"(1) Section    18AA(1) (a) (b) excludes the giving of prior hearing to the party who would be affected by order thereunder.

(2) Section 18F expressly provides for a post- decisional hearing     to the owner     of the industrial undertaking, the management of which is     taken    over under Section 18AA to have the order made under Section 18AA cancelled on any relevant ground.

(3) As the taking over of management under Section 18AA is not vitiated by the failure to    grant prior hearing, the question of any such vice being cured by a grant of a subsequent hearing does not arise." H. L. Anand and N. N. Goswamy, JJ, however dissented. In the opinion of the minority, in compliance with the principles of natural justice, a    prior hearing to the owner of     the undertaking was required to be given before passing an order under Section 18AA, that the second question did not arise as the    denial of a prior hearing would not cure the vice by the grant of subsequent hearing, but it would be open to the Court to moderate the relief in such a way that the order is kept alive to the extent necessary until the making of the fresh order to subserve public interest, and to    make appropriate directions to ensure that the subsequent hearing would be a full and complete review of the circumstances of the take-over and for    the preservation and maintenance of the property during the interregnum.

After the    decision of the reference, the case     was reheard on merits by    a Bench of three learned Judges (consisting of    Deshpande, C.J., Anand and M. L. Jain, JJ.) who by    their judgment,     dated May 1, 1979, disposed of the writ-petition. The operative part of the judgment reads as under:

"In the result, the     writ-petition    succeeds in part, the    challenge to the validity of the impugned order fails and     to that extent the    petition is dismissed. The petition succeeds in so far as it seeks to protect from the impugned order the corporate entity of the company, the corporate entity of the subsidiary and its assets, the holding of the company in Polytex and the assets and property of the company which are not referable to any of the industrial undertakings. The respondents are hereby restrained from in     any manner interfering

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with the corporate entity, the assets and property which are    outside the impugned order. The respondents would release from its control    and custody and/or deliver possession     of any     assets or property of     the company, which are not referable     to the industrial undertakings in terms of the observations made in paras 46 and 47 of the judgment, within a period of three months from today (May 1, 1979). In the peculiar circumstances the    parties would bear their respective costs."

On the application of the Company, the Delhi High Court certified under     Article 133 of the Constitution that     the case was fit for appeal to this Court. Subsequently, on July 12,1979, a similar certificate was granted by the High Court to the    Union of India and the National Textile Corporation Ltd. Consequently, the Company, the Union of India and the National Textile Corporation have filed Civil Appeals 1629, 2087 and 1857 of 1979, respectively, in this Court. All the three appeals will be disposed of by this judgment. The primary, two-fold proposition posed and propounded by Shri     F. S.    Nariman, learned counsel for the appellant- Company in Civil Appeal 1629 of 1979, is as follows: (a) Whether it is     necessary to observe the rules of natural justice     before issuing, a notified    order under Section 18AA, or enforcing a decision under Section 18AA, or (b) Whether the provisions of Section    18AA and/or Section 18F impliedly    exclude     rules    of natural justice relating to prior hearing.

There were     other contentions also which were canvassed by the    learned counsel     for the parties at considerable length. But for reasons mentioned in the final part of this judgment, we do not think it necessary, for the disposal of these appeals to deal with the same.

Thus, the    first point for consideration is whether, as a matter of law, it is necessary, in     accordance with the rules of natural justice, to give a hearing to the owner of an undertaking before issuing a notified order, or enforcing a decision of its take-over under Section 18AA. Shri Nariman contends that there is nothing in     the language, scheme or object of the provisions in Section 18AA and/or Section     18F which expressly or by inevitable implication, excludes the application    of the principles of natural justice     or the     giving     a pre-decisional hearing, adapted to the situation, to the owner of the undertaking. It is submitted that mere use     of the     word "immediate" in sub-clause (a)     of Section 18AA (1) does    not show a legislative intent to exclude the

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application of    audi alterm partem rule, altogether. It is maintained that     according to the decision of this Court in Keshav Mills Company Ltd. v. Union of India, even after a full investigation has been made under Section of the I.D.R. Act, the Government has to observe the rules     of natural justice and fairplay, which in the facts of    a particular case, may include the    giving    of an    opportunity to     the affected owner    to explain the adverse findings against him in the    investigation report. In support of his contention, that the use of the word "immediate" in Section 18AA(1)(a) does not exclude natural justice, learned    counsel     has advanced these reasons:

(i) The word "immediate" in clause (a) has been used in contra distinction to 'investigation'.     It only means that under Section    18AA action can be taken without prior investigation under Section 15, if there is evidence in the possession of the Government, that the assets of the Company owning the undertaking are being frittered away by doing any of the    three things mentioned in clause (a); or, the undertaking has     remained closed for a     period of not less than three months and    the condition of plant and machinery is such that it is possible to restart the undertaking. This construction, that the use of the word "immediate" in Section 18AA(1)(a) only dispenses with investigation under Section 15 and not with the principle of audi alterm partem altogether, is    indicated by the marginal heading of Section 18AA and para 3 of the Statement of Objects and Reasons of the Amendment Bill which inserted Section 18AA, in 1971. (ii) The word 'immediate' occurs only in clause (a) and not in    clause (b) of Section    18AA(1). It would be odd if intention to exclude this principle of natural justice is spelt out in one clause of the sub-section, when its other clause does not exclude it.

(iii) Section 18F does not exclude a pre-decisional hearing. This section was there, when in Keshav Mills' case, (ibid), it was held by this Court, that even at the post- investigation stage, before passing an order under Section 18A, the Government must proceed fairly in accordance with the rules of natural justice. The so-called post-decisional hearing contemplated by Section 18F cannot be-and is     not intended to be-a substitute for a pre-decisional hearing. Section 18F, in terms,     deals with the power     of Central Government to    cancel    an order of take-over under     two conditions, namely: First when     "the purpose of an order under Section 18A has    been fulfilled, or, second when "for any other reason it is not necessary that the order should remain in force". "Any other reason" has reference to post- "take-

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over" circumstances only, and     does not cover a reason relatable to    pre-takeover circumstances. An order of cancellation under Section 18F is     intended to     be prospective. This is clear from the plain meaning of the expressions "remain in force", "necessary" etc. used in the Section.

Section 18 incorporates only a facet, albeit qualified, of Section 21 of the General    Clauses Act, (Kamla Prasad Khetan v. Union of India, referred to.) Therefore,     the illusory right    given by Section 18F to the aggrieved owner of the    undertaking, to make an application for cancellation of the    order, is not a full right of appeal on merits. The language of the Section impliedly prohibits an enquiry into circumstances that led to the passing of the order of "take- over", and under it, the aggrieved person is not entitled to show that on merits, the order was void ab initio. As held by a Bench (consisting of Bhagwati and Vakil JJ.) of     the Gujarat High Court, in     Dosabhai Ratanshah Keravale v. State of Gujarat, a power to rescind or cancel an order, analogous to that    under Section    21, General Clauses Act, has to be construed as a power of prospective cancellation, and not of retroactive obliteration. It is only the existence of    a full right of appeal on the merits or the    existence of a provision which unequivocally confers a power     to reconsider, cancel and obliterate completely the original order, just as in appeal, which may be construed to exclude natural     justice or a pre-decisional hearing in an emergent situation. (Reference on this point has been made to Wade's Administrative Law, 4th Edition, PP.464 to 468.) (iv) 'Immediacy' does not exclude a duty to act fairly, because, even an emergent situation can co-exist with the canons of natural justice. The only effect of urgency on the application of    the principle of fair-hearing would be that the width, form and duration     of the hearing would be tailored to the situation and reduced     to the reasonable minimum so that it does not delay and defeat the purpose of the contemplated action.

(v) Where    the civil consequences of the administrative action- as in the instant case-are grave and its effect is highly prejudicial to the rights and interests of the person affected and there is nothing in the language and scheme of the statute which unequivocally excludes a fair    pre- decisional hearing, and the post-decisional hearing provided therein is not a real remedial hearing equitable to a full 551

right of appeal, the Court should be     loath    to infer a legislative intent to exclude even a minimal fair hearing at the pre-decisional stage merely on    ground    of urgency. (Reference in this connection     has been made to Wade's Administrative Law, ibid, page 468 bottom.) Applying the proposition propounded by him to the facts of the    instant case, Shri Nariman submits that there was ample time at the disposal of     the Government     to give a reasonably short notice to the Company to present its case. In this connection, it is pointed out that according to para 3 of the further affidavit filed by Shri Daulat Ram on behalf of the Union of India    and other respondents,     the Central Government had in its     possession two documents, namely: (a) copy of the Survey Report on M/s. Swadeshi Cotton Mills Company Ltd., covering the period from May to September, 1977     prepared by the office of    the Textile Commissioner, and (b) Annual Report (dated September     30, 1977) of the Company for the year ending March 31, 1971. In addition, the third circumstance mentioned in the affidavit of Shri     Daulat Ram is, that by an order dated January 28, 1978, the Central Government appointed four Government Officials, including one from    the office of    the Textile Commissioner, to study the affairs of     the Company and to make recommendation. This Official Group submitted     its report on February 16,     1978. It is submitted that    this evidence on the basis    of which the    impugned order     was passed, was not disclosed to the appellant Company till May 1978, only after it had filed the writ petition in the High Court to challenge the impugned order. It is emphasised that if the Survey    Report    was assumed to contain something adverse to the appellants, there was time enough-about six weeks between the submission of the Survey Report and the passing of the impugned order for giving a short, reasonable opportunity to     the appellants to explain    the adverse findings against them. It is urged that even if there was immediacy, situational    modifications could be made to meet the requirement     of fairness, by reducing the period of notice; that even the manner and form of such notice could be simplified to eliminate delay, that telephonic notice or short opportunity for furnishing their explanation to the Company might have satisfied the requirements     of natural justice. Such an opportunity of hearing could have    been given after the passing of a conditional tentative order and before    its enforcement under Section 18AA. For     the interregnum suitable interim action such as freezing     the assets of the     Company or restraining the Company    from creating further encumbrances, etc. could be    taken under Section 16.

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Reference in this connection has been made to Keshav Mills case (ibid); Mohinder     Singh     Gill    v. Election Commissioner of     India; Maneka    Gandhi    v. Union of India Sukhdev Singh & Ors. v. Bhagatram Sardar Singh; A. K. Kraipak v. Union of India; Ridge v. Baldwin;     Heatley v. Tasmanian Racing & Gaming Commission; Commissioner of Police v. Tanos; Secretary of     State for Education & Science v. Metropolitan Borough of Tameside; Wiseman v. Borneman; Nawabkhan Abbaskhan v. State of Gujarat and State of Orissa v. Dr. Bina Pani Dei.

As against     this, Shri Soli Sorabji, learned Solicitor- General appearing on behalf of respondent 1, contends that the presumption in favour of audi alteram partem rule stands impliedly displaced by the language, scheme,    setting, and the purpose of the provision in Section 18AA. It is maintained that Section 18AA, on its plain terms, deals with situations where immediate preventive    action is required. The paramount concern is to avoid serious problems which may be caused by fall in production. The purpose     of an order under Section 18AA is    not to    condemn     the owner but to protect the scheduled industry. The issue under Section 18AA is not    solely between    the Government and the management of the industrial    under taking. The object of taking action under this Section is to protect other outside interests of the community at large     and the workers. On these premises, it is    urged,    the context, the subject-matter and     the legislative history of Section 18AA negative the necessity of giving a prior hearing; that Section 18AA does     not contemplate any interval between the making of an order thereunder and    its enforcement, because it is designed to meet an     emergent situation by immediate preventive action. Shri Sorabji submits that this rule of natural justice in a modified form has been     incorporated in Section 18F which gives an opportunity of a post-decisional hearing to     the owner of the undertaking who, if he feels aggrieved, can, on his application, be heard to show that even    the original order under Section 18AA was passed on invalid grounds and should be cancelled or rescinded. Thus,

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Shri Sorabji does not    go to the length of contending that the principles    of natural justice have been fully displaced or completely excluded by Section 18AA. On the contrary, his stand is that on a true construction of Section 18AA read with Section 18F, the    requirements of     natural justice and fair-play can be read    into the statute only "in so far as conformance to    such canons can reasonably and realistically be required of it", by the provision for a remedial hearing at a subsequent stage.

Shri Sorabji further submits that since    Section     18F does not specify any    period    of time within which the aggrieved party can    seek the relief thereunder,     the opportunity of    full, effective     and post-decisional hearing has to    be given within a reasonable time. It is stressed that under Section 18F, the Central Government exercises curial functions, and that Section confers on the aggrieved owner a right to apply to the Government to cancel the order of take-over. On a true construction this Section casts an obligation on the Central Government     to deal with     and dispose of an application filed thereunder with reasonable expedition. Shri Sorabji further concedes that on the well- settled principle of implied and ancillary powers, the right of hearing afforded by Section 18F carries with it the right to have     inspection and     copies of all the relevant books, documents, papers etc. and the Section obligates the Central Government to take all     steps which are necessary for the effective hearing and    disposal of an application under Section 18F.

Shri Sorabji has in connection with his arguments cited these authorities: Mohinder Singh Gill v. Chief Election Commissioner (ibid);    In re.     K. (An Infant), Official Solicitor v. K. & Anr.; Collymore v. Attorney General; Union of India v. Col. J. N. Sinha; Judicial Review, 3rd Edn. by De Smith; Queen v. Davey; Gaiman v. National Association for Internal Revenue; John     H. N.     Fahey    v. Paul Millionee; Schwartz's Administrative Law'; Madhav     Hayawadanrao Hoskot v. Maharashtra;     Vijay Kumar Mundhra v. Union of India; Joseph Kuruvilla Vellukumel v.

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Reserve Bank of India;     Corporation of Calcutta v. Calcutta Tramways and Furnell v. Whapgarei High School. Before dealing with the contentions advanced on both sides, it will be useful to have a general idea of     the concept     of "natural justice"     and the broad principles governing its application or exclusion in the construction or administration of statutes    and the exercise of judicial or administrative powers by an authority or tribunal     or constituted thereunder.

Well then what is "natural justice" ? The phrase is not capable of a static and precise definition. It cannot be imprisoned in the straight-jacket of a cast-iron formula. Historically, "natural    justice" has been used in a     way "which implies    the existence of moral     principles of self- evident and unarguable truth.    In course of time, judges nurtured in the traditions of British jurisprudence, often invoked it in conjunction with a reference to "equity and good conscience". Legal experts of earlier generations did not draw any distinction between "natural justice"     and "natural law".    "Natural justice" was considered as "that part of     natural law which relates to the administration of justice". Rules     of natural justice are not embodied rules. Being means to an end and not an end in themselves, it is not possible to make an exhaustive catalogue of such rules. But two fundamental maxims of natural justice have now become    deeply     and indelibly     ingrained in     the common consciousness of man kind, as pre-eminently necessary to ensure that the law is applied impartially, objectively and fairly. Described in the form of Latin tags     these    twin principles are    :(i) audi alteram partem and (ii) nemo judex in re sua. For     the purpose of the question posed above, we are primarily concerned with the first. This principle was well-recognised even in the ancient    world.    Seneca,     the philosopher, is     said to have referred     in Medea that it is unjust to reach a decision without a full hearing. In Maneka Gandhi's case,    Bhagwati, J. emphasised that audi alteram partem is a highly effective rule devised by the Courts to ensure that a statutory authority arrives at a just decision and it    is calculated to act as a healthy check on the abuse or misuse of power. Hence its reach should not be narrowed and its applicability circumscribed.

During the     last two decades, the     concept of natural justice     has made great strides in the     realm     of administrative law. Before the epoch-making decision of the House of Lords in Ridge v. Baldwin, it was 555

generally thought that the rules of natural justice apply only to judicial or quasi-judicial proceedings; and for that purpose, whenever a breach of the rule of natural justice was alleged, Courts in England used to ascertain whether the impugned action     was taken by the statutory authority or tribunal in the exercise of its administrative or quasi- judicial power.     In India also, this was the position before the decision, dated February 7, 1967, of this Court in Dr. Bina Pani Dei's case (ibid); wherein it was held that even an administrative order or decision in matters involving civil consequences, has to be made consistently with     the rules of natural justice. This supposed distinction between quasi-judicial    and administrative decisions, which     was perceptibly mitigated in Bina    Pani Dei's case, was further rubbed out to a vanishing point in A. K. Kraipak v. Union of India (ibid), thus:

"If the purpose of these rules of natural justice is to prevent miscarriage     of justice one fails to see why those     rules     should     be made inapplicable to administrative enquiries. Often times it is not easy to draw the line that demarcates administrative enquiries from quasi-judicial enquiries..................... Arriving at a just decision is the aim of both quasi- judicial enquiries as well as administrative enquiries. An unjust    decision in an administrative    enquiry     may have more    far-reaching effect than a decision in a quasi-judicial enquiry."

In A. K. Kraipak's case, the Court also     quoted with approval the observations of Lord Parker from the Queens Bench decision in In re H. K. (An Infant) (ibid), which were to the    effect, that good administration and an honest or bona fide decision require not merely impartiality or merely bringing one's    mind to     bear on the problem,     but acting fairly. Thus irrespective of whether the power conferred on a statutory body or tribunal is administrative or quasi- judicial, a duty to act fairly, that is, in consonance with the fundamental principles of substantive     justice is generally implied, because the     presumption is     that in a democratic polity wedded to the rule    of law, the state or the Legislature     does not intend that    in the    exercise of their statutory powers its functionaries should act unfairly or unjustly.

In the language of V.R. Krishna Iyer, J. (vide Mohinder Singh Gill's case, ibid.):

"Subject to certain necessary limitations natural justice is now a brooding omnipresence although varying in its play. Its essence is good conscience in a given situation; nothing more-but nothing less." 556

The rules    of natural justice can operate only in areas not covered by any law validly made. They can supplement the law but     cannot supplant it (Per Hegde, J. in A. K. Kraipak, ibid). If a statutory provision either specifically or by inevitable implication excludes the application of the rules of natural justice, then the Court cannot ignore the mandate of the    Legislature. Whether or not the application of the principles of natural justice    in a given case has    been excluded, wholly or in     part, in the exercise of statutory power, depends    upon the language and    basic scheme of the provision conferring the power, the nature of the power, the purpose for which it is conferred and the effect of the exercise of that power. (See Union of India v. Col. J. N. Sinha, ibid.)

The maxim    audi alteram partem has many facets. Two of them are: (a) notice of the    case to be met; and     (b) opportunity to    explain. This rule is universally respected and duty to afford a fair hearing in Lord Loreburn's oft- quoted language, is "a duty lying upon every one who decides something", in the exercise of legal power. The rule cannot be sacrificed at the altar of administrative convenience or celerity; for,     "convenience and justice"-as     Lord Atkin felicitously put it- "are often not on speaking terms". The next general aspect to be considered is: Are there any exceptions    to the application of     the principles of natural justice, particularly the audi alteram partem rule ? We have already noticed that the statute conferring     the power, can by express language exclude its application. Such cases do not present any difficulty. However, difficulties arise when the statute conferring the power does     not expressly exclude this rule but its exclusion is sought by implication due to the presence of certain factors: such as, urgency, where the obligation to give notice and opportunity to be heard would obstruct the taking of prompt action of a preventive or remedial nature.     It is    proposed to dilate a little on this aspect,     because in the instant case before us, exclusion of this    rule of     fair hearing is sought by implication from the use of the word 'immediate' in Section 18AA(1). Audi alteram partem rule may be disregarded in an emergent situation where immediate action brooks no delay to prevent     some    imminent danger or injury or hazard to paramount public interests. Thus, Section 133 of the Code of Criminal Procedure, empowers     the magistrates specified therein to make an exparte conditional order in emergent cases, for removal of    dangerous public nuisances. Action under Section 17, Land     Acquisition Act, furnishes another such instance. Similarly, action on grounds of public safety public health may justify disregard of the rule of prior hearing.

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Be that as it may, the fact remains that there is no consensus of judicial opinion    on whether more urgency of a decision is a practical consideration which would uniformly justify non-observance    of even     an abridged form of    this principle of natural justice.    In Durayappah v. Fernando. Lord Upjohn observed that "while urgency may rightly limit such opportunity timeously perhaps severely, there can never be a denial of that opportunity if the principles of natural justice are applicable.

These observations     of Lord Upjohn in Durayappah's case were quoted with approval by this Court in Mohinder Singh Gill's case. It is therefore, proposed to notice the same here.

In Mohinder Singh Gill's    case, the appellant and the third respondent were candidates for election in a Parliamentary Constituency. The appellant alleged that when at the last hour of counting it appeared that he had all but won the     election, at the instance of respondent, violence broke out and the Returning Officer was forced to postpone declaration of    result. The Returning Officer    reported the happening to the Chief Election Commissioner. An officer of the Election Commission who was an observer at the counting, reported about     the incidents to the Commission.     The appellant met the Chief Election Commissioner and requested him to    declare the result. Eventually, the Chief Election Commissioner issued a notification which stated that taking all circumstances into     consideration    the Commission     was satisfied that    the poll had been vitiated, and therefore in exercise of the powers under Article 324 of     the Constitution, the poll already     held was cancelled and a repoll was being ordered in the constituency. The appellant contended that     before making the impugned     order,     the Election Commission had not given him a full and    fair hearing and all that he had was a vacuous meeting where nothing was disclosed. The Election Commission contended that a    prior hearing has, in     fact,    been given to     the appellant. In addition, on the question of application of the principles    of natural justice, it     was urged by     the respondents that the tardy process of     notice and hearing would thwart the conducting of elections with speed, that unless civil consequences ensued, hearing was not necessary and that the right accrues to     a candidate only when he is declared elected. This contention, which had    found favour with the High Court, was negatived by this Court. Delivering the judgment of the Court, V. R. Krishna Iyer, J., lucidly explained the meaning and scope of the concept of natural justice and its role in a case where there is a competition between the necessity of taking speedy

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action and the duty to act fairly. It will be useful to extract those illuminating observations, in extenso: "Once we understand    the soul of the rule as fairplay in action - and it is so - we must hold that it     extends to     both    the fields.    After    all, administrative power in     democratic set-up is     not allergic to fairness in     action     and discretionary, executive justice    cannot    degenerate into unilateral injustice. Nor is there ground to be frightened of delay, in    convenience and expense, if 'natural justice gains access. For fairness itself is    a flexible, pragmatic    and relative     concept, not     a rigid, ritualistic or sophisticated abstraction.     It is not a bull in a china shop, nor a bee in one's bonnet. Its essence is good    conscience in    a given situation; nothing more - but nothing less.     The 'exceptions' to the rules    of natural justice are a misnomer or rather are but a shorthand form of expressing the idea that in those exclusionary cases nothing unfair can be inferred by not affording an opportunity to present or meet a case."

After referring to several decisions, including     the observations of     Lord Upjohn in Durayappah v. Fernando, the Court explained that mere invocation or existence of urgency does not exclude the duty of    giving a fair hearing to the person affected:

"It is untenable heresy, in our view, to lock law the victim or act behind his back    by tempting invocation of urgency, unless the clearest case of public injury flowing from the least delay is self- evident. Even in such cases a remedial hearing as soon as urgent    action has been taken is the next best. Our objection    is not to circumscription    dictated by circumstances, but     to annihilation as an easy escape from benignant, albeit inconvenient obligation.     The procedural     pre-condition     or fair hearing, however minimal, even post-decisional,    has relevance     to administrative and judicial gentlemanliness." "We may not be taken to....say that situational modifications to notice and hearing are altogether impermissible......... the glory of the law is not that sweeping rules are laid down but that     it tailors principles to practical needs. doctors remedies to suit the patient promotes not    freezes Life's processes, if we may mix metaphors.".............

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The Court    further emphasised the necessity of striking pragmatic balance between competing requirements of acting urgently and fairly, thus:-

"Should the cardinal principle of "hearing' as condition for decision-making be martyred for the cause of administrative,     immediacy? We    think not. The full panoply may not be there but a manageable minimum may make-do."

"In Wiseman v. Borneman there was a hint of the competitive claims     of hurry and    hearing. Lord Reid said: 'Even where the decision has to be reached by a body acting judicially, there must be a balance between the need for expedition and the    need to give    full opportunity to the defendant to see material against him (emphasis added). We    agree that the elaborate and sophisticated methodology    of a formalised hearing may be injurious to promptitude so essential in an election under way.     Even so, natural justice is pragmatically flexible and is amenable     to capsulation under the compulsive     pressure of circumstances. To burke it altogether may not be a stroke of fairness except in very exceptional circumstances."

The Court further pointed out that the competing claims of hurry and hearing can    be reconciled by making situational modifications in the audi alteram partem rule: "Lord     Denning M.R., in Manward v. Boreman, summarised the observations of the Law Lords in this form. No doctrinaire approach is desirable but     the Court must     be anxious to salvage the cardinal rule to the extent     permissible in     a given case. After all, it is not obligatory that counsel should be allowed to appear 'nor is it compulsory that oral evidence should be adduced. Indeed, it is not even imperative    that written statements     should be called for disclosure of the prominent circumstances and asking for an immediate explanation orally     or otherwise may, in many cases be sufficient compliance. It is even conceivable that an urgent meeting with the concerned parties summoned at an hour's    notice, or in a crisis, even    a telephone call, may    suffice. If all that is not possible as in the case of a fleeing person whose passport has to be impounded lest he should evade the course of justice or a dangerous nuisance needs immediate abate- 560

ment, the action may be taken followed immediately by a hearing for the purpose of sustaining or setting aside the action     to the     extent feasible. It is quite on the cards that     the Election    Commission, if     pressed by circumstances may give a short hearing. In any view, it is not easy to appreciate whether before further steps got under    way he could have afforded an opportunity of hearing the parties,    and revoke the earlier directions...... All that we need emphasize is that the content of natural justice is a dependent variable, not an easy casualty."

"Civil consequence' undoubtedly cover infraction of not merely property or personal rights but of civil liberties,     material deprivations and non-pecuniary damages. In its comprehensive connotation, everything that affects a citizen in his civil life inflicts a civil consequence." (emphasis added)

In Maneka    Gandhi, it was laid down that     where in an emergent situation, requiring immediate action, it is not practicable to give prior notice or opportunity to be heard, the preliminary     action should    be soon     followed by a full remedial hearing.

The High Court of     Australia in Commissioner of Police v. Tanos, ibid, held that some urgency, or necessity of prompt action does not     necessarily exclude natural justice because a true emergency situation can be properly dealt with by     short measures. In Heatley v. Tasmanian Racing & Gaming Commission, ibid, the same High Court held    that without the use of unmistakable language in a statute, one would not attribute to Parliament an intention to authorise the Commission    to order a person not to deal in shares or attend a stock exchange without observing natural justice. In circumstances of likely immediate detriment to     the public, it may be appropriate for the Commission to issue a warning-off notice without notice or    stated    grounds     but limited to a particular meeting, coupled with a notice that the Commission    proposed to make a long-term order on stated grounds and to give an earliest practicable opportunity to the person affected to appear before the Commission and show why the proposed long term order be not made. As pointed out in Mohinder Singh Gill v. Chief Election Commissioner and in Maneka Gandhi v.    Union of India ibid, such cases where owing to the compulsion of the    fact situation or the necessity of taking speedy action, no pre- decisional hearing is given but the action is followed soon by a full post decisional hearing to the

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person    affected, do    not, in reality, constitute an 'exception' to    the audi alteram partem rule. To call such cases an 'exception' is a misnomer because they do     not exclude 'fair-play in action',     but adapt it to the urgency of the    situation by balancing the competing claims of hurry and hearing.

"The necessity for speed", writes Paul Jackson, "may justify immediate action, it will, however, normally allow for a hearing at a later stage. The possibility of such a hearing-and the     adequacy of any later     remedy     should     the initial     action     prove     to have been unjustified-are considerations to be borne in mind when deciding whether the need for urgent action     excludes a right to rely on natural justice. Moreover, however the     need to act    swiftly     may modify or limit what natural justice requires. it must not be thought 'that because rough, swift or imperfect justice only is     available that there ought to be no justice' Pratt v. Wanganui Education Board."

Prof. de Smith the renowned author of 'Judicial Review' (3nd Edn.) has at page 170, expressed his views on    this aspect of the subject, thus:

"Can the absence of a hearing before a decision is made be adequately compensated for by a hearing ex    post facto ? A prior hearing may be better than a subsequent hearing, but a subsequent hearing is better than no hearing at     all; and in some cases the courts have held that statutory provision for an administrative appeal or     even    full judicial    review    on the     merits     are sufficient to negative the existence of    any implied duty to hear before the original decision is made. The approach may be acceptable where the original decision does not     cause    serious     detriment to     the person affected, or where there    is also a paramount need for prompt action, or where it is impracticable to afford antecedent hearings."

In short,    the general principle-as distinguished from an absolute rule of uniform application-seems to be    that where a     statute does not in terms, exclude this rule of prior hearing but contemplates     a post-decisional hearing amounting to a full review of the original order on merits, then such a statute would be construed as excluding the audi alteram partem rule at the pre-decisional stage. Conversely, if the statute conferring the power is silent with regard to the giving of     a pre-decisional hearing to     the person affected and the administrative decision taken by     the authority involves civil consequences of a grave nature, and no full     review or appeal on merits against that decision is provided, courts will be extremely reluctant to con- 562

strue such a statute as excluding the duty of affording even a minimal hearing, shown of all its formal trappings and dilatory features at    the pre-decisional stage, unless, viewed pragmatically, it would     paralyse the administrative process or frustrate the need or utmost promptitude. In short, this rule of fairplay "must not be jettisoned save in very exceptional circumstances where compulsive necessity so demands". The court must make every effort to salvage this cardinal rule to the maximum extent possible,    with situational modifications. But, to recall the words of Bhagvati, J., the core of it must, however, remain, namely, that the person affected must have reasonable opportunity of being heard and the hearing must be a genuine hearing and not an empty public relations exercise.

Keeping the general principles stated above, let us now examine the scheme content, object and legislative history of the relevant provisions of the I.D.R. Act. The I.D.R.     Act (Act 65 of 1951) came into force on May 8,1952 The Statement of Objects and Reasons published in the Gazette of India, dated March 26, 1949, says that its object is to provide the Central Government    with the means of implementing their industrial policy which was announced in their Resolution, dated April    6, 1948, and approved by the Central Legislature. The Act brings under Central Control the development and regulation     of a number of important industries specified in its First Schedule, the activities of which affect the country as a whole and the development of which must be governed by economic factors of all-India import. The requirement with regard to registration, issue or revocation of licences of     these    specific industrial undertakings has been provided     in Chapter II of the Act. Section 3(d) defines an 'industrial undertaking' to    mean "any undertaking pertaining to a scheduled industry carried on in one or more factories by any person or authority including Government": Clause     (f) of the same section defines "owner" in relation to an undertaking. Section 15     gives power to the Central Government to cause investigation to be made into a scheduled industry or industrial undertaking. The Section reads as follows: "where the Central Government is of the opinion that- (a) in respect of any scheduled industry or industrial undertaking or undertakings-

(i) there has been, or is likely to be a substantial fall in the volume of production     in respect of     any article or class

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of articles relatable to that industry or manufactured or     produced in     the industrial undertaking     or undertakings, as the case     may be; for which having regard to    the economic conditions prevailing, there is no justification, or

(ii) there has been, or is likely to be, a marked deterioration in the quality of any article or class of articles relatable     to that industry or manufactured or produced in the industrial undertaking or undertakings, as the case may be, which could have been or can be avoided; or

(iii) there has been or is likely to be a rise in the price of any article or class of articles relatable to that industry or     manufactured or produced in     the industrial undertaking or undertakings, as the case may be, for which there is no justification; or (iv) it     is necessary to take any such action as is provided in this Chapter for the purpose of conserving any resources of national importance which are utilised in     the industry    or the     industrial undertaking or undertakings, as the case may be; or

(b) any industrial undertaking is being managed in a manner highly detrimental to the     scheduled industry concerned or to public interest.

the Central Government may make or cause to be made a full and complete investigation into the circumstances of the case by such person or body of persons as it may appoint for the purpose."

Section 16     empowers the Central Government to issue appropriate directions     to the industrial undertaking concerned on completion of investigation under Section 15. Such directions     may be     for all or any of the following purposes:

"(a) regulating the production of any article or class of articles by the     industrial undertaking or undertakings and fixing the standards of production; (b) requiring the    industrial undertaking or undertakings to    take such steps as    the Central Government may consider necessary, to stimulate the development of the industry to which the undertaking or undertakings relates or relate;

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(c) prohibiting the     industrial undertaking or undertakings from    resorting to any act    or practice which might reduce its or their production, capacity or economic value;

(d) controlling the    prices,     or regulating     the distribution of any article or class of articles which have been the subject matter of investigation." Sub-section (2) enables the Central Government to issue such directions to     the     industrial undertakings pending investigation.

In the course, of     the working of I.D.R. Act, certain practical difficulties    came to     light. One of them was that "Government cannot take over the    management of     any industrial undertaking,     even in a situation    calling     for emergent action     without first    issuing directions to it and waiting to see whether or not they are obeyed." In order to remove such difficulties, the     Amending Act    26 of    1953 inserted Chapter IIIA containing Sections 18A to 18F in the I.D.R.    Act. Section 18A confers power on    the Central Government to assume management or control of an industrial undertaking in    certain cases.    The material part of     the Section reads as under:

"(1) If the Central Government is of opinion that (a) an industrial undertaking to which directions have been    issued in pursuance of Section 16 has failed to comply with such directions, or

(b) an industrial undertaking in respect of which an     investigation     has been made under     Section 15 (whether or not any directions have been issued to the undertaking in pursuance    of Section 16), is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest;

the Central Government    may, by notified order, authorise any person or body of    persons to take over the management of the whole or any part of     the undertaking or to exercise in respect of the whole or any part of the undertaking such functions of control as may be specified in the order.

(2) Any notified order issued under sub-section (1) shall    have effect for such period not exceeding five years as may be specified in the order." Section 18B specifies the effect of notified order under Section 18A Sub-section (1) of the section reads thus: 565

"On the issue of a notified     order under Section 18A authorising the taking over of the management of an industrial undertaking-

(a) all persons in     charge     of the management including,     persons holding office as    managers or directors of the    industrial undertaking     immediately before the issue of the notified order, shall be deemed to have vacated their offices as such;

(b) any contract of management    between     the industrial undertaking and any managing agent, or any director thereof holding office as such     immediately before the     issue of the notified order shall be deemed to have been terminated;

(c) the managing agent, if    any, appointed under Section 18A shall be deemed to have been duly appointed as the managing agent in pursuance of     the Indian Companies Act, 1913 (7 of 1913), and the memorandum and articles of association of the industrial undertaking, and the    provisions of    the said Act    and of     the memorandum and articles shall, subject to the other provisions contained in this Act, apply    accordingly, but no such managing agent shall be removed from office except with the previous consent of    the Central Government;

(d) the person or body of     persons authorised under Section 18A to take over the management shall take all such steps as may be necessary to take into his or their custody or    control     all the property, effects and actionable claims to which the industrial undertaking is or appears     to be entitled, and all the property and effects of the industrial    undertaking, shall be deemed to be in the custody of the person or, as the case may be, the    body of     persons as from the date of the notified order; and

(e) the persons, if any, authorised under Section 18A to take over     the management of an industrial undertaking which     is a    company     shall    be for     all purposes the directors of     industrial undertaking duly constituted under    the Indian Companies Act, 1913 (7 of 1913), and     shall alone be entitled to exercise all the powers of    the directors of the industrial undertaking, whether such powers are derived from the said Act or from the memorandum or articles of association of the industrial undertaking or from any other source." 566

Section 18D provides that a person whose office is    lost under clause    (a) or     whose    contract of management is terminated under clause (b) of Section 18B shall have no right to compensation for such loss or termination. Section 18F is material. It reads thus:

"If at any     time it appears to    the Central Government on the application of     the owner of     the industrial undertaking or otherwise that the purpose of the order    made under Section 18A has been fulfilled or that for any other reason it is not necessary that the order should remain in force, the Central Government may, by notified order, cancel such order and on the cancellation of any such order the management or the control, as the     case    may be     of the industrial undertaking shall     vest     in the owner of     the undertaking."

By the Constitution Fourth Amendment Act 1955, Chapter IIIA of     the I.D.R. Act was included as Item 19 in the Ninth Schedule of the Constitution.

Before we    may come to Section 18AA, we may notice here the legislative policy with     regard     to Cotton Textile Industry, as adumbrated in the Cotton Textile Companies Management of Undertakings and Liquidation or Reconstruction Act, 1967 (Act XXIX of 1967). The Statement of Objects and Reasons for enacting this statute, inter alia, says: "The cotton textile industry     provides one of the basic necessities     of life and affords gainful employment to millions of     people. Over the last few years, this vital industry has been passing through difficult times. Some mills have already to close down and the continuing economic operation of many others is beset with     many difficulties. These difficulties have been aggravated in many cases by     the heavy burden of past debts. The taking over the management of the mills for a limited time and then restoring them to original owners has not remedied     the situation. Steps     are therefore,     necessary to     bring    about a degree of rationalisation of the    financial and     managerial structure    of such units with     a view to their rehabilitation, so     that production and employment may not suffer."

Textile Industry is also among the industries, included in the First Schedule to the I.D.R. Act.

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The Amendment Act 72 of 1971 inserted Section 18AA in the original I.D.R. Act. The material part of the Statement of Objects and Reasons     for introducing this Bill of 1971 published in the Gazette of India Extraordinary, is as follows:

"The industries included in the First Schedule .. not only substantially contribute to the Gross National produce of the    country, but also afford gainful employment to millions of people. For diverse reasons a number of    industrial undertakings engaged in these industries have had to close down and the continuing economic operation of many others is beset with serious difficulties affecting industrial production     and employment. . .     During     the period of take    over Government     has to invest public funds in    such undertakings and it must    be able     to do     so with a measure of confidence about the    continued efficient management of the undertaking at the end of the period of take over. In order to ensure that at the end of the period of    take over by    Government, the industrial undertaking is not returned to the same hands which were responsible for its    earlier misfortune, it     has been provided in the Bill that    in relation to an undertaking taken    over by     them, Government will have the power    to move     for (i) the sale of the undertaking at a reserve price or higher (Government purchasing it at the reserve price if no offer at or above     the reserve price is received), action being taken simultaneously for the winding up of the company owning the industrial undertaking; or (ii) the reconstruction of the company owning the industrial undertaking with a view to giving the Government a controlling interest in it. . . .     With a     view to ensuring speedy action by Government, it has been provided in the Bill that if the Government has evidence to the effect that     the assets of the company owning the industrial undertaking are being    frittered away    or the    undertaking has been closed for a period not less than three months and such closure is prejudicial to the    concerned scheduled industry and that the financial condition of     the company owning the industrial undertaking and     the condition of the plant and machinery installed in the undertaking is such that it is possible to restart the undertaking and    such restarting-is in     the public interest,    Government may     take over the management without an investigation."

(emphasis added).

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With the aforesaid Objects in view, Section 18AA was inserted by the Amendment Act No. 72 of 1971. The marginal heading of the Section is to the effect: "Power to take over industrial undertakings     without investigation under certain circumstances". This marginal heading,     it will be seen, accords     with the Objects and Reasons extracted above. Section 18AA runs as under:

"Without prejudice to any other provision of this Act, if, from the documentary or other evidence in its possession, the Central Government is satisfied, in relation to an industrial undertaking that- (a) the persons incharge    of such industrial undertaking have,    by reckless investments or creation of encumbrances    on the     assets     of the industrial undertaking, or by diversion of funds, brought about a situation which is likely     to affect the production of articles manufactured or produced     in the industrial undertaking, and that immediate action is necessary to prevent such a situation; or

(b) it has been closed for    a period of not less than three     months (whether by reason of the voluntary winding up of the company owning the industrial undertaking or for any other reason) and such closure is prejudicial to the concerned scheduled industry and that the financial condition of the company owning the industrial undertaking and the condition of the plant and machinery of such undertaking are such that it is possible to re-start the     undertaking and such     re- starting is necessary in    the interests of the general public, it     may, by a notified order, authorise     any person (hereinafter referred to    as the     'authorised person') to take over the management of the whole or any part of the industrial undertaking or to exercise in respect     of the whole or any part of the undertaking such functions of control     as may     be specified in the order.

(2) The provisions of sub-section (2) of Section 18A shall,     as far as may be, apply to a notified order made under     sub-section (1) as they apply to a notified order made under sub-section (1) of Section 18A. (3) Nothing contained in sub-section (1) and sub- section (2) shall apply to an industrial undertaking owned by a company which is being wound up by or under the supervision of the Court.

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(4) Where any notified order has been made under sub-section (1), the person or body of persons having, for the time being, charge of the management or control of the industrial undertaking, whether by or under the orders of    any court or any contract, instrument or otherwise, shall notwithstanding anything contained in such order, contract, instrument or other arrangement, forthwith    make over the charge of management or control, as the     case may be,     of the industrial undertaking to the authorised person.

(5) The provisions of Section 18-B    to 18-E (bot inclusive) shall,    as far    as may    be, apply to, or in relation to the industrial undertaking in respect of which a notified order has been made under sub-section (1), as they apply to an     industrial undertaking in relation to which a notified order has    been issued under Section 18-A."

A comparison of the provisions of Section 18A(1)(b) and Section 18AA(1)(a) would bring out two main points of distinction: First, action under Section 18A (1)(b) can be taken only after an investigation had been     made under Section 15: while under Section 18AA(1)(a) or (b) action can be taken without such    investigation. The language, scheme and setting of Section 18AA read in the light of the objects and Reasons for enacting this provision make this position clear beyond doubt. Second, before taking action under Section 18A(1)    (b), the Central Government has to form an opinion on the basis of the investigation conducted under Section 15, in regard    to the    existence of the objective fact, namely: that the industrial undertaking is being managed in a manner highly detrimental to the Scheduled industry concerned or     to public interest;    while under Section 18AA(1) (a) the Government has to satisfy itself that the persons incharge of the undertaking have brought about a     situation likely to cause fall in production, by committing any    of the three kinds of acts specified in that provision. This     shows that the preliminary objective fact attributable to     the persons in charge of the management or affairs of the undertaking, on the basis of which action may be taken under Section 18A(1) (b), is of far wider amplitude than the circumstances, the existence of which is a sine qua non for     taking action    under Section 18AA(1).     The phrase "highly detrimental to the scheduled    industry or public interest" in Section 18A is capable of being construed to over a large variety    of acts or things which may be considered wrong with the manner of running the industry by the management.     In contrast with it,    action under Section 18AA(1) (a) can be taken only if the Central Gov- 570

ernment is satisfied with regard to the existence of the twin conditions specifically mentioned therein, on the basis of evidence in its possession.

From an analysis of Section 18AA(1) (a), it will be clear that as a necessary preliminary to the exercise of the power thereunder, the Central    Government must be satisfied "from documentary or other evidence in its possession" in regard to the co-existence of two circumstances: (i) that the persons in     charge     of the industrial undertaking have by committing     any of     these acts, namely, reckless investments, or creation of incumbrances on     the assets of industrial undertaking, or by diversion of funds, brought about a situation, which is likely to affect the production of the article manufactured or produced in the industrial undertaking, and

(ii) that immediate action is necessary to prevent such a situation.

Speaking for the High Court (majority),    the learned Chief Justice (Deshpande, C.J.) has observed that only with regard to the fulfilment of condition (i) the satisfaction of the    Government is required to be objectively reached on the basis of relevant evidence in its possession; while with regard to condition (ii), that is, the need for immediate action,     it is purely subjective,    and therefore,     the satisfaction of     the Government with regard to the immediacy of the situation is outside the scope of judicial review. Shri Sorabji has in his arguments, forcefully supported this opinion of the High Court. He    maintains that     the satisfaction of     the Government with regard to the existence of the immediacy is not justiciable.     Reliance has    been placed on the following passage in the judgment of Channell, J. in Queen v. Davey & Ors.:

"The general    principle of law is that an order affecting    his liberty or property cannot be    made against any one without giving him an opportunity of being heard; the result is that, if general words used in a statute empowering the making of such an order as this, it must be made on notice to the party affected. There are,     however, exceptions to this    rule, which arise where it can be seen on the words of the statute that it was intended that the order should be made on an ex parte application,    and the     case in which it is easiest to see the propriety of the exception is where, looking

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at the scope and    object of the legislation, it     was clearly intended that the     parties putting the law in force should act promptly. Such a case is an order for the destruction of unsound meat, which clearly may be made ex parte, because it is desirable in the interest of the public health that it should be acted upon at once. The case of removing an infectious person, likely to     spread     abroad     the infection, to an infectious hospital is obviously of the same character." According to    the learned Solicitor-General, the power conferred on the Central Government is in the nature of an emergency power, that the necessity for taking immediate action is writ large in Section 18AA(1) (a)-the provision being a     legislative response to deal    with an economically emergent situation fraught with national repercussions. The object of the exercise of this power is not to punish anyone but to    take immediate     preventive action in     the public interest.

On the other hand, Shri Nariman submits that the High Court was clearly in error in holding that the satisfaction of the    Central Government with regard     to the necessity of taking immediate action was not open to judicial review at all. It is emphasised that    the very language of     the provision shows that the necessity for taking immediate action is a question of fact, which should be apparent from the relevant evidence in the possession of the Government. We find merit in    this contention. It cannot be laid down as     a general proposition that    whenever a statute confers a power on an administrative authority and makes the exercise of that power     conditional on     the formation of an opinion by that authority in regard to the existence of an immediacy, its opinion in regard to that preliminary fact is not open to judicial scrutiny at all. While     it may be conceded that an element of subjectivity is always involved in the    formation of such an opinion, but as was pointed out by this Court in Bariam Chemicals (ibid), the existence of circumstances from which the inferences constituting     the opinion, as the sine qua non    for action are to be drawn, must be demonstrable, and the existence of    such "circumstances", if questioned, must be proved at least prima facie.

Section 18AA(1)(a), in    terms,     requires that     the satisfaction of the Government in regard to the existence of the circumstances or conditions precedent set     out above, including the necessity of taking immediate action, must be based on evidence in the possession of the Government. If the satisfaction of    the Government     in regard to     the existence of any of the conditions, (i) and (ii), is based on no     evidence, or    on irrelevant    evidence or on an extraneous consideration, it will vitiate the order of 'take-over', and the Court will be justified in quashing such an illegal order on judicial review in appropriate proceedings. Even where     the statute conferring the    discretionary power does not, in terms, regulate or hedge around the formation of the opinion by the statutory authority in regard to    the existence     of preliminary jurisdictional facts with    express checks,     the authority has    to form that    opinion     reasonably like a reasonable person.