Doburg Lager Breweries Pvt. Ltd. Vs.
Dhariwal Bottle Trading Co. & ANR [1986] INSC 41 (14 March 1986)
VENKATARAMIAH, E.S. (J) VENKATARAMIAH, E.S.
(J) THAKKAR, M.P. (J)
CITATION: 1986 AIR 1547 1986 SCR (1) 841 1986
SCC (2) 382 1986 SCALE (1)388
ACT:
Bombay Relief Undertakings (Special
Provisions) Act, 1958, ss. 3 and 4 - Declaring an industrial undertaking as a
"relief undertaking" - Whether grant of loan under the Act is a
condition precedent - Whether s. 3 is controlled by the Preamble to the Act.
HEADNOTE:
The appellant, a private limited company,
carrying on business in a backward area of the State, had employed about 200
workmen. It had borrowed about Rs.52.30 lakhs from the State Industrial and
Investment Corporation of Maharashtra Limited (SICOM). It ran into financial
difficulties as a result of which winding up proceedings were commenced against
it by a creditor, respondent No.1 in the year 1982.
Taking into consideration the financial
position of the appellant-company and the consequences that were likely to
ensue if the industry was to be closed, the State issued a notification under
section 3 and sub-clause (iv) of clause (a) of sub-section (1) of section 4 of
the Bombay Relief Undertakings (Special Provisions) Act, 1958 declaring it as a
relief undertaking and directing that any right, privilege, obligation or
liability accrued or incurred by the appellant-company (except those mentioned
in the Notification) before it was declared a relief undertaking and any remedy
for the enforcement thereof became suspended and all proceedings relative
thereto pending before any court, tribunal, officer or authority came to be
stayed automatically. Consequently, the Company Judge of the High Court stayed
the proceedings in the winding up petition. The Division Bench also confirmed
the order of the Company Judge in appeal. The State Government also issued
subsequent notifications on May 9, 1984, May 10, 1985 and November 8, 1985 for
the same purpose and pursuant to the resolution of SICOM dated February 17, 1984
another loan of Rs.15 lakhs was advanced to the appellant-company by the State
Government through SICOM.
842 Respondent No.1 then filed a writ
petition in July 1984 in the High Court challenging the aforesaid
Notifications.
The learned Single Judge allowed the writ
petition and quashed the Notifications on the ground that in order to invoke
the powers under section 3(1) of the Act, the condition precedent was that the
State Government must have provided under the Act, loan guarantee and other
financial assistance to the undertaking as a measure preventing unemployment
relief as per the Preamble of the Act and since it had not been established
that Rs.52.30 lakhs had been lent by SICOM under the Act as a measure of
preventing unemployment or employment relief, the Notification dated November
10, 1983 was ultra vires the Act and that the advance of Rs.15 lakhs by the
State Government before May 9, 1984 did not cure the defect. The
appellant-company filed an appeal against the order of the learned Single Judge
and the same was dismissed by the Division Bench in limine.
Allowing the appeal, ^
HELD: 1. The decision of the High Court that
unless loan is advanced by the State Government under the Act no declaration
can be made under section 3 of the Act is wholly erroneous. It is not warranted
by the provisions of the statute. The case is remanded to the High Court to
consider the other contentions of the parties. [854 A; 853 H]
2. The whole object of the Act is to sub-serve
the public interest and in particular to prevent unemployment or to grant
unemployment relief. Section 3 of the Act which is a self-contained one refers
to the industrial undertakings in respect of which a declaration may be made
under it. It is not controlled by the Preamble to the Act. An industrial
undertaking which may be declared as a relief undertaking under sec. 3 may be
of two kinds. It may be an industrial undertaking started, acquired or
otherwise taken over by the State Government and carried on or proposed to be
carried on by the State Government or under its authority. It may also be an
industrial undertaking to which any loan, guarantee or other financial
assistance has been provided by the State Government. There should be a
declaration that an industrial undertaking of either kind should be conducted
to serve as a measure of preventing unemployment or an unemployment relief.
843 Then such an undertaking will be deemed
to be a relief undertaking for the purposes of the Act. The consequences of
such declaration are contained in section 4 of the Act, one of them being that
the State Government gets the power to direct that notwithstanding any law,
usage, custom, contract, instrument, decree, order, award, submission,
settlement, standing order or other provision whatsoever any right, privilege,
obligation or liability accrued or incurred before the undertaking was declared
as relief undertaking and any remedy for the enforcement thereof shall be
suspended and all proceedings relative thereto pending before any court,
tribunal, officer or authority shall be stayed. A notification issued under
sub-section (1) of section 3 is renewable by like notification from time to
time for further periods not exceeding twelve months at a time, so however that
all the periods the aggregate do not exceed fifteen years. [851 F-H; 852 A-D]
3. A distinction has been made in the Act
between cases falling under sub-clause (ii) of clause (a) of sub-section (1) of
section 4 of the Act and cases falling under sub- clause (iv) of clause (a) of
sub-section (1) of section 4 of the Act. Sub-clause (ii) of section 4(1)(a) of
the Act refers to the agreements, settlements, awards, standing orders made
under the several labour laws mentioned under the Schedule to the Act and
states that agreements etc.
which may be applicable to a relief
undertaking before it was acquired or taken over by the State Government or
before any loan, guarantee or other financial assistance was provided to it by
or with the approval of the State Government for being run as a relief undertaking
may be suspended in operation or shall, if so directed by the State Government
be applied with such modifications as may be specified in the notification
issued for the said purpose.
In this case the Act seems to resolve a
likely value- conflict between loans given for running the industry as a relief
undertaking and the rights of workmen under the agreements, awards etc. under
the labour laws in the Schedule. This sub-clause does not have anything to do
with sub-clause (iv) of section 4(1)(a) under which the case of a creditor like
respondent No.1 falls. Another distinction which may be noticed is the
difference between the language in sub-clause (ii) of section 4(1)(a) and in
section 3. The former contains these words 'before any loan, guarantee or other
financial assistance was provided to it by or with the 844 approval of the
State Government for being run as a relief undertaking' (emphasis added). In
section 3, the words are "or to which any loan, guarantee, or other
financial assistance has been provided by the State Government shall with
effect from....... be conducted to serve as a measure or of unemployment
relief." (emphasis added). The only precondition for the exercise of the
power under section 3 is that loan must have been advanced prior to the date of
notification and it must still be outstanding on that day.
This is what leaps to the eyes effortlessly
on the mere opening of the eyes. On the other hand, section 3 does not say
expressly or by implication "a loan etc. is given for being run as a
relief undertaking under this Act." [852 H;
853 A-G] In the instant case, the State of
Maharashtra had provided through SICOM which is virtually an agent of the State
Rs. 52.30 lakhs by way of an advance to the appellant- company before the first
notification was issued, and at any rate before the second notification was
issued the State Government itself had advanced Rs. 15 lakhs in addition to
what SICOM had advanced earlier. Hence the industry of the appellant-company
was one to which any loan, guarantee or other financial assistance had been
provided in the State Government. There is no provision in the Act requiring
that any such loan should be granted under it before a declaration may be made
under section 3(1) thereof. [852 E- G]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 932
of 1986.
From the Judgment and Order dated 21.1.1986
of the Bombay High Court in Appeal No. 28 of 1986.
Dr. Y.S. Chitale and Mukul Mudgal for the
Appellant.
K. Rajendra Choudhary for the Respondents.
The Judgment of the Court was delivered by
VENKATARAMIAH, J. At the conclusion of the hearing of the above appeal on March
10, 1986 we passed the following order in the above appeal and the connected
special leave petition:
845 "Special leave granted. We do not
agree with the view of the High Court that the loan in question should have
been advanced under the Act in order to attract the provisions of sections 3
and 4 of the Bombay Relief Undertakings (Special Provisions) Act, 1958. The
judgment of the learned Single Judge and of the Division Bench of the High
Court are set aside and the case is remanded to the learned Single Judge to
consider the submissions to be made on other points involved in this case. It
is open to the Union which has filed Special Leave Petition No. 3428 of 1986 to
apply to the High Court for being impleaded and the High Court on such
application being made will consider it in accordance with law. The appeal and
Special Leave Petition No. 3428 of 1986 are disposed of accordingly. There is
no order as to costs.
Reasons follow." We are quite unhappy
with the order of the Bombay High Court against which this appeal is filed. The
grounds urged in support of the writ petition were fallacious, the reasons
given by the learned Single Judge for allowing it were faulty and the order of
dismissal of the appeal in limine passed by the Division Bench exhibits
indifference. Courts are expected to show more concern and to give greater
attention before quashing a statutory instrument made or issued under a beneficent
legislation intended to prevent large scale unemployment and misery than what
is shown by the High Court in this case.
The facts of the case are these. The
appellant herein is a private limited company and has been carrying on business
in the State of Maharashtra. It ran into financial difficulties as a result of
which winding-up proceedings were commenced against it. M/s. Dhariwal Bottle
Trading Co., respondent No.1 herein, which is a partnership firm filed Company
Petition No. 119 of 1982 as a creditor for winding- up of the appellant
company. The appellant company was carrying on business in a backward area of
the State of Maharashtra. It had employed about 200 workmen who were likely to
be thrown out of employment. The appellant company had also borrowed about 846
Rs.52,30,000 from the State Industrial and Investment Corporation of
Maharashtra Ltd. (SICOM). Taking into consideration the financial position of
the appellant company, and the consequences that were likely to ensue if the
industry which was being run by it was to be closed, the Government of
Maharashtra took action under the Bombay Relief Undertakings (Special
Provisions) Act, 1958 (hereinafter referred to as 'the Act') by declaring it as
a relief undertaking with effect from November 10, 1983 by its notification
issued on November 10, 1983 under section 3 and sub-clause (iv) of clause (a)
of sub-section (1) of section 4 of the Act. The notification reads thus:
"NOTIFICATION Industries, Energy and
Labour Department, Mantralaya, Bombay 400032, Dated the 10th day of November,
1983.
No BRU-1083/(9602)/IND-10. In exercise of the
powers conferred by section 3 and sub-clause (iv) of clause (a) of sub-section
(1) of section 4 of the Bombay Relief Undertakings (Special Provisions) Act,
1958 (Bom. XCVI of 1958), the Government of Maharashtra, hereby- (a) declares
that the industrial undertaking called "M/s. Doburg Lager Breweries (P)
Ltd., Bombay" (hereinafter referred to as "the said relief
undertaking") to which State Industrial and Investment Corporation
Maharashtra Ltd., has provided a loan of Rs. 52.30 lakhs, shall for a period of
6 months commencing from 10th day of November, 1983 be conducted to serve as a
measure of unemployment relief; and (b) directs that in relation to the said
relief undertaking and in respect of the said period for which the said relief
undertaking continues as such, any right, privilege, obligation or liability
(excepting the obligations or liabilities incurred in favour of workmen of the
said relief undertaking or in favour of the industrial units which are 847
registered as small scale industrial units with the Directorate of Industries
of the Government of Maharashtra, the Maharashtra State Electricity Board, the
State Industrial and Investment Corporation of Maharashtra Limited, the
Maharashtra State Financial Corporation, Bank of Maharashtra, Vijaya Bank, Bank
of India, Industrial Development Bank of India, Industrial Finance Corporation
of India and Industrial Credit and Investment Corporation of India and the dues
of the Employees' State Insurance Corporation, and any liability incurred under
the Bombay Sales Tax Act, 1959 (Bom. LI of 1959), the Maharashtra State Tax on
Professions, Trades, Calling and Employments Act, 1975 (Mah. XVI of 1975), and
the Employees' Provident Fund and Miscellaneous Provision Act, 1952 (19 of
1952), accrued or incurred before the 10th day of November 1983 and any remedy
for the enforcement thereof shall be suspended and all proceedings relative
thereto pending before any Court, tribunal, officer or authority shall be
stayed.
By order and in the name of the Governor of
Maharashtra.
P.L. Sawai, Desk Officer, Industries, Energy
& Labour Department" The above notification was to be effective for a
period of six months at the first instance.
Section 3 and the relevant part of section 4
of the Act read as follows :
"3.(i) If at any time it appears to the
State Government necessary to do so, the State Government may, by notification
in the Official Gazette, declare that an industrial undertaking specified in
the notification, whether started, acquired or otherwise taken over by the
State Government, and carried on or proposed to be carried on by itself or
under its authority, or to which any loan, 848 guarantee or other financial
assistance has been provided by the State Government shall, with effect from
the date specified for the purpose in the notification be conducted to serve as
a measure of preventing unemployment or of unemployment relief and the
undertaking shall accordingly be deemed to be a relief undertaking for the
purposes of the Act.
(2) A notification under sub-section (1)
shall have effect for such period not exceeding twelve months as may be
specified in the notification;
but it shall be renewable by like
notifications from time to time for further periods not exceeding twelve months
at a time, so however that all the periods in the aggregate do not exceed
fifteen years.
4.(1) Notwithstanding any law, usage, custom,
contract, instrument, decree, order, award, submission, settlement, standing
order or other provisions whatsoever, the State Government may, by notification
in the Official Gazette, direct that - (a) in relation to any relief
undertaking and in respect of the period for which the relief undertaking
continues as such under sub-section (2) of section 3 -
.............................................
(iv) any right, privilege, obligation or
liability accrued or incurred before the undertaking was declared a relief
undertaking and any remedy for the enforcement thereof shall be suspended and
all proceedings relative thereto pending before any court, tribunal, officer or
authority shall be stayed;
.........................." The effect
of the above mentioned notification dated November 10, 1983 was that any right,
privilege, obligation or liability accrued or incurred by the appellant company
(except those mentioned therein) before it was declared a relief undertaking
and any remedy for the enforcement thereof became suspended and all proceedings
relative thereto pending before 849 any Court, tribunal, officer or authority
came to be stayed automatically. Consequently the proceedings in the winding-
up petition (Company Petition No. 119 of 1982) filed by the Ist respondent
against the appellant company were also stayed by the Company Judge of the High
Court. Against his order an appeal was filed before the Division Bench and that
appeal was dismissed. The order of stay thus became final.
Having failed in its attempt to get the order
of stay vacated, the respondent No. 1 apparently in order to coerce the
appellant filed a writ petition, being Writ Petition No.
1552 of 1984 out of which this appeal arises
on the file of the Bombay High Court challenging the notification issued under
sections 3 and 4 of the Act and subsequent notifications which had been issued
from time to time on May 9, 1984, May 10, 1985 and November 8, 1986 for the
same purpose. It may be stated here that even today the last of the
notifications that is the one issued on November 8, 1985 under those provisions
is in force. It should also be stated here that pursuant to the resolution of
SICOM dated February 17, 1984, another loan of Rs. 15,00,000 was advanced to
the appellant company by the State Government through SICOM. The notification
dated May 9, 1984 recites that Rs.15,00,000 had been so advanced. It says that
the State Government had provided the said loan under a package scheme of
incentives through SICOM and the said recital is repeated in each of the
subsequent notifications. Everyone of them contains a declaration in terms of
section 3 and a direction under section 4(1)(a)(iv) of the Act as stated above.
Each one of them can stand by itself though they refer to the fact that the
undertaking is having the protection with effect from November 10, 1983, that
is from the date of the first notification, as that date becomes relevant for
purposes of computing the aggregate period under section 3(2) of the Act.
The Writ Petition was allowed by the learned
Single Judge with costs and the notifications were quashed. An appeal filed by
the appellant company against the order of the learned Single Judge was
dismissed by the Division Bench in limine. The order of the Division Bench ran
as follows:
"Heard both sides. Stay to continue for
four weeks. Dismissed." 850 This appeal is filed under Article 136 of the
Constitution against the order of the Division Bench.
The writ petition was filed in July 1984
after the State Government had issued the notification dated May 9, 1984
containing the statement that the State Government had advanced an additional
loan of Rs.15,00,000 to the appellant company. The contention urged on behalf
of the respondent No.1 (the petitioner in the writ petition) may be stated in
the language of the learned Single Judge himself, thus :
"5. Shri Cooper, learned counsel
appearing for the petitioners while attacking the notification dated November
10, 1983 being illegal and contrary to section 3 of the Act urged that the said
Notification does not fulfil the condition precedent prescribed under section 3
of the Act viz. 'giving a financial assistance to a sick unit like the
respondent No.2 herein under the Act before issuing such notification.
According to the learned counsel before issuance of the notification under
section 3(1) of the Act the Government must have given under that provision any
loan, guarantee or other financial assistance.
He further submitted that no financial
assistance and/or loan and/or guarantee has been provided by the State
Government under the Act before issuing the notification dated November 10,
1983, and, therefore, the impugned Notification is contrary to section 3(1) of
the Act." (emphasis added) Having set out the contention of the respondent
No.1 the learned Single Judge assumed for purposes of the case that SICOM was
'the State' within the meaning of Article 12 of the Constitution. Then he
proceeded to observe that Rs.52.30 lakhs had been advanced by SICOM as loan not
"under this Act", but it was only an ordinary commercial transaction.
Then he held that in order to invoke the powers under section 3(1) of the Act,
the condition precedent was that the State Government must have provided under
the Act loan, guarantee and other financial assistance to the undertaking as a
measure preventing unemployment relief as per the Preamble of the Act and since
it had not been established that Rs.52.30 lakhs had been 851 lent by SICOM
under the Act as a measure of preventing unemployment or unemployment relief,
the notification dated November 10, 1983 was ultra vires the Act. He further
held that the advance of Rs.15,00,000 by the State Government before May 9,
1984 did not cure the defect. He was of the opinion that the subsequent
notifications having been issued in continuation of the first notification were
equally ineffective. The petition thus came to be allowed and the appellant
company lost the protection granted to it by the Act. Since the Division Bench
has not given any reasons for its order we need not refer to it in greater
detail.
The Act contains just four sections in
addition to its long-title and the Preamble. The Preamble reads :
"WHEREAS it is expedient to make
temporary provision for industrial relations and other matters to enable the
State Government to conduct, or to provide loan, guarantee or financial assistance
for the conduct of, certain industrial undertakings as a measure of preventing
unemployment or of unemployment relief; It is hereby enacted in the Ninth Year
of the Republic of India as follows ;-" Section 1 of the Act sets out the
short title of the Act and the extent of its application. Section 2 of the Act
defines 'industry' and 'relief undertaking'. 'Relief undertaking' means an
industrial undertaking in respect of which a declaration under section 3 is in
force. Section 3 of the Act and the material part of section 4 have already
been set out above. Section 3 which is a self-contained one refers to the
industrial undertakings in respect of which a declaration may be made under it.
It is not controlled by the Preamble to the Act. An industrial undertaking
which may be declared as a relief undertaking under section 3 may be of two
kinds. It may be an industrial undertaking started, acquired or otherwise taken
over by the State Government and carried on or proposed to be carried on by the
State Government or under its authority. It may also be an industrial
undertaking to which any loan, guarantee or other financial assistance has been
provided by the State Government. There should be a declaration that an
industrial undertaking of either kind should be 852 conducted to serve as a
measure of preventing unemployment or an unemployment relief. Then such an
undertaking will be deemed to be a relief undertaking for the purposes of the
Act. The consequences of such declaration are contained in section 4 of the Act
one of them being that the State Government gets the power to direct that
notwithstanding any law, usage, custom, contract, instrument, decree, order,
award, submission, settlement, standing order or other provision whatsoever any
right, privilege, obligation, or liability accrued or incurred before the
undertaking was declared as relief undertaking and any remedy for the
enforcement thereof shall be suspended and all proceedings relative thereto
pending before any court, tribunal, officer or authority shall be stayed. A
notification issued under sub-section (1) of section 3 is renewable by like
notification from time to time for further periods not exceeding twelve months
at a time, so however that all the periods the aggregate do not exceed fifteen
years. It is seen that the whole object of the Act is to subserve the public
interest and in particular to prevent unemployment or to grant unemployment
relief.
In the instant case the State of Maharashtra
had provided through SICOM which is virtually an agent of the State Rs.52.30
lakhs by way of an advance to the appellant company before the first
notification was issued and at any rate before the second notification was
issued the State Government itself had advanced Rs. 15,00,000 in addition to what
SICOM had advanced earlier. Hence the industry of the appellant company was one
to which any loan, guarantee or other financial assistance had been provided by
the State Government. It is not clear how the High Court came to the conclusion
that such loan should have been granted "under" the Act. There is no
provision in the Act requiring that any such loan should be granted under it
before a declaration may be made under section 3(1) thereof. If any such loan
is granted by the State Government to an industrial undertaking or guarantee or
other financial assistance is given then it may be declared as a relief
undertaking. The conclusion of the High Court is not, therefore, warranted by
the provisions of the statute.
It may also be noticed that a distinction has
been made in the Act between cases falling under sub-clause (ii) of clause (a)
of sub-section (1) of section 4 of the Act and 853 cases falling under
sub-caluse (iv) of clause (a) of sub- section (1) of section 4 of the Act.
Sub-clause (ii) of section 4(1)(a) of the Act refers to the agreements,
settlements, awards, standing orders made under the several labour laws
mentioned under the Schedule to the Act and states that agreements etc. which
may be applicable to a relief undertaking before it was acquired or taken over
by the State Government or before any loan, guarantee or other financial
assistance was provided to it by or with the approval of the State Government
for being run as a relief undertaking may be suspended in operation or shall,
if so directed by the State Government be applied with such modifications as
may be specified in the notification issued for the said purpose. In this case
the Act seems to resolve a likely value conflict between loans given for
running the industry as a relief undertaking and the rights of workmen under
the agreements, awards etc. under the labour laws in the Schedule. This
sub-clause does not have anything to do with sub-clause (iv) of section 4(1)(a)
under which the case of a creditor like respondent No.1 falls. Another
distinction which may be noticed is the difference between the language in
sub-clause (ii) of section 4(1)(a) and in section 3. The former contains these
words 'before any loan guarantee or other financial assistance was provided to
it by or with the approval of the State Government for being run as a relief
undertaking' (emphasis added). In section 3 we have these words "or to
which any loan, guarantee, or other financial assistance has been provided by
the State Government shall with effect from... be conducted to serve as a
measure or preventing unemployment or of unemployment relief." (emphasis
added). The only precondition for the exercise of the power under section 3 is
that loan must have been advanced prior to the date of notification and it must
still be outstanding on that day. This is what leaps to the eyes effortlessly
on the mere opening of the eyes. On the other hands section 3 does not say
expressly or by implication 'a loan etc. is given for being run as a relief
undertaking under this Act.' Shri Shanti Bhushan, learned counsel for the
respondent No.1, very fairly stated that the order of the High Court may be set
aside and the case may be remanded to the High Court to consider other points
which had not been considered by the learned Single Judge.
854 We are of the view that the decision of
the High Court that unless loan is advanced by the State Government under the
Act no declaration can be made under section 3 of the Act is wholly erroneous.
The judgment of the High Court appears to be a very strained one and it is
unfortunate that the learned Single Judge committed an error in being carried
away by (putting it in the words of the learned Judge) the "very neat and
intelligent question of law" raised by the counsel for the petitioner in
the writ petition. The learned Judge failed to evince awareness of the
incalculable public prejudice that was likely to be caused by the acceptance of
the said fallacious contention and to notice that the case called for close and
thorough consideration. The summary dismissal of the appeal which deserved to
be allowed for the mere asking of it by the Division Bench is equally
lamentable to say the least about it.
This appeal should therefore be allowed and
the case should be remanded to consider the other contentions of the parties.
These are the reasons for our order dated March 10, 1986.
M.L.A. Appeal allowed.
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