1977 (4) TMI 101 - HC - Companies Law

Summary

Issues Involved:
1. Whether winding-up proceedings for an industrial undertaking (company) can be commenced or continued under Section 433 of the Companies Act, 1956, without the consent of the Central Government as required under Section 18E(1)(c) of the Industries (Development and Regulation) Act, 1951, if only part of the undertaking's management has been taken over by the Central Government under Section 18AA(1) of the Regulation Act.

Detailed Analysis:

Issue 1: Applicability of Section 18E(1)(c) of the Industries (Development and Regulation) Act, 1951

The primary question addressed was whether the winding-up proceedings of a company could be initiated or continued without the Central Government's consent when only part of the company's management was taken over by the Central Government under Section 18AA(1) of the Regulation Act. The court considered the following points:

Factual Background:
- The company in question had two factories: a sugar factory in Uttar Pradesh and a vanaspati ghee factory in Amritsar.
- The management of the sugar factory was taken over by the U.P. State Government, and the management of the vanaspati ghee factory was taken over by the Central Government under Section 18AA(1) of the Regulation Act.
- A winding-up petition was filed before the management takeover, and the petition was published under the Companies (Court) Rules.

Legal Contentions:
- The State Bank of India, a secured creditor, argued that under Section 18E(1)(c) of the Regulation Act, winding-up proceedings cannot be initiated or continued without the Central Government's consent if any part of the undertaking is taken over.
- The petitioners contended that Section 18E applies only when the entire undertaking is taken over, not just a part.

Statutory Interpretation:
- Section 18AA(1) allows the Central Government to take over the management of the whole or any part of an industrial undertaking.
- Section 18E(1)(c) states that no proceeding for winding up or appointment of a receiver shall lie without the Central Government's consent if the management of an industrial undertaking being a company is taken over.

Court's Analysis:
- The court examined the scheme of the Regulation Act and the Companies Act, noting that the Regulation Act aims to override normal company law routines to protect public interest and scheduled industries.
- The court emphasized that Section 18E(1)(c) should be strictly construed as it imposes a restriction on creditors' or shareholders' rights under Section 433 of the Companies Act.
- The court observed that the language of Section 18E(1)(c) refers to the whole undertaking being taken over, not just a part. The legislature's use of terms like "whole or any part" in other sections, but not in Section 18E(1)(c), indicated that the provision applies only when the entire undertaking is taken over.

Conclusion:
- The court concluded that Section 18E(1)(c) does not apply when only part of the undertaking is taken over by the Central Government.
- Consequently, the winding-up proceedings could continue without obtaining the Central Government's consent.

Outcome:
- The court held that the winding-up proceedings could proceed without the Central Government's consent, as required under Section 18E(1)(c), since only part of the undertaking was taken over.
- The petition was sent back to the learned company judge for further proceedings and decision on merits.

Separate Judgments:
- Harbans Lal, J., and Surinder Singh, J., concurred with the judgment.

This detailed analysis covers the legal judgment comprehensively, maintaining the original legal terminology and significant phrases, while providing a structured and thorough summary of the court's decision on the issue involved.