Custodian of Textiles
Undertaking, Bombay Vs Hall & Anderson Ltd. & Ors
Dr. B.S. CHAUHAN, J.
appeal has been preferred against the judgment and order dated 14.12.2007 in
FMA No.761/05 and CAN No.7885/07 passed by the High Court of Calcutta affirming
the judgment and order of the Learned Single Judge dated 6.1.2005 in CR No.
10289(W)/83 by which the Learned Single Judge has held that the appellant
cannot take the management or possession of the suit premises, No.31,Chowringhee
Road, Calcutta, in view of the provisions of the Textile Undertakings (Taking
Over of Management) Act, 1983, (here in after called the `Act 1983').
and circumstances giving rise to this case are that Hall &Anderson Ltd.
(hereinafter called `Hall'), incorporated under the Indian Companies Act, 1913,
came into existence on 8.11.1946 and started primarily a departmental store
business on the premises atNo.31, Chowringhee Road (hereinafter called the
premises styled as Hall & Anderson). Hall purchased the textile mill
situated at Globe Mills Passage (Lower Parel) from M/s. Madhusudan Mills Ltd.
on12.6.1950 and commenced business of manufacturing and selling of cotton. The
name of the company M/s. Hall & Anderson Ltd. Was changed to M/s Shree
Madhusudan Mills Ltd., having its registered office at the premises on 21.7.1959.
Amalgamation of Profit & Loss Account was prepared henceforth for M/s Shree
Madhusudan Mills Ltd. from 1970.
1976, the business of departmental store was stopped due to economic loss and
after winding up of the said business, the premises was let out on rent. In
1989, because of strike by workers of textiles mills, several mills suffered
losses and it became difficult to run the business and therefore, the Government
after having due deliberations with Reserve Bank of India and other authorities
first came with the Ordinance and later on it was replaced by Act 1983.
respondent No.1 herein filed Writ Petition No.10289/83before the Calcutta High
Court challenging the provisions of the Act1983 and an injunction was granted
by the High Court vide order dated 26.10.1983 restraining the present appellant
from interfering with bank accounts relating to the property business as well
as textile undertaking business. It was during pendency of the business that Textile
Undertaking Nationalisation Act, 1995 came into existence and the mills stood
acquired. M/s Shree Madhusudan Mills Ltd. Was renamed as Hall on 11.2.1999.
Learned Single Judge allowed the said writ petition vide judgment and order
dated 6.1.2005 holding that the suit premises situated at Calcutta was by no
means related to the textile undertakings and therefore, it could not be part
and parcel of textile undertakings and not covered by the said Acts 1983 or
aggrieved, the present appellant preferred the FMANo.761/05 which has been
dismissed by the Division Bench, and in concurrence with the learned Single
Judge. Hence, the present appeal.
G.E. Vahanvati, Learned Attorney General for India has submitted that the
Division Bench, as well as the Learned Single Judge of the High Court of
Calcutta, failed to appreciate the purpose of taking over the management of
textile undertakings. Because of mismanagement and strike of workers, the
textile undertakings became unworkable and the Government of India in public
interest and taking recourse to the provisions of Articles 39B & 39C of the
Constitution appointed a Committee to examine the issue and after considering
its report with consultation and considering the guidance of the Reserve Bank
of India, it took up a decision to take over the management of the same units
of the textile undertakings. The present textile industry was in category III,
and it was evident that the undertaking made viable after investment of a huge
amount which could be raised by selling the extra land with the textile industries.
In the instant case, the accounts of the textile undertakings and of the premises
stood amalgamated in 1970. The courts below failed to appreciate the law laid
down by this Court in various judgments and held that the premises was not
related to textile industries by any means and was a separate and independent
entity and the business of letting out the premises was totally separate
business having no nexus to the textile undertakings. Thus, the appeal deserves
to be allowed.
the contrary, S/Shri R.F. Nariman, L. Nageswar Rao, U.U.Lalit and Ranjit Kumar,
learned senior counsel appearing for the respondents, have opposed the appeal
contending that the judgments cited by the Learned Attorney General in the
cases of National Textile Corporation Ltd. & Ors etc. v. Sitaram Mills Ltd.
& Ors.etc., AIR 1986 SC 1234 and M/s. Doypack Systems Pvt. Ltd. v. Union of
India & Ors., AIR 1988 SC 782 have no bearing in this case for the reason
that the facts therein are quite distinguishable. Inthe case of Sitaram Mills
(supra) there had been the finding of fact recorded by this Court reversing the
finding of the courts below that the real estate division of that company was
not having separate and independent business and the income of real estate
division came into existence from the funds of the company itself. Therefore,
it was the assets of that company, namely, Sitaram Mills. In the instant case
as the Calcutta High Court has held that the premises had totally separate entity
having no nexus to the textile undertakings or its activities had not come into
existence from the funds of textile undertakings, it could not be the asset of
the said company. More so, the premises had been mortgaged wherein the
mortgagee had already sold this property because it could not be redeemed. In
fact, the mortgage became the liability and under the Act 1995, it is the only
assets which have been taken over and not the liabilities of the nationalised
company. The appeal lacks merit and is liable to be dismissed.
have considered the rival submissions made by learned counsel for the parties
and perused the records.
pleadings in the writ petition before the High Court revealed the factual
matrix of the case and it is evident from the same that the respondent
initially started the business of selling various goods and articles from the
departmental store operating from the premises under the name and style of M/s
Hall & Anderson. The Company purchased the textile mill in Bombay on
12.6.1950 and commenced the additional business of manufacturing and selling cotton
textile. The departmental store continued its business upto1976. Subsequent
thereto, the building was developed as an income yielding asset and as such
started the business of letting out various portions of the said building to
different business organizations. The total area of the premises is about 4
acres and on an area of 345 sq. ft. the registered office of the company is
situated. The business of textile mill remained completely separate from the
premises business of letting out. They had not been interconnected and the
premises business has no connection with running the textile undertakings. The accounts
of the property business were separately and independently maintained. Staff
engaged in the property business were also not connected. They had no concern
with the working of the textile mill, except the Secretary of the Company, as
he had to be the same person in view of the requirement of the provisions of Companies
Act, 1961.No amount for the textile mill business had ever been borrowed from any
financial institution or utilized for its running. Profit and Loss accounts of
both the business have been prepared separately in spite of amalgamation since
1970. The books of account had been maintained for both the business
separately. The premises had been mortgaged with the Central Bank of India,
Bombay by deposit of title deeds with a view to secure advance granted by the
Central Bank of India to the Company for the purpose of running the textile
mill, but it stood only as a security. It has not become an integral part of
the textile industries or had any nexus or relation with the working of textile
mill. In the counter affidavit, reference has been made to the report of the
Committee that disposal of immovable property of the Company, i.e., premises
would provide substantial amount for making the undertaking viable within a few
years provided, the said premises was sold. Further reference had been made to
the observations made by the task force under the terms of reference that
Company would beviable with the sale of land.
considering the pleadings as well as the submissions made on behalf of the
parties, a learned Single Judge as well as the Division Bench recorded the
following findings :
Hall and Anderson premises at Calcutta deals with different business and cannot
be treated as part and parcel of the textile undertaking at Bombay.
company was engaged in multifarious activities.
textile undertaking at Bombay carries no other business other than the textile
bank accounts and balance-sheets of both the units are different.
lump sum compensation to the tune of Rs.2,70,85,000/- has been fixed and paid
under the Act 1995. 415 acres of land, building and the material acquired at
Bombay leaving aside the premises at Calcutta.
textile mill at Bombay had been purchased as an asset of M/s Hall &
Anderson as it had been purchased totally out of the resources of M/s Hall
& Anderson. The premises at Calcutta by no means can be part and parcel having
any nexus or related to the textile undertaking at Bombay.
judgment in Sitaram Mills (supra) was distinguishable as it had been argued in
that case that the land appurtenant to the said mill was not a part of the
textile undertaking. However, this Court came to the conclusion that as a
result of modernization resulted in a formation of mill of a much smaller size,
the land had become surplus. It was lying vacant. It was not in dispute that
the surplus land was under the ownership of the textile undertaking. It was in
fact the land on which the different division of the old mill had been functioning.
Thus, this Court held that the land was an integral part of the textile
undertaking. In the instant case, position is otherwise. The textile mill has
been under the ownership of M/s Hall & Anderson at Calcutta.
M/s Doypack Systems Pvt. Ltd. v. Union of India &Ors., AIR 1988 SC 782,
this Court while interpreting the provisions of Section 3 of the Swadeshi
Cotton Mills (Acquisition and Transfer of Undertaking) Act, 1986, observed that
the provisions of such a statute require broad and liberal interpretation in
consonance and conformity with the principles enshrined in Articles 39B and 39C
of the Constitution. In the said case, the issue was whether shares purchased
using funds of the textile company could be held to be covered under the terms
of said provision. The ratio of the said case has no application in the present
case, as, admittedly, in that case the shares in question had been purchased
from the funds of the textile company. In the instant case, the fact situation
is the other way around. M/s Shree Madhusudan Mills Ltd., Bombay, had been
purchased using funds generated from the premises at Calcutta.
have gone through the provisions of the Act 1995. Section8 thereof, provides
for payment of amount to owners of textile undertaking:
"8. Payment of
amount to owners of textile undertakings - The owner of every textile undertaking
shall be given by the Central Government, in cash and in the manner specified
in Chapter VI, for the transfer to, and vesting in, it, under sub-section (1)
of section 3, of such textile undertaking and the right, title and interest of
the owner in relation to such textile undertaking, an amount equal to the amount
specified against it in the corresponding entry in column (4) of the First Schedule."
However, the column (4) of the First Schedule, so far as the present textile
industry is concerned, reads as under:
Name of the textile
Name of the owner
Amount (in rupees)
Shree Madhusudan Mills,
Pandurang Budhkar Marg,
Shree Madhusudan Mills
31, Chowringhee Road,
Calcutta - 16
From the above, it
is evident that what has been acquired is the property at Bombay. Column 3
makes it clear that it was under the ownership of M/s Shree Madhusudan Mills
Ltd., Calcutta, and after the property acquired at Bombay, a sum of Rs.2,70,85,000/-
had been paid as compensation. No compensation has been paid for the premises
relevant part of the judgment in Sitaram Mills (supra)reads as under: "The
High Court completely ignored the fact that all the assets of the company were
held in relation to the textile business. The company required all its real
estate in the nineteenth century when it was formed for carrying on textile business
and, admittedly, no new assets had been acquired by it thereafter......... Even
for determining the total compensation to be paid on nationalization, the Task
Force takes values into account the total surplus lands of the company and does
not exclude any land belonging to the so-called Real Estate
Division......" Therefore, it is evident that in the said case, the land appurtenant
to the textile undertaking and belonging to it, was converted into real estate
and even on nationalisation, for the purpose of determining the compensation,
the said land had been included in the assets. In the instant case, a contrary
picture emerges as explained herein above. More so, the chart quoted from the
Act, does not show that for determining the compensation, premises property at
Calcutta had also been included. As the premises in Calcutta does not form part
of or has been appurtenant to the textile industry, the judgment in M/s Doypack
Systems Pvt. Ltd. (supra) is also distinguishable.
Court in Minerva Mills Ltd. v. Union of India, AIR1986 SC 2030, dealt with
judgment of this Court in Sitaram Mills(supra) and held as under:
learned Counsel for the petitioners has placed reliance upon an observation of
this Court in National Textile Corpn. Ltd. v. Sitaram Mills Ltd. The question
that was involved in that case was whether surplus land in the precinct of the
taken-over undertaking was an asset in relation to the undertaking. It was
observed: (SCC p. 133 bottom) "The test is whether it was held for the
benefit of, and utilised for, the textile mill". Relying upon this
observation, it is contended by the learned Counsel for the petitioners that as
the vacant land, in the instant case, has not been utilised for the
undertaking, it is not an asset of the undertaking. We do not think that in
Sitaram Mills case this Court really meant to lay down a proposition that in
order that a piece of land be considered as the asset of the textile
undertaking, it must be held for the benefit of and utilised for the
undertaking in question. Can it be said that a piece of land which is held for
the benefit of but not utilised for the textile undertaking, as in the instant
case, is not an asset of the undertaking? The answer must be in the negative.
In Sitaram Milks case that observation was made in the context of facts of that
case, namely, that the surplus land was held for the benefit of and also utilised
for the textile undertaking." (Emphasis added)
view of the above, we do not see any cogent reason not to concur with the view
expressed by the High Court. The appeal lacks merit and is, accordingly,
dismissed. In the facts and circumstances of the case, there will be no order
as to costs.
(Dr. B.S. CHAUHAN)