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PETITIONER: INDORE TEXTILES LTD. & ANR.

       Vs.

RESPONDENT: UNION OF INDIA & ANR.

DATE OF JUDGMENT:       02/03/1998

BENCH: CJI, M.M. PUNCHHI, B.N. KIRPAL, K.T. THOMAS

ACT:

HEADNOTE:

JUDGMENT:                  THE 2ND DAY OF MARCH, 1998 Present :                  Hon’ble the Chief Justice                  Hon’ble Mr. Justice B.N. Kirpal                  Hob’ble Mr. Justice K.T. Thomas G.L. Sanghi, V.C.Mahajan, K.N.Shukla, Sr. Advs., S.K. Gambhir, Vivek Gambhir, Ms. Charu Bhardwaj, Satish K. Agnihotri, Mrs. Yogmaya, (Y.P.Mahajan) Adv. for C.V.  Subba Rao, (Sakesh Kumar) Adv. for Uma Nath Singh, Advs. with them for the appearing parties.                       J U D G M E N T      The following Judgment of the Court was delivered:                             WITH            Writ Petition (Civil) No. 742 of 1986 KIRPAL, J.      The  acquisition  of  the  undertaking  of  the  Indore Textiles Ltd.  by The  Indore Textiles  Limited (Upkaram  Ka Arjan Aur  Antaran) Adhiniyam,  1986, is  under challenge in the writ petition and the appeal.      M/s Indore  Textiles Ltd,  was a public limited company whose shares were purchased by one Ajit Kumar Singh Kasliwal (Petitioner No.2  in the  writ petition)  on 10th  February, 1977. It appears that he undertaking of the company had been closed  for   some  time  and  the  Central  Government  had appointed a committee to investigate into its affairs. After the receipt  of the  report the  Central Government,  by  an order dated  12th August,  1977, took over the management of the textile  mill. This  order was  passed  by  the  Central Government in  exercise of its powers under Section 18AA (1) (b) of the Industries (Development and Regulation) Act, 1951 (hereinafter referred  to as  ’the IDR Act’). The said order was challenged  with the  filing of  a writ petition  in the Madhya  Pradesh   High  Court  and  by  judgment  dated  8th September ,  1980 that  writ petition was partly allowed and the Central  Government was  directed to give an opportunity to the  petitioners to  show cause  why the  order of taking over of  the management  should not  be passed and to cancel the order  if the  petitioners were  able to  show that  the conditions to pass the order did not exist.      The petitioners  were heard  by  the  Joint  Secretary,

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Government of India on 15th November, 1980 but when no order was passed  a fresh  writ petition No. 825 of 1981 was filed in the  Madhya Pradesh  High Court.  During the  pendency of this petition  an interim order was passed by the High Court directing the  Central Government  to pass an order pursuant to the  hearing which  and been  given to  the petitioner on 15th  November,   1980.  Thereafter   the  petitioners  were informed that  an order  dated 2nd  January, 1982  had  been passed by  the Central  Government to  the effect  that  the conditions for the taking over of the management of the mill did exist  and that the take over was justified in the facts and circumstances  of the  case. On  amendment being allowed this communication  dated 2nd  January, 1982  was challenged before the  High  Court  in  the  writ  petition  which  was pending. During  the pendency  of the writ petition an order dated  22nd  May,  1982  signed  buy  the  Joint  Secretary, Ministry of  Commerce, Department  of Textiles,  stating the reasons  for  taking  over  of  the  mills’  management  was communicated to  the petitioner.  By  an  amendment  in  the pending writ  petition this order of 22nd May, 1982 was also allowed to  be challenged.  Ultimately the High Court by its judgment  dated  17th  December,  1982  dismissed  the  writ petition. Civil Appeal No. 6815 of 1983, which is also being disposed of by this judgment, arises by way of special leave having  been   granted  against   the  judgment  dated  17th December, 1982.      The original  order under  Section 18AA  of the IDR Act was to  have effect for a period of five years from the date of its  publication in the official gazette. This period was subsequently extended from time up time. In the present case the extended period of the last extension was upto the including 11th  February, 1986.  It may here be noticed that under Section  18A (2) proviso, the maximum period for which the extension could be granted is twelve years.      One day  before the  extended period  was to come to an end the  Governor of Madhya Pradesh promulgated an ordinance called the  Indore Textiles  Limited (Upkaram  Ka Arjan  Aur Antaran)  Adhyadesh,   1986.  This   has  subsequently  been replaced by  the Indore  Textiles Limited  (Upkaram Ka Arjan Aur Antaran)  Act, 1986,  which received  the assent  of the President  on   5th  April,   1986.  The  Act  provides  for acquisition and  transfer of  the industrial  undertaking of the  company   and  contains   other  incidental  provisions including the  management of  the company  vesting with  the government.  After   the  promulgation   of  the   Act   the petitioners filed  the present  petition under Article 32 of the Constitution challenging the validity of the said Act.      Even    though  in  the  writ  petition  the  principal challenge to  the Act  was on  the ground  that neither  the State  Legislature   nor  the  Governor  of  the  State  had legislative  competence   to  promulgate  the  Act  and  the Ordinance  inasmuch   as  the   appropriate  entry  for  the enactment of such an ordinance of Act was Entry 52 of List 1 of the  7th Schedule,  but this  contention, at  the time of arguments, was not raised by Shri G.L.Singhi, learned senior counsel for  the petitioners  presumable because in cases of similar enactments  such a  contention had  been rejected by this Court  in the  case of  Ishwari Khetan  Sugar Mills (P) Ltd, and  Ors, Vs. State of Uttar Pradesh and Ors. [(1980) 4 SCC 136]  and Mahesh Kumar Saharia Vs. State of Nagaland and Ors. [(1997)  8 SCC  176], to  mention  only  tow.  It  was, however, submitted by Shri Sanghi that there was no existing public purpose  for   which the  acquisition could have been made. It was contended that the object of the Act is clearly reflected in  the preamble  which shows that the undertaking

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was  being  acquired  with  a  view  to  secure  its  proper management. Inasmuch  as the  management of  the undertaking had already been taken over by the Central Government, under the order  passed under  Section 18AA of the IDR  Act,  Shri Sanghi  submitted   that  the  reason  for  securing  proper management did  not exist  and, therefore, the Act could not have been passed.      The preamble of the Act reads as follows :      "An  Act   to  provide   in  public      interest for  the  acquisition  and      transfer    of    the    industrial      undertaking  known  as  the  Indore      Textiles  Limited  Ujjain,  with  a      view   to   securing   the   proper      management   of   such   industrial      undertaking so  as to  subserve the      interest of  the general  public by      ensuring    the    continuity    of      production of  cloth which is vital      to the needs of the country and for      matters  connected   therewith   or      incidental thereof"      It is  true that  on the  date when  the ordinance  was issued i.e.,  10th February,  1986, the  management  of  the undertaking was  still  with  the  Central  Government.  The preamble of  the Act  does not show that the same was passed with a  view only  to secure  the proper  management of  the industrial undertaking.  The reading  of the preamble and of the Act  as a whole makes it clear that the said legislation was undertaken  with a  view to secure the proper management of the  same "so  as to subserve the interest of the general public by  ensuring the  continuity of  producing  of  cloth which is  vital to  the needs  of the country and for matter connected therewith  or incidental thereto" (Emphasis added) The anxiety  in promulgating  the ordinance and replacing it with the  act clearly  was to  see that  the mill, which had been closed  for more then three months at the time when the notification under  Section 18AA  of   the IDR  Act had been issued, should  continue its activity of production of cloth which was in the interest of the country. As a result of the acquisition of  the undertaking  it is  but obvious that its management would  henceforth vest  with the State Government and it  is for  this  reason  that  provisions  with  regard thereto are contained in Chapter IV of the said Adhiniyan.      It was faintly suggested that when the IDR Act contains the e  power to  take over  the management of an undertaking there can be no acquisition by the said Act which would have the same  effect, i.e., taking over of the management of the undertaking. This questions no longer res integra. There was a similar  provision the  one contained in Chapter IV of the Adhiniyam  which  existed  in  the  U.P.  Sugar  Undertaking Acquisition Act,  1971, which  enabled the management of the acquired  undertakings   being  taken   over  by  the  State Government. A contention was raised in Ishwari Khetan’s case (supra) that  the UP  Act was violative of Section 20 of the IDR Act  which provided  that after  the commencement of the IDR Act  it was  not competent for any State Government or a local authority  to take  over the management for control of any industrial  undertaking under any law for the time being in force  which authorises  any  such  Government  or  local authority so to do. It was observed that the said Section 20 of  the  IDR  Act  does  not  preclude  or  forbid  a  State Legislature from  exercising  legislative  powers  under  an Entry other  than Entry  24 of List II and if in exercise of that  legislative   power  the   consequential  transfer  of

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management or  control over  the industry or under taking as an incident  of acquisition  then such  taking over  of  the management or control pursuant to an exercise of legislative power is  not within the inhibition of Section 20 of the IDR Act. To  the same  effect is a recent judgment of this Court in Mahesh  Kumar Saharia’s  case  (supra)  where  a  similar challenge  to   the   Nagaland   Forest   Products   Limited (Acquisition of Shares) Act, 1982, was repelled.      Shri     Sanghi,  however,  vehemently  contended  that neither in  Ishwari Khetan’s  nor in  Mahesh Kumar Saharia’s cases had  the management  been taken  over by  the  Central Government  under   the  IRD   Act  before   the  respective acquisition acts  had been passed. He submitted that present case is  clearly distinguishable  because as  on the date of the issuance  of the  ordinance the  management was with the Central Government.      In our  opinion this  distinction, if  at all, makes no difference to  the merits  of the  case because  as held  in Ishwari  Khetan’s  and  Mahesh  Kumar  Saharia’s  cases  the provision for  taking over  of  the  undertaking  is  merely incidental to  the acquisition of the undertaking and is not in conflict  with Section 20 of the IDR Act. Furthermore the extended period  of management  with the  Central Government was coming  to end  on 11th  February, 1986 and the impugned ordinance was  issued one  day before  that, i.e.,  on  10th February, 1986.  This was  obviously done  with a  view that there should  be  no  break    and  the  management  of  the undertaking should  continue with  the Government even after 11th February,  1986.  The  so  called  overiapping  of  the management for one or two days, i.e. 10/11th February, 1986, would not and cannot affect the validity of the Adhiniyam.      It  was  lastly  submitted  by  Shri  Sanghi  that  the undertaking was  under the  control and  management  of  the Government from  12th August,  1977  till  its  acquisition. According to  Section 5  of the Adhiniyam every liability in respect of  the period  prior tot he appointed date shall be the liability  of  the  company  and  shall  be  enforceable against the  owners and not against the State Government. It was contended  that during  this period  of management after 12th August,  1977, the liabilities had been incurred by the Government when  it was managing the undertaking and it will be unfair and unfair and arbitrary if the liability incurred during this  period, when  the management of the undertaking was not  with the  petitioner, should  be fastened  upon the petitioners and  they be  asked to discharge the same. We do not find  in the  writ petition  any challenge to the Act or Section 5 in particular on the ground that the liability for the period after 12th August, 1977 is sought to  be fastened on the  petitioners. It  is admitted  that so  far no demand under Section  5 has  been raised.  Even  though  Shri  K.N. Shukla, learned  senior counsel  appearing  for  the  State, stated that  the liabilities  between 12th  August, 1977 and 10th February,  1986 will  be borne  by the State, we do not think it  is necessary  or appropriate,  in the  absence  of necessary pleadings,  to  adjudicate  on  this  aspect.  We, however, do  hope and  expect that  the Government  will not act unfairly and whenever necessary it will pass appropriate orders, which  power it  has under Section 32 of the Act, to remove any difficulty in this regard.      Inasmuch as  the validity  of the  Adhiniyam  is  being upheld, the  civil appeal  No. 6815  of 1983  in  which  the challenge was to the taking over of the management under the IRD Act  had become infructuous. We, therefore, dismiss both the writ  petition as well as the civil appeal but leave the parties to bear their own costs.

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