JUDGMENT
Prakash Narain, C.J.
1. This petition under article 226 of the Constitution of India is concerned with the validity, tenability and legality of an order dated August 6, 1983, passed by the Central Government under section 15 of the Industries (Development and Regulation) Act, 1951, hereinafter referred to as the Act, in respect of the rayon unit of the first petitioner.
2. The first petitioner is a public limited company incorporated and registered under the Companies Act, 1913. The second petitioner is a shareholder of the first petitioner. Respondents Nos. 1 to 7 are the Union of India and persons appointed by the Central Government by its impugned order dated 6th August, 1983, for the purpose of investigation postulated by the said order, Respondent No. 8 is the State of Uttar Pradesh.
3. The first petitioner has, inter alia, a cotton textile mill at Kanpur and a mill for manufacture of rayon filament yarn, also, at Kanpur. The cotton mill has been in existence from 1921 and is reported to be doing very well. It is the other mill which has run into difficulties. The industrial license under the Act for the manufacture of rayon filament yarn was originally granted to J. K. Commercial Corporation Ltd. in February, 1956. The said license was amended on June 19, 1956, by substituting the name of the first petitioner in place of J. K. Commercial Corporation Ltd. This license was further amended on March 22, 1958, by the first respondent setting out that under it, manufacture cold be undertaken of rayon filament yarn and also man- made fiber, including regenerated cellulose rayon, nylon and the like. On October 8, 1957, the first respondent granted to the first petitioner a license or permission to manufacture certain new items, viz., sulfuric acide and carbon-bi-sulphide, in the petitioner’s existing rayon unit. There were certain other modifications made in the license on February 15, 1961. For the manufacture of rayon filament yarn and the said bye-products, the first petitioner set up a factory at Jajman, Kanpur, and commenced production of rayon filament yarn in or about the year 1959. Subsequent to this, applications made for diversification were, however, not accepted by the Central Government. An application for modernisation of rayon plant by installation of viscose rayon spinning line with 120 positions and other balancing equipment was also not accepted. These applications were rejected between the years 1960 and 1971. Certain excise duty exemptions were granted on the product of the rayon unit of the petitioner in 1967, but were withdrawn with effect from March 31, 1972. According to the petitioners, there were diverse difficulties faced by the rayon unit with the result that there was an aggregate loss of Rs. 37 lakhs between 1959 and 1975. On October 1, 1975, the rayon plant was given on license to another company, M/s. J. K. Synthetics Ltd., which started the rayon palt. However, on March 4, 1975, the rayon unit had to close down on account of a 100 per cent. power cut and it remained closed for eight months. On an assurance given by the 8th respondent, the Government of the State of Uttar Pradesh, on September 24, 1975, at a high-level meeting, that there would be uninterrupted supply of power to the rayon unit to the extent of 4,500 KVA, this plant was restarted with effect from October 1, 1975. Looking at the various conditions for which the petitioners say they were not responsible, the Uttar Pradesh Government recommended to the Central Government for grant of relief of excise duty to the first petitioner’s rayon unit by a communication dated February 11, 1976. By 1978, the aggregate loss came to Rs. 172.62 lakhs incurred by J. K. Synthetics Ltd., the licensee. Two factors were allegedly mainly contributing to the adverse state of production. These were : continuous power break down or power cuts and labour troubles. Between August, 1979, to July, 1980, the rayon unit remained closed on account of labour trouble, power-cuts and certain other economic factors. In August 1979, to July 1980, the rayon unit remained closed on account of liberator trouble, power-cuts bad certain other economic factors. In August , 1980, the rayon plant was restarted on an assurance, said to have have been given by the chief minister of Government of Uttar Pradesh, to make sufficient power available without interruptions. Labour trouble, however, was still there and, indeed, increased. In December, 1980, the two Unions controlling the labour started work to rule, stay-in-strike and other disturbing features. The result was that the plant had to again close down in December, 1980, and remained closed till January, 1981. The plant resumed production on January 15, 1981, after some settlement had been arrived at with the labour unions. It again had to close down because of labour trouble later in January, 1981. At the request of the first petitioner the Central Government appointed Shri Inamdar, by a communication dated June 6, 1981, for examination of the problems faced by the rayon unit with a view to finding out a solution. Shri Inamdar gave his report and findings in July, 1981. The factory which had been closed down by virtue of a closure notice was reopened in the middle of 1981. The labour trouble, however, continued as also frequent power-cuts and power interruptions. By 1982, the total loss suffered amounted to Rs. 863.86 lakhs. It is pointed out by the petitioners that by this time the rates for consumption of electricity had also been raised. The aggregate loss from 1975 to 1983 by this time came to Rs. 1,129.48 lakhs. On 12th May, 1983, M/s. J. K. Synthetic terminated the license agreement with effect from 16th May, 1983, before the expiry of the license on account of the staggering losses. As the first petitioner was unable to bear the burden of losses of the rayon unit, it gave notice of closure with effect from July, 1983, in the form prescribed under section 25-FFA of the Industrial Disputes Act. Notice was given to the workers and demand drafts for two months’ wages in lieu of notice were issued with offer to pay other labour dues. The Government of Uttar Pradesh then took up the matter and consultations were held with the first petitioner. On 16/17th May, 1983, the factory of the first petitioner was allegedly seized by workers who prevented access to the petitioner’s officers. On 8th June, 1983, the petitioners surrendered their license under the Act and offered to sell the rayon unit to the Central Government free of encumbrances for a token price of Rs. 1. M/s. J. K. Synthetics Ltd., also offered to transfer to the Central Government or its nominee certain assets pertaining to the aforesaid rayon unit and lying in the factory premises of the rayon unit for a token price of Re. 1. The offer was time-bound. On 11th June, 1983, however, the petitioners withdrew the time-limit placed for acceptance of the offer by the Central Government. On 15th June, 1983, the Central Government appointed a Task Force, headed by the second respondent, to visit the factory premises without any prior notice to the first petitioner. The Task Force looked into the functioning and affairs of the rayon unit and submitted its report towards the end of June, 1983. Certain meetings thereafter were held between the officers of the petitioners and officers of the Central Government, the latter examining the possibility of re-starting the rayon unit. On 6th August, 1983, the impugned order was passed by the Central Government. These are the undisputed facts.
4. The impugned order dated 6th August, 1983, reads as under :
“MINISTRY OF INDUSTRY DEPARTMENT OF INDUSTRIAL DEVELOPMENT
New Delhi, the 6th August, 1983.
ORDER
S. O. 561(E). WHEREAS the industrial undertaking known as Messrs. J. K. Rayons owned by Messrs. J. K. Cotton Spinning and Weaving Mills Company Limited, Kanpur, is engaged in the Scheduled Industry, namely, the Textiles industry.
AND WHEREAS, the Central Government is of the opinion that there has been a substantial fall in the volume of production and deteriorations in quality in respect of Viscose Filament Yarn manufactured in the said industries undertaking, for which having regard to the economic conditions prevailing, there is no justification.
AND WHEREAS, the Central Government is further of the opinion that the said Industrial Undertaking is being managed in a manner highly detrimental to the Textile industry and the public interest ;
NOW THEREFORE, in exercise of the powers conferred by section 15 of the Industries (Development and Regulation) Act, 1951 (65 of 1951), the Central Government hereby appoints, for ]cause of labour trouble later in January, 1981. At the request of the first petitioner the Central Government appointed Shri Inamdar, by a communication dated June 6, 1981, for examination of the problems faced by the reyon unit with a view to finding out a solution. Shri Inamdar gave his report and findings in July, 1981. The factory which had been closed down by virtue of a closure notice was reopened in the middle of 1981. The labour trouble, however, continued as also frequent power-cuts and power interruptions. By 1982, the total loss suffered amounted to Rs. 863.86 lakhs. It is pointed out by the petitioners that by this time the rates for consumption of electricity had also been raised. The aggregate loss from 1975 to 1983 by this time came to Rs. 1,129.48 lakhs. On 12th May, 1983, M/s. J. K. Synthetic terminated the license agreement with effect from 16th May, 1983, before the expiry of the license on account of the staggering losses. As the first petitioner was unable to bear the burden of losses of the rayon unit, it gave notice of closure with effect from July, 1983, in the form prescribed under section 25-FFA of the Industrial Disputes Act. Notice was given to the workers and demand drafts for two months’ wages in lieu of notice were issued with offer to pay other labour dues. The Government of Uttar Pradesh then took up the matter and consultations were held with the first petitioner. On 16/17th May, 1983, the factory of the first petitioner was allegedly seized by workers who prevented access to the petitioner’s officers. On 8th June, 1983, the petitioners surrendered their license under the Act and offered to sell the rayon unit to the Central Government free of encumbrances for a token price of Rs. 1. M/s. J. K. Synthetics Ltd., also offered to transfer to the Central Government or its nominee certain assets pertaining to the aforesaid rayon unit and lying in the factory premises of the rayon unit for a token price of Re. 1. The offer was time-bound. On 11th June, 1983, however, the petitioners withdrew the time-limit placed for acceptance of the offer by the Central Government. On 15th June, 1983, the Central Government appointed a Task Force, headed by the second respondent, to visit the factory premises without any prior notice to the first petitioner. The Task Force looked into the functioning and affairs of the rayon unit and submitted its report towards the end of June, 1983. Certain meetings thereafter were held between the officers of the petitioners and officers of the Central Government, the latter examining the possibility of re-starting the rayon unit. On 6th August, 1983, the impugned order was passed by the Central Government. These are the undisputed facts.
The impugned order dated 6th August, 1983, reads as under :
“MINISTRY OF INDUSTRY DEPARTMENT OF INDUSTRIAL DEVELOPMENT
New Delhi, the 6th August, 1983.
ORDER
S. O. 561(E). WHEREAS the industrial undertaking known as Messrs. J. K. Rayons owned by Messrs. J. K. Cotton Spinning and Weaving Mills Company Limited, Kanpur, is engaged in the Scheduled Industry, namely, the Textiles industry.
AND WHEREAS, the Central Government is of the opinion that there has been a substantial fall in the volume of production and deteriorations in quality in respect of Viscose Filament Yarn manufactured in the said industries undertaking, for which having regard to the economic conditions prevailing, there is no justification.
AND WHEREAS, the Central Government is further of the opinion that the said Industrial Undertaking is being managed in a manner highly detrimental to the Textile industry and the public interest ;
NOW THEREFORE, in exercise of the powers conferred by section 15 of the Industries (Development and Regulation) Act, 1951 (65 of 1951), the Central Government hereby appoints, fog of :
(i) Shri Suresh Kumar, Additional Textile Commissioner, Ministry of Commerce …Chairman
(ii) Shri Ashok Kumar, Director, Department of Banking, Ministry of Finance …Member
(iii) Shri N.D. Bhatia, Director (Inspection and Investigation) Department of Company Affairs, Ministry of Law, Justice and Co. Affairs …Member
(iv) Shri Ravi Prakash, Special Secretary, Industries, Government of Uttar Pradesh …Member
(v) Shri B.K. Malhotra, Manager, IFCA …Member
(vi) Shri S.N. Agarwal, Company Secretary, NTC, UP Member-Secretary …Member
The above body shall submit its report within a period of two weeks from the date of publication of this order in the official gazette.
Sd/-
(A. P. SARWAN)
Joint Secretary to the Government of India”.
5. The petitioners moved this Court by a petition under article 226 of the Constitution of India on 11th August, 1983. Rule was obtained on 12th August, 1983. While issuing rule this Court also stayed the operation of the impugned order dated 6th August, 1983.
6. By way of return, the first respondent has filed an affidavit sworn by Shri C. R. Sunderamurty, Deputy Secretary, Ministry of Commerce, Department of Textiles, Udyog Bhavan, New Delhi. The petitioners have also filed a rejoinder to this affidavit.
7. Section 15 of the Act, so far as it is relevant for this case, reads as under :
“15. Power to cause investigation to be made into scheduled industries or industrial undertakings :
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 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) …………
(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 natural 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.”
8. The petitioners’ case is that inasmuch as the issuance of an order under section 15 of the Act, as issued, adversely affect the credibility of the first petitioner and has civil consequences, it was implicit that the petitioners should have been given some sort of a hearing before the impugned order was issued. In other words, in issuing the impugned order, the Central Government has violated the rule of natural justice. It is further submitted by the petitioners that even otherwise the conditions precedent for the issue of an order under section 15 of the Act were not satisfied and, therefore, the order has to be struck down as being without jurisdiction, ultra vires and illegal. It is contended that there was no relevant material before the Central Government to issue an order under section 15(a)(i) or 15(b) of the Act. Indeed, there was non-application of mind in issuing the impugned order as it has been passed without there being any relevant material and by ignoring relevant material. In fine, the order is arbitrary and so, even mala fide in law.
9. The first respondent traverses the contentions of the petitioners. Accounting to it the impugned order was passed after taking into consideration relevant material available to the Central Government. It wa made within jurisdiction and after full application of mind. The first respondent contends that it was bound to order statutory investigation in view of the conditions prevailing and, therefore, the contentions of the petitioners are untenable. According to the Central Government, no rule of natural justice or requirement for hearing could be pleaded by the petitioners at this stage. Section 15 of the Act does not postulate it. In any case, the petitioners will get full opportunity to put their point of view during the investigation contemplated by the impugned order. The investigation contemplated is in the nature of a fact-finding enquiry to enable the Government to make up its mind as to what action should be taken to further the legislative intent of the Act that industry should be run only in such a manner that it subservers the purpose of the common good.
10. Before we proceed to examine the respective contentions of the parties in the content of the facts pleaded, it will be appropriate to clearly understand the legal position. We will, therefore, first dilate on purely the legal propositions of the requirement to comply with the rule of natural justice, claimed by the petitioners, before making an order under section 15 of the Act and the scope and postulates of this section.
11. We have already read section 15 of the Act, so far as it is relevant for the purpose of the present case. It is obvious that the opinion that the Central Government is required to form before passing an order under section 15 of the Act is to be on a subjective satisfication. The law is now well settled and it cannot be doubted that the opinion postulated by this section is not and cannot be whim or caprice. The subjective opinion has to be based on relevant material. Further, in forming it, the Central Government should not ignore any vital or relevant facts. Once the opinion is correctly so formed, it is not liable to be challenged unless it is shown that there was absence of material, or there was ignoring of relevant material so that there would be non-existence of the basic postulates warranting the making of an order under section 15. A valid order having been made, an investigation has to be held for the purposes mentioned in section 15(a)(i) and 15(b). The first question, therefore, that arises is whether such an investigation has any civil consequences, or whether passing of such an order adversely affects the petitioner in any manner and particularly whether the credibility of the management of the industrial undertaking in respect of which the investigation is ordered is adversely affected. Learned counsel for the petitioners strongly contended that there would be adverse effect on the credibility and reputation of the first petitioner. Learned counsel for the respondents, on the other hand, contended that a fact-finding enquiry, as postulated by section 15 of the Act, casts no stigma on the management of the rayon unit and, therefore, there is no question of the rule of natural justice being attracted.
12. In our opinion, the contention of the petitioners is well-founded. A mere reading of the provisions of section 15, set out above, makes it obvious. Clause (a)(i) of section 15 can be invoked when, prima facie, on the basis of material available with the Central Government, it is of the view that there is no justification for a substantial fall in the volume of production. Therefore, prima facie, the management is under some sort of a could, if not blame, though this is no said so in specific terms in this provision. Under section 15(b), however, the prima facie opinion has to be in terms that the management is at fault in running the industry in such a manner that it is highly detrimental to the scheduled industry concerned or even to public interest. To say that with such a prima facie charge being investigated or such a suspion being the basis of the investigation and yet there would be no adverse effect on or to the management or that such an investigation would have no civil consequences is an argument which cannot be accepted.
13. As far back as in Rohtas Industries Ltd. v. S. D. Agarwal, , the Supreme Court had clearly laid down the law in this regard. That was a case in which the Central Government had passed an order appointing an Inspector under sub-clauses (i) and (ii) of clause (b) of section 237 of the Companies Act, 1956, to investigate the affairs of Rohtas Industries Ltd. A question arose as to whether appointment of an Inspector has any effect on the company whose affairs are to be investigated when, admittedly, the report of investigation is only meant to inform the Central Government and the report of the investigation may or may not be accepted. The Supreme Court observed, after examining the entire scheme of sections 235 to 237 of the Companies Act, 1956, that it was clear that the Legislature considered that investigation into the affairs of a company is a very serious matter and it shout not be ordered except on goods grounds. It held : “It is true that the investigation under section 237(b) is of a fact- finding nature. The reports submitted by the Inspector does not bind anybody. The Government is not required to act on the basis of that report, the company has to be called upon to have its say in the matter but yet the risk – it may be a grave one – is that the appointment of an Inspector is likely to receive much press publicity as a result of which the reputation and prospects of the company may be adversely affected.”
14. The same view vis-a-vis section 15 of the Act has been taken by a Division Bench of this Court in Rai Bahadur Hurdutroy Moti Lal Jute Mills Private Ltd. v. Union of India, 2nd 1975 (1) Delhi 382. In this case, by an order made under section 15(a)(i), (section 15(b) not being invoked at all), the Central Government set up a committee for investigation into the affairs of the petitioner’s undertaking. Our learned brothers observed : “It must not be forgotten that in business houses, an order under section 15(1) for investigation of the affairs makes serious inroad and affects the credibility of the undertaking considerably ….”
15. In Mohinder Singh Gill v. Chief Election Commissioner, New Delhi, , the question arose whether the rule of audi alteram partem could be invoked in challenging the exercise of the power by the Election Commission under article 324 of the Constitution in cancelling a poll in the entire constitutency and whether before making such an order the rule of audi alteram partem had to be complied with. It was not disputed in that case that the rule of natural justice would be attracted if the impugned act had any civil consequence to the complaining party. It was urged that a civil right being adversely affected is a since qua non for the invocation of the audi alteram partem rule. It was held that fair hearing is a postulate of decision-making where decision has to be arrived at on an appreciation of vital facts. It was observed : “The philosophy behind natural justice is, in one sense, participator justice in the process of democratic rule of law. The silence of a statute has no exclusionary effect except where it flows from necessary implication.”
16. In Smt. Maneka Gandhi v. Union of India, , the challenge was to the impounding of a passport issued under the Passports Act, 1967. The contention was that the holder of the passport was entitled to be heard on grounds which, according to the authorities concerned, justified impounding of the passport. Without such a hearing the impugned action of the impounding of the passport was liable to be struck down as, inter alia, having offended the rule of natural justice or the audi alteram partem rule. Referring with approval to the rule propounded in an earlier decision of the Supreme Court (A. K. Kraipak v. Union of India, ) or to the earlier prevailing orthodox view, it was held that if an administrative action seriously interferes with the constitutional right then obviously the audi alteram partem rule would be attracted. It will be so attracted even where statutory rights are adversely affected. Going further, the Court held that compliance with this rule arises from the State’s duty to act fairly. The Supreme Court approved of the dicta of Lord Morris of Borthy-y-Gest of “fair play in action”. In other words, laying down the rule that State must always act in a just and fair manner, it was held that the rule of natural justice would be attracted to administrative action which may have any civil consequence or any adverse effect on the persons in respect of whom the order has been made.
17. In A. K. Kraipak v. Union of India, , the Supreme Court was concerned with a challenge to selections made from among the officers serving in the Forest Department of the State of Jammu and Kashmir to the Indian Forest Service. The orthodox argument regarding the absence of the requirement to give a hearing in exercise of administrative power as opposed to quasi-judicial power was raised. Their Lordships observed that in the development of administrative law in this country the dividing line between an administrative power and a quasi-judicial power is quite thin and was being gradually obliterated. The Supreme Court noticed with approval the following observations of Lord Parker, C. J., in Reg. v. Criminal Injuries Compensation Board : Ex parte Lain, [1967] 2 QB 864, which are as follows (at p. 881) :
“With regard to Mr. Bridge’s second point I cannot think that Atkin L. J. intended to confine his principle to cases in which the determination affected rights in the sense of enforceable rights. Indeed, in the Electricity Commissioners’ case. [1924] 1 KB 171, the rights determined were at any rate not immediately enforceable rights since the scheme laid down by the commissioners had to be approved by the Minister of Transport and by resolutions of Parliament. The commissioners nevertheless were held amenable to the jurisdiction of this Court. Moreover, as can be seen from Rex v. Postmaster-General : Ex parte Carmichael, [1928] 1 KB 291 and Rex v. Boycott : Ex parte Keasley, [1939] 2 KB 651, the remedy is available even tough the decision is merely a step as a result of which legally enforceable rights may be affected.”
18. Therefore, it is too late in the day for any one to urge that an order under section 15 of the Act, particularly under section 15(b), is a purely administrative order or one which is merely a step-in-aid of some possible action in future and, therefore, does not attract the rule of audi alteram partem. Admittedly, in the present case, the petitioners have not been heard prior to the order being made. The impugned order, it is urged has, therefore, to be held to be violative of the rule of natural justice and in derogation of the audi alteram partem rule.
19. Shri Bhandare, learned counsel for the respondents, urged that the rule of natural justice or the maxim of audi alteram partem could not be claimed by the petitioners prior to the passing of an order under section 15. He contended that, admittedly, the mill was lying closed and there has been not only fall in production but almost no production. In this situation, keeping in view the discipline of the Act and to ensure that the industry is carried on and not closed down, the Central Government has either to pass an order under section 18A or section 18AA of the Act or purchase the rayon unit for Rs. 1, as offered by the petitioners, or to decide not to take any action. Before it does so, it has to inform itself of the entire situation and that is what is the purpose of the statutory investigation under section 15 of the Act. Since full opportunity of hearing, i.e., post- decisional hearing, will be given during investigation, there was no need for a hearing prior to the making of an order under section 15. Inviting our attention to sections 3(c) and 3(d) of the Act, he urged that he words “carried on” or “carries on” are not to be construed in present. These have to be construed to mean where manufacturing process can be carried on or was being carried on and is possible to be carried on, in other words, where manufacturing process is ordinarily so carried on. Nothing, however, turns on this point.
20. What has to be seen is whether the post-decisional hearing contemplated during investigation can be a substitute for per- decisional hearing, advocated by the petitioners. Shri Bhandare, learned counsel for the respondents, first invited our attention to the decision of the Supreme Court in M. A. Rasheed v. State of Kerala . This decision is not relevant for the issue that we are examining. Indeed, this decision reaffirms the earlier decision of the Supreme Court in Rohtas Industries Ltd. (supra) and notices with approval Lord Atkin’s classic words in Liversidge v. Anderson, [1942] AC 206. The existence of the relevant material is the sine qua non for passing an administrative order which requires the formation of subjective satisfaction. This decision throws no light on the applicability of the audi alteram partem rule.
21. Reliance was also placed on Kesava Mills Co. Ltd. v. Union of India, and Swedish Cotton Mills v. Union of India, . In Kesava Mill’s case, the administrative order challenged was one which was passed under section 18A of the Act. It was admitted that during investigation the company was given a full opportunity of adducing evidence. In that view of the matter it was observed that the company could not be heard to complain that there was a failure to observe the rules of natural justice before passing an order under section 18A of the Act. This observation, therefore, is of no avail on the facts of the present case. In Swedish Cotton Mill’s case the administrative order was passed under section 18-AA of the Act. One of the questions that arose for consideration was whether in construing section 18-AA as a pure question of law, compliance with the principle of audi alteram partem has to be implied. If so, whether such a hearing is to be given to the parties who would be affected by the order to be passed under the said section prior to the passing of the order or whether such a hearing is to be given after the passing of the order and if prior hearing is to be normally given and the order passed under the said section is vitiated by not giving of such hearing, whether such vice can be cured by the grant of a subsequent hearing. A Full Bench of this Court herd the parties on a reference being made f the above proposition. The majority was of the opinion that section 18-AA(1)(a)(b) excludes the giving of prior hearing to the party who would be affected by an order there under. Section 18-F expressly provides for a post-decisional hearing to the wonder of the industrial undertaking, the management of which is taken over under section 18-AA to have the order so made canceled on any relevant ground. As the taking over of management under section 18-AA can be set aside by failure to grant post-decisional hearing, the question of the vice of absence of per-decisional hearing being cured by the grant of a subsequent hearing did not arise. On the fact’s of this case, the Supreme Court observed that the audi alteram partem rule is a very flexible, malleable and adaptable concept of natural justice. In the ultimate analysis, the question as to what extent and in what measure this rule of fair hearing will apply at the per-decisional stage will depend upon the degree of urgency, if any, evident from the facts and circumstances of a particular case. On facts it was held that there was sufficient time available to the Government to serve a copy of the report on the appellant company and to give them a short measure opportunity to submit their reply and representation regarding the findings and report one the appellant company and to give them a short measure opportunity to submit their reply and representation regarding the findings and recommendations of the Group Officers and the proposed action under section 18-AA(1). The High court’s view as such was not approved. It was held : “In sum for all the reasons aforesaid we are of the view that it is not reasonably possible to construe section 18-AA(1) as universally excluding, either expressly or by inevitable intendment the application of the audi alteram partem rule of natural justice at the per-takeover stage, regardless of the facts and circumstances of the particular case. In the circumstances of the instant, case, in order to ensure fairplay in action, it was imperative for the government to comply substantially with this fundamental rule of prior hearing before passing the impugned order. We, therefore accept the two-fold proposition posed and propounded by Shri Nairman.” this case, also, therefore, does not advance the proposition propounded by the Shri Bhandare that, if necessary, post- decisional hearing could be given and per-decisional hearing was not necessary. Indeed, nothing has been shown to us that there was such desperate hurry to pass an order under section 15 of the Act so as to exclude at least the very minimal harangue which should have been given to the petitioners before passing the impugned order.
22. Lastly, reliance was placed by Shri bhandare on sukhwinder Pal Bipan Kumar v. State of Punjab, . This was of suspension of licensese to Deal in foodgrains issued under the Punjab Food Grains Dealers Licensing and prince control order, 1978. The power to suspend the license without first giving a hearing was upheld. Once again, this decision is of no help to us. In the facts of the case, the power exercised was held to be one by which suspension could be order by way of interim measure pending the holding of an enquiry as to whether there is nay breach which must result in the cancellation of the license. It was observed that such a power would be valid as it was a measure of social control in the interest of the community and also as, in terms, post-decisional hearing was contemplated.
23. On a conspectus of the law, we have no doubt in holding that on the facts of the present case the audi alteram partem rule was attracted and that the petitioners had to be given some sort of a hearing or say in the matter before the impugned action was taken which could adversely affect the credibility of the first petitioner.
24. We now come to the second aspect and proceed to dilate upon what are the necessary ingredients of section 15(a)(i) or section 15(b) of the Act, It is settled law that the existence or non-existence of relevant material can be a matter of judicial review if an administrative order is challenged on the ground that there was no relevant material available with the State to enable it to pass an administrative order by arriving at an opinion or in its subjective satisfaction. Likewise, the State cannot plead that such an order, if passed is not subject to judicial review to find out as to whether any relevant material has been ignored. We have, therefore, to see what are the postulates necessary before an order can be passed under section 15(a)(i) of section 15(b) of the Act.
25. Clause (A)(i) contemplates that an opinion has to be formed by the Central Government (i) in respect of any scheduled industry or industrial undertakings, (ii) there must be some material to show there has bene or is likely to be a substantial fall in the volume of production in respect of any article or class of articles produced or manufactured by the scheduled, industry on industrial undertaking or undertakings, (iii) the economic conditions prevalent have to be known and have to be taken into account, and (iv) that having regard top the economic conditions prevailing, at the national level, or even local, regarding the whole industry or part of the industry, regarding the industry in the whole country or the scheduled industry in a particular State or Locality, facts disclose at lest prima facie, that there is no justification for a substantial fall in the volume of production of likely fall in such production.
26. Regarding section 15(b) the postulates will be : (1) the opinion has to be formed regarding an industrial undertakings; (ii) the opinion should be that, prima facie, it is being mismanaged, (iii) the industrial undertaking is being mismanaged to the extent that it is highly detrimental; (iv) such mismanaging of the industrial undertaking is detrimental to the scheduled industry concerned or to public interest or to either. In other words there is some fault with the management.
27. If the above are the postulates, it is obvious that the Central Government must have material relevant to satisfy itself about the existence of the above postulate for passing on order under section 15(a)(i) or section 15(b) of both, as has been done in the present case. If this material is not there, or if relevant material has not been taken into consideration in arriving t a subjective decision or forming an opinion to issue an order then the order would be without jurisdiction, ultra vires and even arbitrary. We make no comment at this stage regarding mala fides in law.
28. The facts, as disclosed during the hearing, may now be examined to see whether the postulates of section 15(a)(i) or section 15(b) or either or both have been satisfied or not satisfied.
29. Learned counsel for the parties have taken us at great length through the reports of Shri Inamdar, the Task Force, and cost audit reports in respect of the rayon unit of the first petitioner. Admittedly, there has been a sustanitla fall in the volume of production of the reyon unit. Indeed, it has been lying closed down since 12th May, 1983, with intermittent colosures since commencement of production. this posutalte, therefore, was satisfied. The next is as to what were the economic condition prevailing. It is on record that there were power- cuts and power cuts of substantial durations. there was labour trouble and even over-employment in the reyon unit. The locations of the rayon unit was well known. Its high cost of production could not be disputed. The cost of raw material an dirts availability were known. Its high Cost of production could not be disputed. The cost of raw material and its availability were, known. There was material to show whether there was demand of the finished product. The marketing feasibility and viability were also known or at least there was some materiel in regard to makings prima faces opinion about the same. Conditions of other units making the same product were also known. The way the management was functioning was also known. It was also known as to what was the position of labour and power in the other unit of petitioner No.1, i.e., the cotton mill. In this view of the matter one could say that for the requirement of knowdledge with the economic conditions there was some relevant material available with the Central Government. Admittedly, the cotton mill, also located at Kanpur was doing well. Therefore, it will be difficult to say that the order under section 15(a)(i) did not satisfy the postulates analysed by us earlier. with the admitted stoppage of production what had to be found out by investigation was whether any of the above factors or a combination of one or more was responsible for the fall in production, indeed, stoppage of production.
30. It was also argued by Mr. Sorabjee, learned counsel for the petitioner, that if it was known to the central Government that there were good reasons for all in production or indeed stoppage of production there would be no jurisdiction to make on order under section 15(a)(i) of the Act. Referring to the admitted position about labour and power and the observations of Shri Inamdar nd the task force or even the cost audit reports that the management could not be blamed, he urged that an investigation as envisaged by section 15(a)(i) could not be ordered. We do not agree. Assuming that the management was an efficient management, and its efficiency appears to be evident from the management of the cotton mill, the Government was entitled to investigate as to why the rayon unit could not continue to be on steam and give production according to its installed capacity. Indeed, the question did arise in these circumstances a sot whether the blame for fall in production was account of one cause or another, labour or management, or even the State which was to supply the power. May be, the stoppage of production was on account of certain factors which had still to be found out. the puzzle had to solved and, therefore, an order under section 15(a)(i) could be made on the material as available to the Central government. We cannot agree with Mr. Sorabjee that on the basis of the observations in Sri Inamadar’s report or the Task Force or even the cost audit reports, the Government should have come to the conclusion that the unit not being viable there was no option but to let it remain closed.
31. The position regarding the postulates of section 15(b), however, is entirely different. In our view, there was no material before the Central Government to come to the conclusion, even prima facie, at prima face, it was the fault of the management and the stoppage of the rayon unit created a constitution which was determinated to the interest of the interest of the industry or detrimental to public interest. Public interest is a term which is now well-understood. Merenon employment of some working may create a problem but the extent of the problem has to be such that it is detrimental to public interest. Reliance by Shri Bhandare, learned counsel for the respondents, on observations in the cost audit reports in this regard cannot be accepted. Indeed, these observation in the cost audit reports have been torn out of context and have been quoted in the counter-affidavit filed buy the respondents by not reproducing the in the reports. We may refer to the counter-affidavit and the cost audit reports, in this regard and quote only a few parts of it. There are two cost audit reports, one for the year ending 31st December, 1980, and the other for the year ending 31st December, 1980, Quoting from the cost audit report for the period ending 31st December 1980, what it reproduced in the counter-affidavit of the first respondent is as follows :-
“Reference is also craved to the following observations of the cost auditor in his report for the period 1980 :-
A.6(2)(b) `Consumption in quantity and cost of rayon plup per kg. of viscose filament yarn have gone up because of increase in waste and due to increase in prices of raw material.”
32. When we turn to the relevant cost audit report, we find that though the above observations has no doubt been made, yet what has been left out are the other observations and findings .
33. The cost audit report deals various factors for the above factual statement and sets out in para 16(1)(c) as follows :-
“The consumption of rayon pulp per kg. of viscoe filament year has gone up too much due to more wastage produced by 11% as compared to previous year. However, earning in the facts and circumstances of the case was necessary, whether the order had to be passed under section 15(a)(i) or section 15(b) of the Act, or both.
34. The impugned, order, therefore, cannot be sustained.
35. Inn the view that we have taken on two of the main points urged before us, we do not find it necessary to make any comments on the third limb of the challenge to the impugned order put forward by the petitioners. we refer to the contention of Mr. Sorabjee that the impugned order is liable to be struck down on grounds of legal Mala fides.
36. The result is that we quash the impugned order dated 6th August, 1983, passed by the Central Government under section 15(a)(i) and (b) and the act, and restrain the respondents from taking any action there under A writ would issue accordingly. The petitioners will be entitled to costs. Counsel’s fee Rs. 2,000.