mandates it. The Court further noted that if the preambles and provisions of statutes classified in the first category can be interpreted as establishing a reasonable classification that satisfies the equality requirement of Article 14, and if the preamble in the Kathi Raning Rawat decision can be read as setting a clear policy or principle for the executive, then there is no basis to object to construing section 3 of the present Act as likewise making a reasonable classification and declaring a clear parliamentary policy for guiding the exercise of the delegated powers. Relying on existing authorities, the Court concluded that it cannot be said that an arbitrary and uncontrolled power has been vested in the appropriate Government, and therefore the law itself is not infirm. The petitioners’ counsel then argued that, even assuming the Act declares its policy and provides guiding principles, the appropriate Government has failed to exercise its discretion properly because it did not apply a reasonable classification. Finally, the Court reiterated that Article 14 protects every person from discrimination by both the legislative and executive branches, that “State” under Article 12 includes the Government, and that “law” under Article 13 embraces any notification or order, thereby recognizing the petitioners’ right to challenge the constitutionality of the notification on the ground that the Government did not correctly implement the statutory policy or exceeded the authority delegated to it.

In this case, the Court observed that the petitioners attacked the notification on the ground that the Government had failed to properly implement the policy or to follow the principle laid down in the Act, thereby exceeding the limits of the authority that had been delegated to it. The Court noted that in March 1946 a solicitor from Bombay named Shri Tricumdas Dwarkadas was appointed as an officer on Special Duty to indicate the lines along which the Indian Companies Act was to be revised, and that he prepared a report which was, however, incomplete in certain particulars. Consequently, the Government appointed Shri Thiruvenkatachari, who was then the Advocate‑General of Madras, to conduct a further inquiry; the latter submitted his own report, and on the basis of that report a memorandum containing tentative proposals was prepared and circulated in order to elicit the opinions of various organisations. The Court further recorded that on 28 October 1950 a Committee called the Indian Company Law Committee, popularly known as the Bhaba Committee, was constituted; that Committee travelled widely, collected material and produced a comprehensive report, and on the strength of that report the new Indian Companies Act was subsequently remodelled. The petitioners questioned why any further inquiry should be made when, as they argued, nothing new had occurred since the Committee’s work, contending that no definite matter of public importance capable of calling for an inquiry existed. The Court rejected this contention, stating that the argument possessed no force. Firstly, the Bhaba Committee, on page 29 of its report, recommended that further inquiries might, in the future, be required with respect to certain matters relating to companies, and therefore the necessity for a fresh inquiry could not be ruled out. Secondly, the Court pointed out that the appropriate Government is empowered to appoint a Commission of Inquiry whenever, in its opinion, such a step is necessary. The preambles to the notification recited that matters enumerated under five heads had been placed before the Central Government, which then concluded that a full inquiry should be undertaken into those matters because, in its view, they were definite matters of public importance, given the grave consequences that had apparently arisen for the investing public and the need to determine measures deemed necessary to prevent a recurrence. Parliament, the Court observed, wisely left the decision to set up a Commission of Inquiry to the discretion of the appropriate Government, and if that Government forms the opinion that a definite matter of public importance has arisen and calls for an inquiry, the Court will not lightly discard such an opinion. Learned counsel for the petitioners argued that, because the necessity for constituting a Commission of Inquiry is left to the subjective determination of the appropriate Government, the actual establishment of a Commission is conditioned upon the existence of some definite matter of public importance; if there be no such definite matter of public importance in

The Court observed that if no definite matter of public importance existed, then no question of necessity for appointing a Commission could arise. It noted that reference had been made to the first preamble of the notification, which pointed out that all the matters alleged to have been brought before the Central Government concerned a supposed act or conduct of the petitioners. The petitioners repeated the contention that the act and conduct of individual persons could never be regarded as a definite matter of public importance. The Court was unable to accept that argument as sound, because, as it had already stated, the act or conduct of individuals might assume dangerous proportions that could affect public well‑being and thereby become a definite matter of public importance. Consequently, the Court did not agree that the notification should be struck down on the ground that there was no definite matter of public importance calling for an inquiry. The Court then turned to the next point raised in support of the appeals, a point that caused it considerable anxiety: the petitioners and their companies were alleged to have been arbitrarily singled out for hostile and discriminatory treatment and subjected to a harassing and oppressive inquiry. It was contended that the provisions of Article 14 protected every person against discrimination by the State, covering both law and executive action, and that this protection extended to State action at all stages. The petitioners’ grievance was that discrimination began at the earliest stage, when the Government conceived the idea of issuing the notification. Reference was made to a memorandum filed by the Bombay Shareholders’ Association before the Bhaba Committee, which showed that the same or similar allegations had been made not only against the petitioners and their companies but also against other businessmen and their companies. Although the petitioners and those other persons were similarly situated, the Government had arbitrarily applied the Act to the petitioners and issued the notification concerning them while leaving out the others. The Court acknowledged that the notification primarily, or even solely, affected the petitioners and their companies, but it could not overlook the fact that Parliament had left the selective application of the Act to the discretion of the appropriate Government. Accordingly, the Government was required, of necessity, to take its decision on the materials available to it and the opinion formed thereon. The Court held that the Government could not be expected, in such matters, to sit down and hold a judicial inquiry or to examine informants on oath in the presence of the parties who might be affected by its decision. In matters of this kind, the Government necessarily had to act upon the information it possessed, being the best judge of the reliability of its sources, and, if it acted in good faith on the materials brought to its notice, its action could not be readily condemned.

The Court observed that it did not possess the full factual record concerning the conduct of the petitioners and the affairs of their companies. Consequently, it anticipated that reaching a conclusion that the executive action was improper or illegal would be a slow process. The Court recognized that Parliament had granted a very wide discretionary power to the Government. It acknowledged an accompanying anxiety that such broad powers, when placed in the hands of the executive, might at times be misused or become a tool of oppression. Nonetheless, the Court held that the mere possibility of abuse was insufficient to deny the existence of the power itself. It emphasized that Parliament had entrusted this discretion not to a minor official but to the appropriate Government, which was expected to act in accordance with the policy and principles laid down in the statute. Referring to the decision in Matajog Dobey v. H. C. Bhari (1), the Court reiterated that a discretionary power vested in the Government was not automatically a discriminatory one and that allegations of abuse could not be readily presumed merely because the authority rested with the executive rather than a low‑ranking officer.

The Court further expressed confidence that, should the Government apply the law with bias, an “evil eye,” or for an improper purpose, the judiciary possessed sufficient authority to intervene and to set aside such misuse with decisive force. Turning to the facts before it, the Court noted that the Central Government had appointed investigators to examine the affairs of three of the petitioners’ enterprises. Those investigators submitted reports to the Central Government. In addition, the Central Government possessed the Bhaba Committee Report together with all memoranda that had been filed before that Committee, and it might have had access to other relevant information. Based on this material, the Government formed the view that the conduct of the petitioners and the operations of their companies presented a clear matter of public importance that warranted a full inquiry. At this stage, the Court observed that there was no requirement for legal proof of the allegations as would be needed in a civil trial. The sole question, in the Court’s view, was whether the allegations, if honestly believed, amounted to a matter of public importance. The Court stated that it could not say that they did not meet that standard.

Finally, the Court referred again to the enumeration of matters set out in the five clauses contained in the first preamble to the notification. It noted that the petitioners contended that those clauses did not disclose any intelligible basis for classifying the petitioners and their companies as a distinct class. The Union of India, on the other hand, maintained its position, relying on the language of the preamble itself. The Court indicated that this contention formed part of the material before it for determining whether the classification in the notification was valid.

The Court noted that reference was made to the affidavits sworn by Shri H. M. Patel, who was the Principal Secretary to the Finance Ministry of the Government of India. Those affidavits purported to set out, in detail, the background circumstances that led to the issuance of the impugned notification, to describe the matters recited in the notification, and to cite the several reports mentioned therein. Counsel for the petitioners objected to the reliance upon any extraneous material, insisting that the basis for any classification must appear on the face of the notification itself. They relied upon observations found in the dissenting judgments of Chiranjitlal Chowdhury’s case (1) and upon item (2) of the summary given by Justice Fazl Ali in his judgment in F. N. Balsara’s case (2). In Chiranjitlal Chowdhury’s case (1) the majority read the preamble to the Ordinance, which had been superseded by the Act under consideration, as part of the Act itself and held that the recitals, supported by the presumption of the Act’s validity, were prima facie sufficient to provide an intelligible basis for treating the company in question as a separate class. The majority therefore concluded that the petitioner had failed to discharge the burden placed upon him. The dissenting judges, however, pointed out that neither the petition nor the affidavit indicated any differentiating factor that justified singling out the company, and they observed that the statute, on its face, did not contain any basis for classification. This observation was reproduced in clause (2) of the summary of the judgment in F. N. Balsara’s case (2). Consequently, those observations cannot be read to mean that a classification must always be evident on the face of the law and that reference to extraneous materials is impermissible. In fact, the majority opinion in Chiranjitlal Chowdhury’s case (1) referred to parliamentary proceedings insofar as they illustrated the surrounding circumstances and supplied background information. Similarly, in Kathi Raning Rawat’s case (2) the hearing was adjourned to allow the respondent to file an affidavit setting out material circumstances, and in Kedarnath Bajoria’s case (3) the court took notice of conditions created by wartime emergencies. The same approach was adopted in A. Thanyal Kunju Musaliar v. V. Venkitachulam Potti (4) and Pannalal Binjraj v. Union of India (5). Therefore, the Court held that there was no impediment to considering the matters brought before it by Shri H. M. Patel’s affidavit together with the matters specified in the notification to determine whether a valid basis existed for treating the petitioners and their companies as a distinct class.

Subsequently, counsel for the petitioners argued that even if the contents of Shri H. M. Patel’s affidavits and the material appearing on the face of the notification were both taken into account, no differentiating factor could be discerned that would distinguish the petitioners and their companies from other persons and enterprises. They maintained that the qualities and characteristics attributed to the petitioners and their companies were neither peculiar nor exclusive, but were shared by many other persons and companies, yet the petitioners had been singled out for hostile and discriminatory treatment while similarly situated persons were omitted. The Court, however, observed that Parliament had entrusted the task of selective application of the law to the appropriate Government, and that it was for the Government to exercise its discretion in this matter. It was further noted that, until the contrary is proved, it must be presumed that the Government, which is accountable to Parliament, will act honestly, properly and in conformity with the law.

When the content of the notification was examined together with the material presented, no distinction could be identified that would clearly separate the petitioners and their companies from other persons and other companies. The attributes and features that were ascribed to the petitioners and their enterprises were not exclusive or unique to them; the same qualities could be observed in other individuals and other businesses. Nevertheless, the petitioners and their companies had been isolated for adverse and discriminatory treatment while similarly situated persons and companies were left untouched. The argument that this situation was unjustified therefore lacked any persuasive force. The Parliament had assigned the responsibility for the selective enforcement of the law to the appropriate Government, and consequently it was that Government which was required to exercise its discretion in this matter. It was to be expected—indeed, until evidence to the contrary is produced—that the Government, which remains accountable to Parliament, would act honestly, properly and in accordance with the policy and principles laid down by Parliament, as reflected in the authorities cited at (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 and (5) [1957] S.C.R. 233. It was possible that the Central Government had concluded that, even if one or more of the specific qualities and characteristics attributed to the petitioners and their firms could also be found in another person or corporation, the particular combination of those qualities that it perceived to exist in the petitioners and their companies was of a distinctive nature and did not exist in any other entity. In evaluating the material facts that preceded the exercise of the discretion entrusted to it by Parliament, the Central Government might have been of the view that the wrongdoing was more acute in the petitioners and their concerns than in any other person or concern, and that the necessity for an inquiry was therefore more urgent and clearer in the case of the petitioners and their enterprises than in the case of any other person or company. The essential substance of the allegations made against the petitioners and their companies was summarized as follows: a small group of individuals, since before 1946, had taken control of a number of enterprises, including a blank‑insurance company and an insurance company; some of these enterprises were private companies while others were public companies in which the public had invested substantial sums by purchasing shares; the financial years of certain companies differed from those of the others; the funds of the limited companies had been employed to purchase shares in other companies that possessed large reserve funds, with the intention of gaining control over those companies and using those funds either to acquire further shares or to further the personal benefit of the individuals involved; the shares had been acquired through blank transfer deeds and were not recorded in the names of the companies whose funds had been used for the purchases, thereby allowing the same shares to be held without appearing on the balance sheets of the various companies that operated with differing financial years.

The allegations further stated that the shares were shown in the balance sheets of the different companies, each of which had a different financial year; that after 1951 several of those companies were placed into voluntary liquidation or that their assets were transferred to another company under a pretended scheme of arrangement or re‑organisation; that after gaining control of a company the persons involved appointed some of themselves as managing director or as selling agent on a very high remuneration and, after a period, cancelled such appointments by paying large sums as compensation; and that the funds of one company were transferred to another company in order to conceal the true financial position. It was considered unnecessary to list further allegations to explain the matter.

The issue before the Court was not whether the allegations set out on the face of the notification and in the affidavits filed on behalf of the Union of India were true, but whether the qualities and characteristics, if honestly believed to exist in the petitioners, were so peculiar or unique as to provide a sound basis for treating the petitioners and their companies as a separate class. The Court did not hold that such qualities were absent. The Court also refrained from stating, and did not suggest, that the allegations concerning the petitioners and their concerns were well founded. For the purpose of the present determination it was sufficient to observe that the facts disclosed on the face of the notification itself, together with the facts brought to the Court’s notice by the affidavits, gave adequate support to a presumption of constitutionality of the notification.

Because a presumption of validity in favour of the Act and the notification existed, the burden fell on the petitioners to allege and prove beyond doubt that other persons or companies similarly situated had been omitted and that the petitioners and their companies had been singled out for discriminatory or hostile treatment. In the Court’s opinion the petitioners failed to meet that burden. Moreover, the petitions did not even contain an averment that there were other persons or companies similarly situated as the petitioners and their companies. It was also noted that the allegations presented in the memorandum submitted by the Bombay Shareholders’ Association to the Bhaba Committee had not been proved by legal evidence. Nevertheless, the report itself contained matters that could be interpreted as supporting the view that, whether taken as a combination of various evils or according to their degree, the petitioners could reasonably be grouped as a class by themselves.

Consequently, the Court held that the plea of infringement of the equal‑protection clause of the Constitution could not be sustained. The next contention raised was that the notification was invalid because the Government’s action in issuing it was mala fide and amounted to an abuse of power. Counsel appearing for the petitioner, who was the appellant in Civil Appeal No 455 of 1957, made this point clear.

In the arguments presented, counsel for the petitioner asserted that no personal motive or ill‑will against the petitioners was imputed to anyone, but he observed that the Bhaba Committee had been constituted and the Companies Act had been remodelled, and therefore the present Commission was not created for any legitimate purpose. He explained that the principal idea behind the Commission’s establishment was to obtain information which the Government could not secure by following the ordinary procedure prescribed under the Code of Criminal Procedure, and that this ulterior motive clearly rendered the governmental action malicious or in bad faith. This contention was reinforced by counsel for the petitioners, who are appellants in Civil Appeals Nos. 456 and 457 of 1957. That counsel drew the Court’s attention to the affidavits filed by his clients and maintained that it was well known to the Government that none of the petitioners had any role in promoting or managing any of the companies, and that, being aware of this, the inclusion of the petitioners in the notification exceeded the power conferred on the Government and also constituted a mala fide exercise of that power. The Court found that no substantial ground supporting this position had been presented, and it was not satisfied that the circumstances mentioned in the notification and the affidavits filed on behalf of the Union of India could not, if true, form the basis of a further inquiry. The matter was left to the Commission to investigate the allegations, reach its own findings, and submit a report containing its recommendations, and the Court declined to say more on the point. It merely noted that the charge of mala fides had not been proved against the Government. Another point raised was that the original notification was defective because it did not specify a time within which the Commission was to complete its report, and that a later notification fixing a time could not cure that defect. The Court held that there was no substance to this argument. The third notification amended the original by fixing a time, and nothing prevented the Government from issuing a fresh notification appointing a Commission and fixing a time. Consequently, the combined effect of the two notifications could achieve the same result, and the amending notification, read together with the original, could be regarded as a fresh notification within the meaning of section 3 of the Act, operative at least from the date of the later notification. Finally, an argument was advanced that the notification was invalid because it amounted to a delegation of an essential legislative function. Assuming such delegation existed, the Court observed that the Act had already laid down its policy, and any delegation of power, if any, would not be vitiated, because the delegate’s legislation would have to conform to the policy set out in the Act.

In this case a submission was made that the notification is invalid because it contravenes Article 23 of the Constitution. Counsel for the party raising that submission stated plainly that the objection was premature at this stage of the proceedings and that he wished to preserve his client’s right to raise the constitutional challenge at a later time. No other ground of objection was advanced before the Court. Accordingly, for the reasons already discussed, the Court dismissed appeals numbered 455, 456 and 457 of 1957 and ordered that costs be awarded against those appellants. The appeals numbered 656, 657 and 658 of 1957 were only partly successful. The only relief granted in those appeals was the deletion of the words “by way of redress or punishment” that appear in the latter portion of clause (10). After that deletion, the remaining language of clause (10) will read: “and the action which in the opinion of the Commission should be taken ……… to act as a preventive in future cases,” as previously indicated. The Court emphasized that this partial amendment does not affect the substantive obligations imposed by the notification. The Court declined to make any order as to costs in respect of the three partly‑allowed appeals, leaving the parties to bear their own expenses. Accordingly, the Court records that appeals 455, 456 and 457 of 1957 are dismissed, while appeals 656, 657 and 658 of 1957 are partially allowed.