Citations: Chiranjit Lal Chowdhuri Vs Union of India and Others, 1951 AIR 41

Date of Judgment: 04/12/1950

Equivalent citations: 1950 SCR 869

Case No.: Petition No. 72 of 1950

Case Type: Writ Petition

Petitioner: Chiranjit Lal Chowdhuri

Respondent: Union of India & Others

Bench: Hon’ble Justice H. J. Kania (CJI), Hon’ble Justice Saiyid Fazal Ali, Hon’ble Justice M. Patanjali Sastri, Hon’ble Justice B. K. Mukherjea and Hon’ble Justice S. R. Dass 

Court: Supreme Court of India

Statutes Referred:

  • Constitution of India 1950; Articles-14, 19(1)(f), 19(5), 31, 32
  • Indian Companies (Amendment) Act, 1930
  • Sholapur Spinning and Weaving Company (Emergency Provisions) Act, 1950

Cases Referred:

  • McCabe Vs Atchison, 235 U.S. 151
  • Barbier Vs Connally, 113 U.S. 27
  • Gulf C. & S. F.R. Co. Vs Ellis, 163 U.S. 150 at 159
  • Southern Railway Co. Vs Greene, 216 U.S. 400
  • Radics Vs New York, 264 U.S.
  • Minister for State for the Army Vs Datziel, 1944 68 CLR 261
  • Pennsylvania Coal Company Vs Mahon, 260 U.S. 393


  • In the instant case, the petition is filed by Chiranjit Lal Chowdhuri, a shareholder of Sholapur Spinning and Weaving Company Limited governed under the provisions of the Indian Companies Act. He was the holder of three ordinary shares and eight preference shares pledged under the Bank of Baroda.
  • In August 1949, mills of the company were shut down and the reason specified in the ordinance laid that it was due to the mismanagement & the need to produce essential commodities. Later a Central Act named, Sholapur and Weaving Company(Emergency Provisions) Act was enacted for the regulation of the Company’s affairs.
  • This Act empowered the government to interfere in the functioning of the mill, appoint new directors, curtail voting rights of the shareholders and modify the Indian Companies Act concerning the company.
  • The Act somewhere recreated and validated the provisions of the Ordinance and was questioned by the Petitioner (-Shareholder). The petitioner challenged the constitutional validity of both the Ordinance & the Act as violative of Article 14, 19(1)(f) and 31 of the Constitution of the shareholder as well as the Company.
  • Further, the petitioner prayed for the writ of mandamus against the Central Government, Government of Bombay & Directors restraining them from interfering with the management of the Company and to declare the Ordinance and Act as unconstitutional.

Issues Involved:

  • Whether the Sholapur and Weaving Company (Emergency Provisions) Act in contravention to Article 14, 19(1)(f) & 31 of the Constitution?
  • Whether the impugned Act imposed any restriction on the petitioner’s right of acquisition of private property of the Company or the shareholder?

Contention of Petitioner/Appellant:

The counsel for Petitioner contented that:

  • The primary purpose of the Sholapur and Weaving Company(Emergency Provisions) Act is to control and take over the possession of the mill of theSholapur Spinning and Weaving Company limited. This action is beyond the power of the legislative body.
  • The Actis made applicable to only this company and not to other companies. Further, the Act also denies the provision of equality and equal protection of the law as guaranteed under Article 14 of the Constitution. Thus, this is violative of Article 14 of the Constitution of India.
  • The Act restricts the rights of the shareholders thereby causing unreasonable interference with the rights provided under Article 19(1)(f) of the Constitution of India.
  • The petitioner also claimed violation of Article 31 of the Constitution of India caused as a result of the control of the Government on the company’s property. The possession was unjustified, without any compensation.
  • Further, the legislation is beyond the competence of the Parliament as it was not covered under the central list under the seventh schedule.

Contention of Defendant/Respondent:

The counsel for the Union made following contentions to counter the Petitioner’s arguments:

  • The condition of the mill was unusual and the inquiry revealed that there was mismanagement in the company. Thus, to control the situation and for smooth functioning of the Company, the Central Government laid the Ordinance first and further this Act.
  • The classification made was reasonable and thus there was no violation of Article 14 of the Constitution of India.
  • The power defined under Article 31(1) of the Constitution is different from those rights mentioned under Article 31(2) of the Constitution. The appointment of Directors in the management of the Company by the Government does not lead to dispossession of property.


  • On the question related to the violation of Article 19(1)(f) and Article 31 of the Constitution the bench opined that there has been no curtailment of the rights of the petitioner.
  • On the question relating to the infringement of Article 14 of the Constitution, the five-judge bench held the judgment in the ratio of 3:2. The majority judgment was given by Hon’ble Chief Justice H. J. Kania, Justice Saiyid Fazal Ali, and Justice B. K. Mukherjea while Justice M. Patanjali Sastri and Justice S. R. Dass dissented from the majority.
  • The Hon’ble Court held that the Sholapur and Weaving Company(Emergency Provisions) Act does not deprive the petitioner (shareholder) of enjoyment of his basic rights. Also, the Act enacted does not aim for the acquisition of property of the company.
  • There is a mere denial of the voting rights of the shareholders while the petitioner still has the right to hold and earn income from his shares. Also, there is no infringement with the rights provided under Article 14 and Article 19(1)(f) of the Constitution as per the majority.

Therefore, the appeal stands dismissed with costs.

Ratio Decidendi:

  • The Constitution of India under Article 32 empowers the citizens to approach the Supreme Court for the enforcement of individual rights in case it is violated. These rights are not only available to the natural person but also the companies.
  • In order to establish the maintainability of this case, the onus lies on the petitioner to prove that the law in question is beyond the legislative competence of a particular legislature and that this Act in itself contravenes the constitutional guarantees of the petitioner as provided in Part III of the Constitution.
  • In a question related to violation of Article 31 of the Constitution, the court opined that the sovereign has an inherent right to acquire private property in good faith for public use. However, the Act does not acquire the property and the legal as well beneficial interest arising out of the share the petitioner holds remains intact.
  • Furthermore, there is no restriction on the petitioner to hold, buy, sell or dispose of his property. Also, the shareholder entitlement to the dividend remains unaffected. The disabilities provided in the legislation impose reasonable restraint that is sought for public interest i.e. to ensure regular supply of essential commodities to the people and prevent the issue of unemployment. Hence the Act is not violative of Article 19(1)(f) and the legislation falls within the exception of Article 19 (5) of the Constitution.
  • Concerning the violation of Article 14 of the Constitution, the court observed that ‘the guarantee against the denial of equal protection of the laws does not mean that identically the same rules of law should be made applicable to all persons within the territory of India.’ In the instant matter, the classification made is reasonable, keeping in view the mismanagement of the Company leading to serious unemployment and non-availability of essential commodities.
  • The court referred to the case of Middleton v. Texas Power and Light Company, where the Supreme Court of America observed that the legislative body correctly assess the need of people, and the enacted laws are made to address the problems of people and discrimination if any is done on adequate grounds.
  • Moreover, the burden is on the petitioner to establish that the classification or distinction so made by the enacted legislation is improper and arbitrary. The petitioner failed to discharge the prima-facie burden either by a claim or by placing any material records in this regard.
  • Court also observed that the petitioner’s argument on the validity of the law based on the claim that the Act in question not placed in the Central List lacks substance. This Sholapur and Weaving Company(Emergency Provisions) Act comes under Item No. 43 of the Union List named as ‘incorporation, regulation and winding up of trading corporations.

Obiter Dicta:

  • “Article 14 of the Constitution, as already stated, lays down an important fundamental right, which should be closely and vigilantly guarded, but, in construing it, we should not adopt a doctrinaire approach which might choke all beneficial legislation.”
  • “If a law is made applicable to a class of persons or things and the classification is based upon differentia having a rational relation to the object sought to be attained, it can be no objection to its constitutional validity that its application is found to affect only one person or thing.”


In the instant case of Chiranjit Lal Chowdhuri Vs Union of India, the petitioner claims for the infringement of his fundamental rights that later turns out not to be infringed. The legislative competence of the Parliament to enact the legislation was the primary question before the Hon’ble Court.

The five-judge bench unanimously held that the Sholapur and Weaving Company (Emergency Provisions) Act does not curtail the rights under Article 19(1)(f) and Article 31 of the shareholder. However, in question to Article 14 of the Constitution, the bench was divided in the ratio of 3:2. It is vital to note that the enacted Act must obey the proportionality test to fall within the ambit of Article 14, and reasonable classification is permitted herein in the case in good faith and for the public’s benefit.

Drafted By: Shivani Tiwary, School of Law DAVV.

Published On: September 28, 2021 at 19:38 IST

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