Panipat Woollen & General Mills
Co. Ltd.& ANR Vs. Union of India & Ors [1986] INSC 200 (26 September
1986)
DUTT, M.M. (J) 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 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 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]
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, 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.
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 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, 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.
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