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PETITIONER: VISHNU DAYAL JHUNJHUNWALA & ANR.

       Vs.

RESPONDENT: UNION OF INDIA AND OTHERS

DATE OF JUDGMENT18/04/1984

BENCH: SEN, AMARENDRA NATH (J) BENCH: SEN, AMARENDRA NATH (J) DESAI, D.A. MISRA, R.B. (J)

CITATION:  1984 AIR 1346            1984 SCR  (3) 530  1984 SCALE  (1)699

ACT:      Defence of  India Rules, 1962. Rules 125 and 125A Sugar Mill  Closed-Order   of  Central   Government  taking   over Management-Authorised controller  appointed-order of Central Government-Whether valid.      Words  &   Phrases:   ’Undertaking’-’Engaged   in   the production of’-Meaning of-Rule 125A Defence of Indian Rules, 1962.

HEADNOTE:      The management  of the  Sugar Mill of the Appellant was taken over under Rule 125 of the Defence of India Rules 1962 and an Authorised Controller was appointed.      In the  appeal by  certificate to  this Court,  it  was contended on  behalf  of  the  Appellant  that  long  before passing of  the order  and even before sugar was declared to be an  essential commodity,  the  appellant  had  completely stopped the  running of  the Mill with no intention to start it again,  there was,  therefore, no  undertaking within the meaning of  Rule 125A  and the  order passed under Rule 125A which was not attracted must be held to be bad and invalid.      On behalf  of the Union of India, it was contended that Rule 125A  confers jurisdiction  and authority  to  pass  an order even  in respect of an undertaking closed and intended to be permanently shut down.      Dismissing the appeal, ^      HELD :  The taking  over of the management of the sugar mill of  the appellant and the appointment of the authorised controller were  perfectly valid and lawful and the act done by the  authorised controller in the course of management is binding on the appellant. [553A] 531      2. Although  Rule 125  confers  very  wide  powers  for general control  of an undertaking, there is no provision in the  said   rule  to   take  over   the  management  of  any undertaking. Rule  125A by  way of amendment was, therefore, inserted  to   confer  further  power  of  taking  over  the management of  particular  undertakings  and  of  appointing authorised controllers for running such undertakings. [541G, 542A]

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    3. Rule  125A makes  it clear  that the  rule  was  not intended to  apply to  each and every undertaking within the meaning of  Rule 125. Special provision is made in Rule 125A in  respect  of  particular  undertakings  only.  Rule  125A describes and  particularizes the undertakings to which this rule will be applicable. [542B]      4. The provision in Rule 125A that "in this rule unless the context  otherwise requires,  an ’undertaking’ means any undertaking  (including   an  undertaking   vested   in   or controlled or  managed  by,  a  local  authority)  which  is engaged in---",  is merely descriptive of the undertaking to which this  rule is  applicable. The words "which is engaged in the  production" merely describes the kind of undertaking by  referring   to  the   nature  of  the  activity  of  the undertaking for  bringing it within the purview of Rule 125A and they  have  no  bearing  on  the  question  whether  the activities are  in the  process of  being carried on or have been  stopped.  The  expression  any  undertaking  which  is ’engaged in’  has  been  used  to  describe  the  nature  of business of the undertaking and is merely descriptive of the undertaking to which this rule will apply. [542C-E]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal No. 481 of 1971.      From the  Judgment and  Decree dated the 22nd December, 1969 of  the Allahabad High Court in Writ Petition . No. 210 of 1967.      S.T. Desai and H.S. Parihar for the Appellant.      Harbans Lal,  Miss A.  Subhashini and  V.B. Saharya for the Respondent.      Mrs. Shobha Dikshit for Respondent. No. 3.      The Judgment of the Court was delivered by 532      AMARENDRA NATH SEN, J. Whether the order of the Central Government taking  over the  management of the Sugar Mill of the Appellant  under Rule 125A of the Defence of India Rules and appointing  an authorised  Controller of  the said  Mill thereunder is  valid, is  the principal question which falls for determination in this appeal by certificate.      The main contention of Mr. S. T. Deasi, learned Counsel for the  appellant, is that on a proper construction of Rule 125A of  the Defence of India Rules (hereinafter referred to as the  Rules) the  order taking  over the management of the Sugar Mill under this rule is invalid, as on the date of the order the  Sugar Mili  was closed  and the  appellant had no intention of  re-opening the  same. It has not been disputed that if the order of the take over of the management is held to be valid the appellant will not be entitled to any relief and the appeal must fail.      We may  observe that  the question whether the Mill was closed or  not  on  the  date  the  order  taking  over  the management and  appointing an  authorised  Controller  under Rule 125 was passed, is in serious dispute. However, for the purpose of  deciding the  question raised  in this appeal it does not become necessary to go into any dispute with regard to the  facts. We  propose to  proceed on the basis that the Mill had  remained closed and the appellant had shut it down permanently on  the date the order came to be passed, as, in our opinion, the order in question, even if the same be held to have  been passed  at the time when the Mill was lying so closed, must  be held  to be  perfectly valid  on  a  proper interpretation of  Rule 125A. As in our opinion, on a proper

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interpretation of Rule 125A, the order in question is lawful and justified  even if we accept the submission of Mr. Desai that the  Mill was  factually so  closed, it does not become necessary for  us to  advert to the facts of this particular case. The  real question  is one  of interpretation  of Rule 125A.      Rule 125A  was introduced  by an amendment and inserted by G.  S. R.  1813 dated 28th December, 1962. The provisions of this  Rule relevant  for the  purpose of  this appeal are contained in subrules (1) and (2) which provide as follows:-      "125A (1).  In this  rule unless  the context otherwise      requires, ’undertaking’ means-      (a)   any undertaking  (including an undertaking vested in. 533           or controlled  or managed  by, a  local authority)           which is  engaged in  the production,  generation,           supply,  distribution   or  provision   of  water,           transport, fuel, light electricity or other power,           or any other thing or service which is notified by           the Government  as essential  to the  life of  the           community;      (b)   any system  of public  conservancy and sanitation           and any hospital or dispensary;      and  also   includes  any   part  or   property  of  an      undertaking.           (2) If it appears to the Central Government or the      State Government  that  for  maintaining  supplies  and      services essential  to the life of the community, it is      necessary  to   take  over   the  management   of   any      undertaking, that  Government may,  by notified  order,      authorise any  person or  body of  persons to take over      the management  of any  undertaking  specified  in  the      order and  thereupon such  undertaking shall be managed      in accordance with the provisions of that order;           Provided that  powers under this sub-rule shall be      exercised by  the State  Government  in  respect  of  a      company to which the Companies Act 1956 applies.      Mr. Desai referring to sub-rule (1) (a) of Rule 125A of the Rules  has argued that the Mill of the Appellant was not an undertaking  within the meaning of this Rule, as the Mill on the  date of  the order  was not  engaged in  production, generation, supply,  distribution, or  provision  of  water, transport, fuel,  light, electricity  or other  power or any other thing  or service  which is notified by the Government as essential  to the  life of the community because the Mill had been  lying closed.  It is  his argument  that an  order under Rule  125A can only be validly passed in respect of an undertaking within  the meaning  of the Rule and in terms of the definition  of ’undertaking’ in the rule, an undertaking to which  this rule  may apply, must be one which is engaged in  the  production,  generation,  supply,  distribution  or provision of  water, transport,  fuel, light, electricity or other power or any other thing or service 534 which is notified by the Government as essential to the life of the  community. He contends that the Mill had been closed and had not been functioning and therefore, the Mill was not engaged   in   the   production,   generation,   supply   or distribution of  any sugar  or any  other thing  or  service essential to the life of the community. It is his contention that as  the appellant  had long  before the  passing of the order and  even before sugar was declared to be an essential commodity completely stopped the running of the Mill with no intention to  start it  again, the  Mill had  ceased  to  be

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engaged in  the manufacture or production of sugar and there was therefore,  no undertaking  within the  meaning of  Rule 125A and  the order  passed under  Rule 125A  which was  not attracted must  be held  to  be  bad  and  invalid.  He  has submitted that  an order  under Rule 125A can only be passed in respect  of an  undertaking which  is actually engaged in the activity  of production at the time the order is passed. In support  of the  submissions made, Mr. Desai has referred to the  decision of  this Court  in R. C. Cooper v. Union of India(’) and also to the decision of the Delhi High Court in the case  of National Projects Construction Corporation Ltd. v. Commissioner of Wealth Tax. Delhi(2).      On behalf  of the Union of India, it has been submitted that stoppage  of production and non-functioning of the Mill even with  an intent  to close it down permanently does not, in any  way, affect  the power  to take  over the management under Rule  125A and  the jurisdiction and authority to pass an order  even in  respect  of  an  undertaking  closed  and intended  to  be  permanently  shut  down,  can  validly  be exercised under  rule 125A.  The submission  is that  merely because an  undertaking has been shut down with no intention of being  reopened it  will not on that ground only cease to be an  undertaking within  the  meaning  of  the  rule.  The learned counsel argues that for a proper appreciation of the true import  and meaning  of the  word ’undertaking’ and for understanding the  true scope and effect of rule 125A, it is necessary to  refer to  rule 125. It is his argument that in the light  of the provision contained in rule 125, rule 125A which was  introduced by  way of amendment to confer further power of  take over of the management of an undertaking will have  to   be  understood   and  construed;  and  on  proper interpretation  it  is  clear  that  in  the  larger  public interest. 535 the power  and  authority  conferred  under  rule  125A  can undoubtedly be  exercised in respect of an undertaking which may not  be functioning  and may  have even been closed with intent of not reopening the same.      The relevant provisions of rule 125 read:-           "125. General  control of  industry,  etc.-(1)  In      this rule, unless the context otherwise requires,-      (a)   any reference  to any  article or  thing shall be           construed as  including a  reference to electrical           energy;      (b)  the expression ’undertaking’ means any undertaking           by way  of any  industry, trade  or  business  and           includes the  occupation of  handling, loading  or           unloading of goods in the course of transport.           (2)  If   the  Central  Government  or  the  State      Government is  of  opinion  that  it  is  necessary  or      expedient so  to do  for securing  the defence of India      and civil  defence, the  efficient conduct  of military      operations or  the maintenance  or increase of supplies      and services  essential to the life of the community or      for   securing    the   equitable    distribution   and      availability of any article or thing at fair prices, it      may, by  order, provide  for regulating  or prohibiting      the production,  manufacture, supply  and distribution,      use and  consumption of articles or thing and trade and      commerce therein or for preventing any corrupt practice      or abuse of authority in respect of any such matter.           (3) Without  prejudice to  the generality  of  the      powers  conferred   by  sub-rule  (2),  an  order  made      thereunder may provide-      (a)   for regulating  by licences, permits or otherwise

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         the   production, manufacture,  treatment, keeping           storage,   movement,    transport,   distribution,           disposal,  acquisition,   use  or  consumption  of           articles or things of any description whatsoever; 536      (aa)  for   regulating  or  prohibiting  any  class  of           commercial or financial transactions in respect of           any article  or thing  which in the opinion of the           Government  are,   or,   if   not   regulated   or           prohibited, are  likely to  be, detrimental to any           of the purposes specified in subrule(2)      (b)  for prohibiting the with holding from sale, either           generally or  to specified  persons or  classes of           persons, of articles or things ordinarily kept for           sale  and   for  requiring   articles  or   things           ordinarily kept  for sale  to  a  be  sold  either           generally or  to specified  persons  or  class  or           classes of persons or in specified circumstances;      (c)   for requiring  any person  holding in  stock  any           article or  thing to sell the whole or a specified           part of  the stock  to the  Government  or  to  an           officer or  agent of  the Government  or  to  such           other person or class or classes of persons and in           such circumstances  as may  be  specified  in  the           order and  if the order relates to food-grains, at           such prices  as may  be  specified  in  the  order           having regard to;-           (i)   the maximum  price, if  any, fixed  by order                under clause (e) or by or under any other law                for the time being in force, for the grade or                variety of  food-grains to  which  the  order                this clause applies; and           (ii) the  price for that grade or variety of food-                grains prevailing or likely to prevail during                the post  harvest period in the area to which                the order applies;      (d)   for securing  the production  or  manufacture  of           specified  articles   or   things   in   specified           quantities and  for effecting  modification in the           pattern  of  production  or  manufacture  of  such           articles or things;      (dd) for securing the production, manufacture supply or           sale according  to the  prescribed  standards  and           specifications, of  any article or thing appearing           to the Government essential to any of the purposes           specified in sub-rule (2); 537       (ddd) for the minimum and maximum stock of any article           or thing  appearing to the Government essential to           any the  purposes specified in sub-rule (2), to be           held  by   any  consumer   or  by   any  producer,           manufacturer, distributor, dealer or other person;      (e)   for controlling  the prices  or  rates  at  which           articles or  things of  any description whatsoever           may be  sold or  hired or for relaxing any maximum           or minimum limits otherwise imposed on such prices           or rates;      (f)   for controlling  the rates  at which  any  vessel           registered in  India may be hired and the rates at           which persons or goods may be carried in or on any           such vessel;      (g)  for requiring any employers or class or classes of           employers to  supply to  all or any class of their           employees or  to any  class of  dependants of such           employees  such   articles  or   things  in   such

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         quantities and  at such  price as may be specified           in the order and to provide such accommodation and           other facilities  for taking  meals at or near the           place of employment as may be so specified;      (h)   for controlling the recruitment and employment of           labour in  such areas  as may  be specified in the           order with  a  view  to  securing  that  efficient           workers are  available for  undertakings which, in           the  opinion  of  the  Government,  are  essential           undertakings;      (i)   for regulating the carrying on of any undertaking           engaged in  or capable of doing, work appearing to           the Government  essential  to  any  of  the  above           mentioned purposes, and, in particular:                (i) for requiring work to be done by an under           taking;                (ii) for determining the order of priority in           which, and the period or periods within which work           shall be done by an undertaking;                (iii) for  controlling or  fixing the charges           which may be made by undertaking in respect of the           doing of any work by it; 538                (iv) for requiring, regulating or prohibiting           the engagement in the undertaking of any employees           or class or classes of employees;                (v) for  requiring the undertaking to provide           adequate safeguards against sabotage;      (j)   for requiring  persons engaged in the production,           manufacture, supply  or distribution  of or  trade           and commerce  in any article or thing, to maintain           and produce  for inspection  such books,  accounts           and records  relating to  their  business  and  to           furnish such  information relating  thereto and to           employ such  accounting and  auditing staff as may           be specified in the order;      (k)   for collecting any information or statistics with           a view  to regulating  or prohibiting  any of  the           aforesaid matters;      (i)   for requiring  persons carrying  on any industry,           trade or  business or  employed in connection with           any undertaking  to produce  to such  authority as           may be  specified in the order, any books, account           or  other  documents  relating  thereto;  and  for           requiring such  persons to  furnish such authority           as may  be specified  in the  order such estimates           returns  or  other  information  relating  to  any           industry. trade  or business or any undertaking as           may  be   specified  in   the  order  or  demanded           thereunder;      (m)   for the  grant or  issue of  licences, permits or           other documents,  the charging  of fees  therefor,           the  deposit  of  such  sum,  if  any  as  may  be           specified in  the order  as security  for the  due           performance of the conditions of any such licence,           permit or  other document,  the forfeiture  of the           sum  to   deposited  for   any  part  thereof  for           contravention of  any  such  conditions,  and  the           adjudication of such forfeiture by such authority. 539           as may be specified in the order;           *  *  *  *  *  *  *  *  *  *  *  *  *  *           *  *  *  *  *  *  *  *  *  *  *  *  *  *           *  *  *  *  *  *  *  *  *  *  *  *  *  *           (4) If it appears to the Central Government or the

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    State Government  that in  the interests of the defence      of India and Civil defence, or the efficient conduct of      military operations,  or for  maintaining supplies  and      services essential  to the life of the community, it is      necessary to  exercise control  over the  whole or  any      part of an existing undertaking, that Government may by      order authorise  any person (hereinafter referred to as      an authorized  controller) to exercise, with respect to      the undertaking  or any  part thereof  specified in the      order, such  functions of control as may be provided by      the order; and so long as an order made under this sub-      rule is  in force  with respect  to any  undertaking or      part of an undertaking-      (a)  the  authorised   controller  shall  exercise  his           functions  in  accordance  with  any  instructions           given to  him by  the Central  Government  or  the           State Government,  so, however,  that he shall not           have power  to give  any  directions  inconsistent           with the provisions of any Act or other instrument           determining the  functioning  of  the  undertakers           except in  so far  as may be specifically provided           by the order; and      (b)   the undertaking  or part  shall be  carried on in           accordance  with   any  directions  given  by  the           authorised  controller   in  accordance  with  the           provisions of the order, and any person having any           function  of   management  in   relation  to   the           undertaking or  part shall  comply with  any  such           directions;           (5) The  Central Government,  so far as it appears      to it  to be  necessary or  expedient for  securing the      defence of  India and  civil defence  or the  efficient      conduct of military 540      operations, or  for maintaining  supplies and  services      essential to  the life of the community, may direct the      employment of  persons subject to the Army Act, 1950 or      the Air Force Act, 1950, or the Navy Act, 1957-      (a)   in any  public  utility  service  as  defined  in           section 2 of the Industrial Disputes Act. 1947, or      (b)  in any undertaking or part thereof,           (i)  which is being carried on by the Central or a                State Government, or           (ii)  which   in  the   opinion  of   the  Central                Government  is   engaged  in   any  trade  or                business  essential   to  the   life  of  the                community, or            (iii) with  respect to  which an order made under                subrule (4) is in force.      and thereupon  it shall  be the duty of every person so      subject to  obey any  command  given  by  any  superior      officer in  relation to  such employment and every such      command shall  be deemed  to be a lawful command within      the  meaning and for the purpose of the Army Act, 1950,      or Air  Force Act,  1950, or the Navy Act, 1957, as the      case may be.           (6) A  direction under  sub-rule (5)  may be  made      with or  without the  consent of the person carrying on      the undertaking  or part thereof to which the direction      relates but  if  made  without  his  consent  shall  be      communicated to  such person  who  shall  thereupon  be      deemed to  have contravened  an order  made under  this      rule  if  he  obstructs  or  fails  to  facilitate  the      employment of persons subject to the Army Act, 1950, or      the Air  Force Act,  1950 or  the Navy  Act,  1957,  in

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    pursuance of the direction."      Sub-rule (2)  of rule  125  makes  it  clear  that  for securing the  defence of  India and civil defence, efficient conduct  of   military  operations  or  the  maintenance  or increase of  supplies and  services essential to the life of the community  or for  seeking  equitable  distribution  and availability of  any article  or thing  at fair  prices very wide powers  which are  indicated in  sub-section(3) without prejudice to  the generality of the powers conferred by this sub-section have 541 provided   for   regulating   or   prohibiting   production, manufacture, supply and distribution, use and consumption of articles or things and trade and commerce and for preventing any corrupt practice or abuse of authority in respect of any such matter.  Rule 125(1)(b)  which defines  an  undertaking makes it  clear that  the expression ’undertaking’ means any undertaking by  way of  any industry,  trade or business and includes the occupation of handling, loading or unloading of goods in  the course of transport. Sub-rule 3(i) of rule 125 makes  provision  for  regulating  the  carrying  on  of  an undertaking engaged  in, or  capable of doing work appearing to the Government essential to any of the purposes mentioned above in  sub-rule (3)  and in  particular (i) for requiring work to  be done  by an undertaking and (ii) for determining the order  of priority  in which,  and the period or periods within which  the work  shall be  done by an undertaking. It has to  be noted  that the  expression undertaking  has been given a  very wide  meaning in  rule 125(1)(b)  and  is  not limited to  any undertaking  which is  functioning, or  is a going concern. Sub-rule 3(i) confers powers and jurisdiction for regulating  the carrying  on of any undertaking not only engaged in  but also capable of doing, work appearing to the Government essential  and this provision makes this position abundantly clear.  In the larger interest of the country and particularly for  the purpose specifically mentioned in rule 125, power  of general  control of  very wide  amplitude  is conferred under rule 125 and there is nothing to indicate in the said  rule that  the powers  conferred  under  rule  125 cannot be  exercised over  any undertaking which has stopped functioning.  Indeed,   such  a   construction  is   clearly unwarranted on  a plain reading of the section which clearly provides that  such powers  can be  exercised  not  only  in respect of  an undertaking engaged but also capable of doing the kind of activity contemplated in the rule. Such a narrow construction is  likely to defeat the very purpose for which the rule  has been  enacted. Although  rule 125 confers very wide powers  for general control of an undertaking, there is no provision in the said rule to take over the management of any undertaking.  Orders and  directions under  rule 125  to exercise  general  control  over  an  undertaking  were  not considered to  be sufficient  and the  authority  felt  that further power  to take over the management of an undertaking in  appropriate  cases  was  necessary,  when  such  general control may  not prove  effective particularly in respect of certain undertakings.  Rule 125A  by way  of amendment  was, therefore, inserted to confer 542 further power  of taking  over the  management of particular undertakings and  of appointing  authorised controllers  for running  such   undertakings.  The   meaning  of   the  word ’undertaking’ in  rule 125A  has to  be understood  in  this background and  context. Rule  125A makes  it clear that the rule 125A  is not  intended  to  apply  to  each  and  every undertaking  within   the  meaning   of  rule  125.  Special

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provision is  made in  rule 125A  in respect  of  particular undertakings. Only  Rule 125A  describes and  particularises the undertakings  to which this rule will be applicable. The provision in this rule that "in this rule unless the context otherwise requires  an ’undertaking’  means any  undertaking (including an undertaking vested in or controlled or managed by, a  local authority)  which is engaged in the production, generation, supply,  distribution  or  provision  of  water, transfer, fuel,  light, electricity  or other  power or  any other thing  or service  which is notified by the Government as essential  to the  life  of  the  community",  is  merely descriptive  of  the  undertaking  to  which  this  rule  is applicable. The  words "which is engaged in the production * * *"  merely describes  the kind of undertaking by referring to the  nature  of  the  activity  of  the  undertaking  for bringing it within the purview of rule 125A and they have no bearing on  the question  whether the  activities are in the process of  being carried  on  or  have  been  stopped.  The expression any  undertaking which  is ’engaged  in’ has been used to  describe the  nature of business of the undertaking and is  merely descriptive  of the undertaking to which this rule will  apply. The  take over  of the  management  of  an undertaking to  which rule 125A is applicable may become all the  more  necessary  in  larger  public  interest  and  for effectively serving  the purposes  for which  this rule  has been incorporated,  particularly when an undertaking engaged in any  kind of  activity coming  within the purview of this rule  stops   functioning,  to  enable  tee  undertaking  to function  for   achieving  the   purposes  for  which  these provisions have been made. The construction contended for by Mr. Desai  will be  inconsistent with  the provisions of the rule and  will defeat  the purposes which this rule seeks to serve. The  decisions relied  on by  Mr.  Desai  are  of  no assistance as  the expressions  ’undertaking’ and  ’engaged’ which came  to be  considered in  these cases,  were used in different status and in entirely different context.      We must,  therefore, hold  that the  taking over of the management of  the sugar  mill  of  the  appellant  and  the appointment of 543 the authorised  controller were  perfectly valid  and lawful and the  act done by the authorised controller in the course of management  by virtue  of the  provisions of  these rules must be held to be binding on the appellant.      The appeal,  therefore, fails  and is dismissed with no order as to costs. N.V.K.                                     Appeal dismissed. 544