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PETITIONER: PANIPAT WOOLLEN & GENERAL MILLS CO. LTD.& ANOTHER

       Vs.

RESPONDENT: UNION OF INDIA & OTHERS

DATE OF JUDGMENT26/09/1986

BENCH: DUTT, M.M. (J) BENCH: DUTT, M.M. (J) REDDY, O. CHINNAPPA (J)

CITATION:  1986 AIR 2082            1986 SCR  (3) 937  1986 SCC  (4) 368        JT 1986   573  1986 SCALE  (2)536  CITATOR INFO :  F          1989 SC1331  (5)

ACT:      Sick Textile  Undertakings (Taking  over of Management) Act, 1972, ss. 2(a), 2(d) and 4(1)-Management of undertaking taken over  by Central  Government-Undertaking specified  in First Schedule  as a  ’sick  -  textile  undertaking-Whether opportunity of  hearing should  be given to the owner before such ’taking over’.      Sick Textile  Undertakings (Nationalisation)  Act, 1974 Constitutional  validity   of-Art.  31,  31C  &  39  (b)  of Constitution of India.

HEADNOTE:      A provisional  liquidator was  appointed in  respect of two textile  undertakings of  the  petitioner-company  since they had  gone into  huge loss and had to be closed sometime in May  1972. As the textile undertakings of the petitioner- company were  ’sick textile undertakings’ within the meaning of  sub-clause   (i)  of   s.  2(d)  of  the  Sick  Textiles Undertakings  (Taking-over  of  Management)  Act  1972  (for short, Take  over Act)  and have  also been specified in the First Schedule  to the  Take-over Act,  they vested  in  the Central Government  as ’sick textile undertakings’ by virtue of s. 4(1) of the Take-over Act.      The petitioner-company  challenged before  the  Supreme Court the taking over of the management of the aforesaid two textile  mills   under  the   Take-over  Act  and  also  the constitutional validity  of the  Take-over Act  and the Sick Textile  Undertakings  (Nationalisation)  Act  1974  on  the grounds (a)  that the  Company should  have  been  given  an opportunity of  being heard  before the  management  of  its undertakings was  taken over as ’sick textiles undertakings’ and if such an opportunity had been given, the company could have shown that its undertakings were not sick undertakings; (b) that the legislature, having itself decided the question whether an  undertaking is  sick textile  undertaking or not without  giving   any  opportunity  to  the  owner  of  such undertaking to  make a representation, has damaged the basic structure of the Constitution 938

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    namely separation of power between the legislature, the executive and  the judicially; and (c) that the Nationalisa- tion Act  is consititutionally  invalid  on  the  ground  of inadequacy of compensation.      Dismissing the petition, ^      HELD 1.1  In the  First Schedule  to the Take-over Act, the undertakings  of the company have been specified as sick textile undertakings.  In other  words, the  Legislature has itself decided  the undertakings  of the  Company to be sick textile undertakings.  Indeed, in the First Schedule all the sick textile  undertakings have  been specified. Thus, it is apparent that  the  Legislature  has  not  left  it  to  the Executive to decide whether a particular textile undertaking is a sick textile undertaking or not. If under the Take-over Act the  question whether  a textile  undertaking is  a sick textile undertaking  or not  had been directed to be decided by the  executive authorities, the owner of such undertaking could claim  an opportunity  of being  heard.  But  when  an undertaking has  been specified in the First Schedule to the Take-over Act as a sick textile undertaking, the question of giving an  opportunity to  the owner of the undertaking does not at all arise. [942C-F]      1.2 In  including the  sick textile undertakings in the First Schedule,  the Legislature  has not acted arbitrarily, for it  has also  laid down  the criteria  or tests for such inclusion. If any undertaking which has been so specified in the First  Schedule does not satisfy the tests under s. 2(d) of the  Take-over Act,  the  owner  of  it  is  entitled  to challenge such  inclusion or  take-over in  a court  of law, although such  challenge has  to  be  founded  on  a  strong ground. Thus,  there is no finality or conclusiveness in the legislative  determination  of  an  undertaking  as  a  sick textile undertaking.  Such determination is neither judicial nor quasi  judicial. Therefore,  the question of damaging or altering the  basic structure  of the  Constitution  namely, separation of  powers among  the Legislature,  the Executive and the  Judiciary, does  not at  all  arise.  So  also  the question of the validity of the constitutional amendments by which the  Take-over Act  and the  Nationalisation Act  have been included  in the  Ninth Schedule  on the ground that by such amendments  the basic  structure of the Constitution is damaged, as contended on behalf of the petitioners, does not arise. [943F-H; 944A-B]      2. The  Nationalisation Act  gives effect to the policy of the  State towards  securing the ownership and control of the  material  resources  of  the  community  which  are  so distributed as best to subserve the common 939 good, as  contained in  Art. 39(b)  of the  Constitution. It falls within  the provision  of Art. 31C of the Constitution before it  was amended  by  the  Constitution  (Forty-Second Amendment) Act, 1976. Even assuming that the Nationalisation Act violates  the provision  of Art. 31, no challenge to its validity can be made on that ground. [944E-G]      Minerva Mills  Ltd. &  Ors. v.  Union of  India & Ors., Writ Petition  Nos. 356-361 of 1977, decided on September 9, 1986, relied upon.      In the  instant case,  the compensation  that has  been awarded to  the Company  is neither inadequate nor illusory. It is  not in  dispute that the paid-up share capital of the Company was  Rs.60 lakhs  and it  paid dividend from 1965 to 1970. It  will  not  be  unreasonable  to  presume  that  in specifying the compensation, the Legislature has taken these facts into  consideration. There  is, therefore no substance

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in the  contention of  the petitioners that the compensation specified in  First Schedule  to the  Nationalisation Act in respect of  the undertakings  of the  Company  is  illusory. [944G-H; 945A]

JUDGMENT:      ORIGINAL JURISDICTION:  Writ Petition  (Civil) No. 1129 of 1977      Under Article 32 of the Constitution of India.      M . R. Sharma and Dalveer Bhandari for the Petitioner.      B.Datta Additional Solicitor General, Ms. A.Subhashini, A.K. Goel, T.V.S.N. Chari, R.K. Jain, Dr. N.M. Ghatate, D.N. Mishra and H.S. Parihar for the Respondents.      The Judgment of the Court was delivered by      DUTT, J.  In this writ petition the petitioner, Panipat Woollen & General Mills Co. Ltd., hereinafter referred to as ’the  Company’,  has  challenged  the  taking  over  of  the management of  its two  textile mills under the Sick Textile Undertakings (Taking  over of  Management)  Act,  1972  (for short ’Take-over  Act’) and also the constitutional validity of the  Take-over Act  and  the  Sick  Textile  Undertakings (Nationalisation) Act,  1974 (for short ’the Nationalisation Act’).      It appears  that the  Company had  falled on  evil days resulting in  initiation of  liquidation proceedings against the Company and the 940 appointment of  a provisional  liquidator. The  mills of the Company  were   closed  sometime   in  May,   1972.  On  the application by  the Industrial Finance Corporation of India, the Punjab  & Haryana  High  Court  directed  the  Board  of Directors of  the Company to hand over possession of the two mills to  the Corporation  to which the Company was indebted for a  huge sum  of money. The Corporation was also directed by the  High Court  to lease  out the  mills, and it appears that Padmashree  Textile Industries  Ltd.  was  granted  the lease of the mills, that is to say, the textile undertakings of the Company.      At this stage, it may be mentioned that the lessee, the said Padmashree  Textile Industries  Ltd., also filed a writ petition before  this Court,  inter  alia,  challenging  the Take-over  Act   and  the  Nationalisation  Act.  That  writ petition has  since been  disposed of  by  this  Court  upon settlement between the parties.      Section 4(1)  of the  Take-over Act provides that on or before the appointed day, the management of the sick textile undertakings specified  in the  First Schedule shall vest in the Central  Government. Under  Section 2(a) "appointed day" means 31st  day of October, 1972. Section 2(d) defines "sick textile undertaking" as follows:      "S. 2(d).  "sick textile undertaking" means the textile undertaking which  falls within one or more of the following categories, namely:-                (i) which is owned by a textile company which           is being  wound up,  whether voluntarily  or by or           under the  supervision of any Court, or in respect           of  which   a  provisional   liquidator  has  been           appointed by a Court,                (ii) which  had remained  closed for a period           of not  less than  three months immediately before           the appointed  day and  the closure  of  which  is           prejudicial  to  the  textile  industry,  and  the           condition of  the undertaking is such that it may,

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         with  reasonable  inputs,  be  re-started  in  the           interests of the general public,                (iii) which  has been leased to Government or           any other  person or  the management  of which has           been taken  over by Government or any other person           under any leave or licence granted by any Receiver           or Liquidator  by or  under the orders of, or with           the approval of, any Court, 941                (iv) the  management of  which was authorised           by the  Central Government,  by a  notified  order           made under  section 18A,  or in  pursuance  of  an           order made  by the  High Court under section 18FA,           of the  Industries  (Development  and  Regulation)           Act, 1951, to be taken over by a person or body of           persons, but  such management  could not  be taken           over by such person or body of persons, before the           appointed day,                (v) the  management  of  which  ought  to  be           [according to  the report made after investigation           by any  person or  body of persons appointed after           the 1st  day of January, 1970, under section 15 or           section 15A  of the  Industries  (Development  and           Regulation) Act,  1951] taken  over under  section           18A of  that Act,  but in  relation  to  which  no           notified order  authorising any  person or body of           persons  to  take  over  the  management  of  such           undertaking was made before the appointed day,                (vi) in respect of which an investigation was           caused to  be made,  before the  appointed day, by           the Central Government under section 15 or section           15A of the Industries (Development and Regulation)           Act, 1951,  and the  report of  such investigation           was not  received by the Central Government before           the appointed day;           and includes  any  textile  undertaking  which  is           deemed, under  sub-section (2) of section 4, to be           a sick textile undertaking;"      In view  of  sub-clause  (i)  of  section  2(d),  as  a provisional liquidator  was  appointed  in  respect  of  the textile undertakings  of the Company, they were sick textile undertakings. Moreover, the sick textile undertakings of the Company have  been specified  in the  First Schedule  to the Take-over Act and by virtue of section 4(1) of the Take-over Act, the  undertakings of  the Company  have vested  in  the Central Government as sick textile undertakings.      It is  vehemently urged  by Mr. Sharma, learned Counsel appearing on behalf of the petitioners, that before actually taking possession  of the  undertakings of  the Company, the Company should  have been  given  an  opportunity  of  being heard. It is submitted that if such an 942 opportunity had  been given,  the Company  could have  shown that its  undertakings were  not sick  undertakings. Counsel submits that  the intention  of the Legislature to give such an  opportunity   of  being   heard  is  apparent  from  the provisions of  clauses (iv), (v) and (vi) of section 2(d) of the Take-over Act which relate to the taking over of manage- ment of an undertaking under the Industries (Development and Regulation) Act,  1951. In  support of  this contention, the learned Counsel  has placed reliance upon three decisions of this Court in A. K. Kraipak & Ors. v. Union of India & Ors., [1970] 1 SCR 457, Maneka Gandhi v. Union of  India, [1978] 2 SCR 621,  and Smt.  Indira Nehru  Gandhi v. Shri Raj Narain, [1976] 2 SCR 347.

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    In  our   opinion,  none  of  the  above  decisions  is applicable to  the facts  and circumstances  of the  instant case. In  the First  Schedule  to  the  Take-over  Act,  the undertakings of  the Company  have been  specified  as  sick textile undertakings.  In other  words, the  Legislature has itself decided  the undertakings  of the  Company to be sick textile undertakings.  Indeed, in the First Schedule all the sick textile  undertakings have  been specified. Thus, it is apparent that  the  Legislature  has  not  left  it  to  the Executive to decide whether a particular textile undertaking is a sick textile undertaking or not. If under the Take-over Act the  question whether  a textile  undertaking is  a sick textile undertaking  or not  had been directed to be decided by the  executive authorities, the owner of such undertaking could claim an opportunity of being heard.   But   when   an undertaking has  been specified in the First Schedule to the Take-over Act as a sick textile undertaking, the question of giving an  opportunity to  the owner of the undertaking does not at all arise.   We are  unable to  accept the contention of the  petitioners that  sub clauses  (iv), (v) and (vi) of section 2(d)  indicate that  principles of  natural  justice should be complied with. The provisions of these sub clauses are some  of the  categories under  any  one  of  which  the undertaking may  fall and,  in that  case, it will be a sick textile undertaking.  There is,  therefore, no  substance in the contention  made on  behalf of  the petitioners that the Company should have been given an opportunity of being heard before the  management of its undertakings was taken over as sick textile undertakings.      It is  next  urged  by  the  learned  Counsel  for  the petitioners that  the Legislature  having itself decided the question  whether   an  under   taking  is  a  sick  textile undertaking or  not without  giving any  opportunity to  the owner of  such undertaking  to make  a  representation,  has damaged the  basic structure  of the  Constitution of India, namely, 943 separation of  power between  the Legislature, the Executive and the  Judiciary. Our  attention has  been  drawn  to  the observations made  by Sikri,  CJ, in  Kesavananda Bharati v. State of  Kerala, [1973]  2 Supp. SCR 1, and that of Mathew, J, in  Smt. lndira Nehru Gandhi v. Shri Raj Narain, [1976] 2 SCR 347  at  page  503  to  the  effect,  inter  alia,  that separation of  powers among  the Legislature,  the Executive and the  Judiciary, is  one of  the basic  structures of the Constitution. It is, accordingly, submitted on behalf of the petitioners  that  the  doctrine  of  separation  of  powers implies that the Legislature should define civil or criminal wrong or  a default  and create  an  independent  machinery, judicial or  quasi-judicial, to  determine the  liability of the status of an individual. Further, the Legislature itself cannot give  a judgment and, in any case, if such a judgment is given  by the Legislature, it must act in accordance with the principles of natural justice.      The  above  submissions  of  the  petitioners,  in  our opinion, are  misconceived. There  can be  no doubt  that in respect of  each sick  textile undertaking,  a Take-over Act and a Nationalisation Act could be passed and, in that case, a large  number of  enactments would  come into existence to the inconvenience  of all  concerned. In order to avoid such cumbersome course  and for  the  sake  of  convenience,  the Legislature has  mentioned in the First Schedule in both the Take-over Act  and the  Nationalisation Act the names of all sick textile  undertakings  in  the  country.  By  including certain textile  undertakings as sick textile E undertakings

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in the  First Schedule to the Take-over Act, the Legislature has not  made any  judicial or quasi-judicial determination, nor has  the Legislature given any judgment, as contended on behalf  of  the  petitioners,  although  such  inclusion  is sometimes loosely  expressed as  ’legislative judgment’.  In section 2(d), the Legislature has laid down the criteria for a sick  undertaking. The sick textile undertakings have been specified in  the First  Schedule on  the basis of the tests laid down  in section  2(d). In  including the  sick textile undertakings in  the First Schedule, the Legislature has not acted arbitrarily,  for, it  has also laid down the criteria or tests  for such  inclusion. If  any undertaking which has been so specified in the First Schedule does not satisfy the tests under  section 2(d) of the Take-over Act, the owner of it is entitled to t challenge such inclusion or take-over in a court of law, although such challenge has to be founded-on a  strong   ground.  Thus,   there   is   no   finality   or conclusiveness in  the legislative determination of an under taking as  a sick textile undertaking. Such determination is neither judicial nor quasi-judicial. Therefore, the question of  damaging   or  altering   the  basic  structure  of  the Constitution, namely, separation of 944 powers  among   the  Legislature,   the  Executive  and  the Judiciary, does  not at  all arise.  So also the question of the validity  of the  constitutional amendments by which the Take-over Act and the Nationalisation Act have been included in the  Ninth Schedule on the ground that by such amendments the basic  structure of  the  Constitution  is  damaged,  as contended on  behalf of the petitioners, does not arise. The contentions are misconceived and are rejected.      As a  last resort,  the petitioners have challenged the validity  of  the  Nationalisation  Act  on  the  ground  of inadequacy   of    compensation.   The   Company   had   two undertakings,  namely,  Panipat  Woollen  Mills  and  Kharar Textile Mills.  In the third column of the First Schedule to the Nationalisation  Act, a  sum of  Rs. 6,40,000  has  been specified for  the Panipat  Woollen Mills  and a  sum of Rs. 12,89,000 has been specified for the Kharar Textile Mills by way  of  compensation  for  the  acquisition  of  these  two undertakings. It  is the  contention of the petitioners that the amounts  of compensation,  which have been specified for the acquisition  of these  two undertakings, are inadequate. We are  afraid, as  on the  date the Nationalisation Act had come into  force, Article  31 of  the Constitution  was  not repealed, the  validity of the Nationalisation Act cannot be challenged on  the ground  of inadequacy of compensation. In Minerva Mills  Ltd. &  Ors. v.  Union of  India & Ors., Writ Petition Nos. 356-361 of 1977, decided on September 9, 1986, it has  been already held by us that the Nationalisation Act gives effect to the policy of the State towards securing the ownership and  control of  the  material  resources  of  the community which  are so  distributed as best to subserve the common  good,   as  contained   in  Article   39(b)  of  the Constitution. In  the circumstances, the Nationalisation Act falls  within   the  provision   of  Article   31C  of   the Constitution before  it  was  amended  by  the  Constitution (Forty-Second Amendment)  Act, 1976.  Even assuming that the Nationalisation Act violates the provision of Article 31, no challenge to  its validity can be made on that ground. Apart from that, we are of the view that the compensation that has been awarded  to  the  Company  is  neither  inadequate  nor illusory as  contended on  behalf of  the petitioners. It is not in dispute that the paid-up share capital of the Company was Rs.60 lakhs and it paid dividend up to 1965. Thereafter,

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the Company  did not  pay any dividend from 1965 to 1970. It will not  be unreasonable  to presume that in specifying the compensation, the  Legislature has  taken these  facts  into consideration. There  is, therefore,  no  substance  in  the contention  of   the  petitioners   that  the   compensation specified in  First Schedule  to the  Nationalisation Act in respect of the undertakings of 945 the Company  is illusory.  The contention  is  rejected.  No other point has been urged on behalf of the petitioners.      For  the   reasons  aforesaid,  the  writ  petition  is dismissed and  the rule  nisi  is  discharged.  There  will, however, be no order as to costs. M.L.A.                                   Petition dismissed. 946