1986 (9) TMI 404 - SC - Indian Laws

Summary

Issues:
1. Interpretation of whether the hosiery and spinning sections of a textile company constitute separate undertakings.
2. Determination of whether the spinning section of the company had ceased working permanently.
3. Analysis of the definitions of 'textile,' 'textile company,' and 'textile undertaking' under the Sick Textile Undertakings (Taking Over of Management) Act.
4. Consideration of whether the hosiery section's continuous operation affects the closure status of the textile undertaking.

Analysis:
1. The judgment addresses the issue of whether the hosiery and spinning sections of a textile company are distinct undertakings. The Supreme Court previously held that these sections were separate entities under the Bombay Industrial Relations Act. However, under the Sick Textile Undertakings (Taking Over of Management) Act, the definitions of 'textile,' 'textile company,' and 'textile undertaking' necessitate treating the hosiery section as part of the sick textile undertaking. This inclusion is supported by the deeming provision in the Act, which considers the hosiery section as an asset of the textile company related to the sick textile undertaking.

2. The judgment further examines the contention that the spinning section had permanently closed, rendering it ineligible for takeover and nationalization. Evidence presented, such as agreements with workers, machinery sale, and regulatory compliance, suggests a potential revival of the spinning section. The court refutes the claim of permanent closure, emphasizing the absence of necessary permissions for machinery disposal and the intention to replace old machinery with new equipment.

3. Regarding the continuous operation of the hosiery section, the court determines that the closure of the more significant spinning section constitutes the substantial closure of the textile undertaking. Despite the hosiery section's continued functioning, the primary activity's cessation indicates the overall closure of the textile undertaking under the Act. The court dismisses the argument that the hosiery section's operation negates the textile undertaking's closure, upholding the conclusion that the textile undertaking had effectively shut down.

In conclusion, the judgment clarifies the legal interpretation of distinct undertakings within a textile company, the criteria for determining permanent closure, and the impact of continuous operation on the closure status of a textile undertaking under the Sick Textile Undertakings (Taking Over of Management) Act.