1986 (9) TMI 357 - SC - Companies Law

Power to cause investigation to be made into scheduled industries, Powers of Central Government on completion of investigation under section 15, Powers of Central Government to assume management or control of an industrial undertaking in certain cases

Issues Involved:
1. Legality of the order dated October 19, 1971, under Section 18A of the Industries (Development and Regulation) Act, 1951.
2. Constitutional validity of the Sick Textile Undertakings (Nationalisation) Act, 1974.
3. Alleged violation of principles of natural justice due to non-supply of the investigation report.
4. Legality of taking possession of vacant land by the National Textile Corporation.

Detailed Analysis:

1. Legality of the Order under Section 18A:
The petitioners challenged the legality of the order dated October 19, 1971, under Section 18A of the Industries (Development and Regulation) Act, 1951, which authorized the National Textile Corporation to take over the management of Minerva Mills Ltd. The petitioners contended that the order was passed without any application of mind, especially considering an earlier order dated April 24, 1971, which sanctioned a loan guarantee for the company. They argued that if the management was indeed detrimental to public interest, such a guarantee would not have been sanctioned. However, the court held that the investigation under Section 15 justified the finding that the management was detrimental to public interest. The court also noted that the petitioners did not challenge the order for several years, implying acceptance of the takeover. The court concluded that the order under Section 18A was valid and not illegal.

2. Constitutional Validity of the Sick Textile Undertakings (Nationalisation) Act, 1974:
The petitioners argued that several provisions of the Sick Textile Undertakings (Nationalisation) Act, 1974, imposed unreasonable restrictions on their fundamental rights under Articles 14 and 19 of the Constitution. They contended that the Act altered or damaged the basic structure of the Constitution. The court, however, held that the Act was enacted to give effect to the policy of the State towards securing principles specified in Article 39(b) of the Constitution. Since the Act was included in the Ninth Schedule and aimed at reorganizing and rehabilitating sick textile undertakings, it was protected under Article 31C. Thus, the challenge to its constitutional validity on the grounds of Articles 14 and 19 was dismissed.

3. Alleged Violation of Principles of Natural Justice:
The petitioners contended that the order under Section 18A was passed without supplying them with a copy of the investigation report, thus violating principles of natural justice. The court noted that the company had been given a hearing by the Investigation Committee and had ample opportunities to make representations. The court referred to the precedent in Kesava Mills Co. Ltd. v. Union of India, which established that non-supply of the report does not necessarily constitute a failure of natural justice. The court concluded that the petitioners were not prejudiced by the non-supply of the report and dismissed this contention.

4. Legality of Taking Possession of Vacant Land:
The petitioners claimed that the National Textile Corporation had illegally taken possession of 17.52 acres of vacant land, which did not vest in the Central Government under the Sick Textile Undertakings (Nationalisation) Act. The court noted that the land was within the mill compound and formed an integral part of the textile undertaking. Under Section 4(1) of the Act, all properties, including lands, in the possession of the owner of the sick textile undertaking, were deemed to be part of the undertaking. The court held that the vacant land was part of the undertaking, irrespective of its current use, and dismissed the petitioners' claim for its return.

Conclusion:
The court dismissed all the writ petitions, upholding the legality of the order under Section 18A, the constitutional validity of the Sick Textile Undertakings (Nationalisation) Act, and the possession of the vacant land by the National Textile Corporation. The court found no violation of principles of natural justice and ruled that the petitioners were not entitled to challenge the impugned order or the Act.

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