1974 (10) TMI 54 - HC - Companies Law

Power to investigate into affairs of a company-in-liquidation, Powers of Central Government to authorise with permission of High Court to takeover management or control of industrial undertaking

Summary

Issues:
Application under section 18FA of the Industries (Development and Regulation) Act, 1951 for management takeover of an industrial undertaking.

Analysis:
The judgment delivered by Justice R.P. Bhatt pertains to a company application under section 18FA of the Industries (Development and Regulation) Act, 1951, seeking permission for the Union of India to appoint a person or body to take over the management of an industrial undertaking at Badnera. The application was made following an investigation under section 15A of the Act, which recommended restarting the industrial undertaking for the production of cotton textiles in the public interest. The Central Government supported the restarting of the mill to address unemployment concerns. The respondents argued against the application, contending that court discretion is essential even after a government opinion is formed. However, Justice Bhatt held that once the government forms an opinion and an application is made, the court must pass an order under section 18FA, albeit limited to a period not exceeding 5 years, with a provision for further extensions subject to court discretion.

The respondents further argued that the use of "shall" in section 18FA may render the provision ultra vires, but Justice Bhatt disagreed, stating that no constitutional challenge was raised in the application. He emphasized the mandatory nature of the provision and the court's obligation to follow the law as prescribed in section 18FA. Addressing a preliminary contention, Justice Bhatt clarified that the form of the application, whether a company application or not, does not affect the court's jurisdiction to pass an order based on the merits of the case. He highlighted that the Central Government had formed the necessary opinion for restarting the industrial undertaking, as required by section 18FA, thus compelling the court to grant the application for management takeover.

Consequently, Justice Bhatt made the judge summons absolute, granting permission to appoint a person or body to manage the industrial undertaking at Badnera for a maximum of 5 years. The official liquidator was directed to hand over possession to the authorized person after preparing an inventory of assets and liabilities. The official liquidator was also instructed to recover costs incurred during their tenure. No costs were awarded for the application, and the judgment had implications for Company Petition No. 54/1974, with no orders made in that regard. The judgment upholds the mandatory nature of section 18FA and emphasizes the court's duty to act upon a government-formed opinion for the public interest.