1998 (3) TMI 525 - SC - Companies Law

Acquisition of the undertaking of the Indore Textiles Ltd. by the Indore Textiles Limited (Upkaram Ka Arjan Aur Antaran) Adhiniyam, 1986 challenged Held that - Appeal dismissed. The provision for taking over of the undertaking is merely incidental to the acquisition of the undertaking and is not in conflict with section 20 of the IDR Act. Furthermore, the extended period of management with the Central Government was coming to end on February 11, 1986, and the impugned Ordinance was issued one day before that, i.e. , on February 10, 1986. This was obviously done with a view that there should be no break and the management of the undertaking should continue with the Government even after February 11, 1986. The so called overlapping of the management for one or two days, i.e., February 10, 11, 1986, would not and cannot affect the validity of the Adhiniyam.

Summary

Issues:
Challenge to the acquisition of the undertaking of a company under the Indore Textiles Limited (Upkaram Ka Arjan Aur Antaran) Adhiniyam, 1986.

Analysis:
The judgment involved a challenge to the acquisition of the undertaking of a company under the Indore Textiles Limited (Upkaram Ka Arjan Aur Antaran) Adhiniyam, 1986. The company, Indore Textiles Ltd., had its management taken over by the Central Government under the Industries (Development and Regulation) Act, 1951. The petitioners challenged the acquisition through writ petitions and appeals. The primary contention was that the acquisition lacked a public purpose as the management was already under government control. The Act aimed to secure proper management of the industrial undertaking for the public interest, ensuring the continuity of cloth production vital for the country. The petitioners argued that since the management was already with the government, there was no need for the acquisition.

The judgment addressed the legality of the acquisition under the Act. It was argued that the Act's provision for taking over the management was incidental to the acquisition and not in conflict with the Industries (Development and Regulation) Act, 1951. The timing of the acquisition, one day before the extended management period was to end, was highlighted to ensure continuity in management. The judgment cited previous cases where similar challenges were rejected, emphasizing that the acquisition was within the legislative competence of the State.

Another argument raised was regarding the liabilities incurred during the period when the government managed the undertaking. Section 5 of the Act specified that liabilities prior to the appointed date would be enforceable against the owners, not the State Government. The petitioners raised concerns about being held responsible for liabilities incurred during the government's management period. The judgment noted that no challenge was made specifically on this ground, and it was expected that the government would handle such liabilities fairly and appropriately under the provisions of the Act.

Ultimately, the Supreme Court upheld the validity of the Indore Textiles Limited (Upkaram Ka Arjan Aur Antaran) Adhiniyam, 1986, dismissing the writ petitions and the civil appeal challenging the takeover of management under the Industries (Development and Regulation) Act, 1951. The parties were left to bear their own costs in the matter.