P.D. Shamdasani vs Central Bank Of India Ltd.

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P.D. Shamdasani vs. Central Bank of India
In the Supreme Court of India
Equivalent Citation: 
1952 AIR 59, 1952 SCR 391
Petitioner: 
P.D. Shamdasani
Respondent: 
Central Bank of India ltd.
Decided on 
21 December, 1951
Bench
Sastri, M. Patanjali (Cj), Mahajan, Mehr Chand, Mukherjea, B.K., Das, Sudhi Ranjan, Aiyar, 
N. Chandrasekhara

Background 

This case was originally filed by the petitioner in the court of High Court at Bombay on its original and appellate jurisdiction. The earliest suit was filed in the year 1951 which was rejected due to limitation. The petitioner made a prayer that all the adverse orders made in the previous proceedings be quashed and the said High Court be directed to have ” the above suit set down to be heard as undefended and pronounce judgment against the respondent or to make such orders as it thinks fit in relation to the said suit.”[1] An interesting part of the same was that the petitioner did not prefer an appeal against the decision of the High Court stating reasons that all the judges of the said court were disqualified from hearing the case as they were a party of interest by virtue of being either related to the respondents or customers of the bank.

In India, it is a widely accepted rule that fundamental rights are enforceable against the State barring a few exceptions. Unlike in the United States there had not been much debate over Public/Private divide because there are Constitutional provisions are clear regarding against whom fundamental rights are enforceable. It was in P.D. Shamdasani v. Union Bank of India[2] the question as to the enforceability of fundamental rights against private actor came for the first time. The Court drew a line between private and state action and held that fundamental rights are not enforceable against private actor.

The petitioner held five share capital in the bank of the respondent, namely, Central Bank of India Ltd., a company incorporated under the Indian Companies Act, 1882 and having its registered office at Bombay. In purported exercise of its right of lien for recovery of a debt due to it from the petitioner, the Bank sold those shares to a third party and the transfer was registered in the books of the Bank in the year 1937. The contention of the petitioner was that the same was a violation of his fundamental rights under Article 19 (1) (f) and Article 31 (1). The provisions of law mentioned here read as follows:

“Art. 19(1) All citizens shall have the right_

(f) to acquire, hold and dispose of property….”

“Art 31 Compulsory acquisition of property –

  • No person shall be deprived of his property save by authority of law.”

Art. 19(1) (f) guaranteed to the Indian citizens a right to acquire, hold and dispose of property. Art 19 (5), however, permitted the state to impose by law reasonable restrictions on this right in the interests of the general public or for the protection of any Scheduled Tribe.

An important aspect needs to be kept in mind here.  The Constitutional (Forty-Fourth Amendment) Act, 1978, signified the demise of the Fundamental Right to Property. Before 1978, there were mainly two articles to protect private property. Article 19 (1) (f) and 31, but they were repealed by the constitutional amendments, and thus private property was left defenceless.[3]

It was abolished because the Indian government wanted to bring land reforms and encourage social justice (by taking land from landowners who have surplus land and then distributing it to landless farmers).

It also aimed to establish an equal distribution of resources. Furthermore, it was important for the development of India to abolish it. For example – if the Indian government wanted to build a dam or construct a road it had to acquire the people’s property and in return people used to revolt and approach judiciary even though the government compensate them by giving money or land somewhere else for taking their property hence this created problem to the development functions of the government, hence it was abolished.

Arguments 

Arguments on behalf of Petitioner

The petitioner has urged that clause (1) should be constructed apart from and independently of the rest of the article and, if so construed, its language is wide enough to cover infringements of rights or property by private individuals.

He laid emphasis on the omission of the word “State” in clause (1) while it was used in clause (2) of the same article as well as in many other articles in Part III.

Referring to entry No. 33 of the Union List, entry No. 36 of the State List and entry No. 42 of the Concurrent List of the Seventh Schedule to the Constitution, he also argued that “deprivation contemplated in clause (1) could only be deprivation by individuals.

In support of his arguments, the petitioner relied on the case of Chiranjit Lal Chowdhary[4] in which Mukherjee, j. held that acquisition means acquiring the entire title of the expropriated owner, whatever, the nature and extent of that title might be and that the entire bundle of rights which were vested in the original holder would pass on acquisition to the acquirer, leaving nothing to the former.[5] It enunciated the general principle that no person should be deprived of his property except by authority of law and laid down no condition for payment of compensation, while clause (2) dealt with deprivation of property brought about by acquisition or taking possession of it and required payment of compensation. In other words, deprivation referred to in clause (1) must be taken to cover deprivation otherwise than by acquisition or requisitioning of property dealt with in clause (2).

However, distinguishing the two cases, the court thought it unnecessary to go into that question.

Held by the court

Even assuming that clause (1) has to be read and construed apart from clause (2), it is clear that is a declaration of the fundamental right of private property in the same negative form in which article 21 declares the fundamental right to life and liberty. There is no express reference to the State in article 21.

The words “save by authority of law” in clause (1) of article 31 show that it is a prohibition of unauthorised governmental action against private property, as there can be no question of one private individual being authorised by law to deprive another of his property.

It is not correct to suggest that, merely because there is no entry in the Lists of Seventh Schedule relating to “deprivation of property” as such, it is not within the competence of the legislatures in the country to enact a law authorising deprivation of property.

Article 31(1) itself contemplates a law being passed authorising deprivation of the properties and it is futile to deny the existence of the requisite legislative power.

Section 299(1) of the Government of India Act, 1935 was never interpreted as prohibiting deprivation of property by private individuals.

It was finally held by the Supreme Court that Articles 19(1)(f) and 31(1) of the Constitution of India are not intended to prevent wrongful individual acts or to provide protection against merely private conduct.

Fundamental Rights are enforceable through writ petitions before the High Court and the Supreme Court, and against bodies that come in the ambit of the term “State” of Article 12 of the Constitution. This article lists bodies that are to be held as “State” for the purpose of Part III of the Constitution which includes the Fundamental Rights Although there is no clear indication as to the applicability of the rights only against the State, that has been the interpretation by the Judiciary.[6] To quote the article:

“In this Part, unless the context otherwise requires, “the State’’ includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India.”

After analysing judicial decisions, it can be seen that according to the Court it is only when a private actor satisfies ‘deep and pervasive control test’ or ‘agency or instrumentality test’ that the fundamental Rights can be enforced under Article 32 vis-à-vis Article 12. In this era of globalization this strict vertical approach of Fundamental Rights is no longer proper because now economic and political power are increasingly given to private actors too rather judiciary has to protect and uphold the fundamental rights under the Constitution. But our judiciary is constrained in a set of narrow doctrines evolved from time to time. In the present scenario an innovative and liberal approach in tune with the spirit and fundamental values of the constitution is the need of the hour.[7]

My analysis of the judgment is that the case, decided back in 1951 set up a judicial example of excluding protection of fundamental rights from the realm of private parties. The court should have, however, cleared the area of law whether the distinction between the protection of rights against the state and the private parties exists because of the distinction that exists between fundamental rights and legal rights, a debate which would open up later in subsequent cases.

Edited by Dhruval Singh

Approved & Published – Sakshi Raje

Reference

1 AIR 1952 SC 59.

[2] id

[3] Emergence of Article 31 A, B and C and its validity, Laxman, Legal Service India

[4] Chiranjit Lal v. The Union of India MANU/SC/0009/1950 : [1950] S.C.R. 869

[5] id

[6] Mahendra P. Singh, V.N. Shukla’s Constitution of India, Eastern Book Company, 11th edition (2008), p. 24.

[7] Sanu Rani Paul, Need for Horizontal Application of Fundamental Rights in the Era of Globalization, 2 C.U.L.J. 81-96 (2012); Ashish Chugh