1996 (5) TMI 355 - HC - Companies Law

Powers of Central Government to assume management or control of an industrial undertaking in certain cases

Summary

Issues Involved:
1. Whether the arbitrator ought to have given the award against the Union of India and so a decree is liable to be passed against the Union of India as well.
2. Whether the decree passed against Hind Cycles Ltd. (Government management) is executable against the Union of India.

Issue-wise Detailed Analysis:

1. Whether the arbitrator ought to have given the award against the Union of India and so a decree is liable to be passed against the Union of India as well:

The appellant entered into an agreement with Hind Cycles Ltd. on November 28, 1975, to act as an agent for the sale of cycles and cycle parts in Iran. Despite fulfilling his obligations, the appellant was not paid his commission, leading him to invoke the arbitration clause. The arbitrator, Shri V. D. Misra, passed an award on August 30, 1985, directing Hind Cycles Ltd. to pay the appellant Rs. 25,88,536 and Rs. 1,13,37,025 for different claims. However, the arbitrator exonerated the Union of India from any liability. The appellant contested this, arguing that the Central Government, having taken over the management of Hind Cycles Ltd. under Sections 18A and 18B of the Industries (Development and Regulation) Act, 1951, should be liable for the company's dues. The court, however, upheld the arbitrator's decision, stating that the Central Government's management did not equate to assuming the company's liabilities. The learned single judge concluded that the arbitrator did not err in exonerating the Union of India and that the decree holder could not seek enforcement against the Union of India.

2. Whether the decree passed against Hind Cycles Ltd. (Government management) is executable against the Union of India:

The court examined the provisions of the Hind Cycles Ltd. and Sen Raleigh Ltd. (Nationalisation) Act, 1980, which came into force on October 15, 1980. Under this Act, the undertakings of Hind Cycles Ltd. vested in the Central Government, free from any encumbrances. Sections 4 and 5 of the Nationalisation Act were pivotal in determining the liabilities. Section 5(1) explicitly stated that liabilities incurred before the appointed day would remain the company's responsibility and not the Central Government's. The court noted that the appellant's claims were for the period before the nationalisation, and thus, the Central Government could not be held liable. The court further clarified that no decree, award, or order regarding liabilities incurred before the appointed day could be enforced against the Central Government. Consequently, the learned single judge's decision that the decree against Hind Cycles Ltd. was not executable against the Union of India was upheld. The appeal was dismissed, affirming that the liabilities of Hind Cycles Ltd. prior to October 15, 1980, could not be transferred to the Central Government.