Constitutional Law

State of Gujarat v. Shri Ambica Mills Ltd.

AIR 1974 SC 1300; (1974) 4 SCC 656

Citation: AIR 1974 SC 1300; (1974) 4 SCC 656
Court: Supreme Court of India
Date: 26 March 1974
Bench: A.N. Ray C.J.; H.R. Khanna; K.K. Mathew; Y.V. Chandrachud; A. Alagiriswami

Facts

The Bombay Labour Welfare Fund Act, 1953 created a fund for activities promoting labour welfare.
The Act required employers to transfer “unpaid accumulations” to the Labour Welfare Fund.
Unpaid accumulations included wages, gratuity and other amounts legally payable to employees but remaining unpaid for a specified period.
After claims were invited and determined, amounts remaining unclaimed could be appropriated for labour welfare.
Shri Ambica Mills Ltd., a company incorporated under the Companies Act, received a demand requiring it to transfer unpaid accumulations.
The company challenged the relevant provisions before the Gujarat High Court.
It argued that the provisions infringed Article 19(1)(f), which then protected citizens’ right to acquire, hold and dispose of property.
The High Court held that the provisions violated the rights of citizen employers and employees and were therefore void under Article 13(2).
It reasoned that because the law was void, it could not be enforced even against a company that was not itself a citizen.
The State of Gujarat appealed to the Supreme Court.

Whether a company, which is not a citizen for Article 19, could challenge a law on the ground that it violated the Article 19 rights of citizens.
Whether a law violating a citizens-only fundamental right becomes void for all persons and all purposes.
Whether “void” under Article 13 means absolute non-existence or only relative unenforceability.
Whether the classification of establishments under the Welfare Fund Act violated Article 14.

A corporation is not a citizen and cannot independently claim the rights guaranteed only to citizens under Article 19.
Article 13 makes a law void only to the extent of the inconsistency or contravention.
Constitutional invalidity is connected with the right infringed and the person entitled to that right.
A law violating Article 19 may be unenforceable against citizens but remain operative against non-citizens who possess no Article 19 rights.
The voidness under Article 13 is therefore not necessarily absolute or “in rem”; it may be relative to the persons whose fundamental rights are affected.

Ambica Mills was an incorporated company and therefore could not claim citizenship for Article 19.
The Court assumed, without finally deciding, that the impugned provisions might interfere with the Article 19(1)(f) rights of citizen employers or employees.
Even on that assumption, the company could not argue that the law had completely disappeared from the statute book.
Article 13(2) states that a law is void “to the extent of the contravention.”
The contravention must be identified by examining:
the particular fundamental right involved; and
the person or entity in whom that right is vested.
Since Article 19 rights belonged only to citizens, a law offending those rights was void only in its application to citizens entitled to invoke them.
There was no constitutional inconsistency when the same law was applied to a non-citizen corporation.
The company could not rely upon the fundamental rights of its shareholders, employers or employees merely to avoid its own statutory liability.
The Court rejected the High Court’s view that the law became completely non-existent once it infringed the Article 19 rights of some persons.
A law may be “stillborn” or unenforceable against the protected class while remaining a valid source of authority against persons outside that class.
The Court also upheld the statutory classification under Article 14, finding a rational basis for applying the legislation to specified factories and larger establishments.

The Supreme Court held that Ambica Mills could not challenge the legislation under Article 19(1)(f) because a company is not a citizen.
A post-Constitution law violating Article 19 does not necessarily become void against non-citizens.
The expression “void” under Article 13 is limited by the words “to the extent of the contravention.”
The law remained valid and enforceable against the respondent company.
The definition and classification of establishments were also upheld under Article 14.