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1980 (7) TMI 184 - HC - Companies Law

Issues Involved:
1. Competency of the State Legislature to enact provisions interfering with company winding-up under the Companies Act, 1956.
2. Impact of the Union Government's control over textile industries on the State Legislature's power to legislate.
3. Alleged discrimination under Article 14 of the Constitution.
4. Conflict between the Industries (Development and Regulation) Act, 1951, and the Kerala Act.
5. Restrictions on fundamental rights under Article 19(1)(g) and Article 301 of the Constitution.

Issue-wise Detailed Analysis:

1. Competency of the State Legislature:
The petitioners argued that the State Legislature lacked the competency to enact provisions that interfere with the winding-up of a company under sections 433 and 434 of the Companies Act, 1956, as the topic of incorporation, regulation, and winding-up of corporations is covered by entry No. 43 of List I of the 7th Schedule. The court, however, concluded that the Kerala Act, which aims at preventing unemployment and providing unemployment relief, falls under entry 23 of List III of the 7th Schedule. The court found no conflict between the Kerala Act and the Companies Act, as they operate in different fields and serve different purposes.

2. Union Government's Control Over Textile Industries:
The petitioners contended that since "textile industries" have been taken over by the Union Government under entry 52 of List I of the 7th Schedule, the State Legislature is deprived of the power to legislate on this subject. The court rejected this argument, noting that the Kerala Act's primary objective is to prevent unemployment and provide relief, which is within the State Legislature's competency under entry 23 of List III. The court also noted that the Kerala Act had received the President's assent, further validating its constitutionality.

3. Alleged Discrimination Under Article 14:
The petitioners claimed that the Kerala Act discriminates against companies that are not government companies or those that have not received government loans, guarantees, or financial assistance, thus violating Article 14 of the Constitution. The court found no merit in this argument, stating that the Act's provisions are aimed at preventing unemployment and providing relief, which justifies the differential treatment.

4. Conflict Between the Industries (Development and Regulation) Act, 1951, and the Kerala Act:
The petitioners argued that there is a conflict between the Industries (Development and Regulation) Act, 1951, which allows the Central Government to suspend obligations and liabilities of industrial undertakings, and the Kerala Act's provisions for suspension of liabilities and obligations. The court found no conflict, stating that the Kerala Act's provisions are consistent with the objective of preventing unemployment and providing relief. The court also noted that the Kerala Act's provisions operate within the scope of entry 23 of List III and do not encroach upon the Central Government's powers.

5. Restrictions on Fundamental Rights Under Article 19(1)(g) and Article 301:
The petitioners contended that the restrictions imposed by the Kerala Act on the enforcement of contractual obligations violate their fundamental rights to carry on trade or profession under Article 19(1)(g) and Article 301 of the Constitution. The court rejected this argument, stating that the restrictions are reasonable and justified in the interest of preventing unemployment and providing relief.

Conclusion:
The court dismissed the original petitions, upholding the constitutionality of sections 3 and 4 of the Kerala Act and the validity of the impugned notifications. The court declared that the Kerala Act and the notifications are valid and constitutional. Consequently, the proceedings in the company petitions, C.P. Nos. 15 to 18 of 1977, were stayed until the expiry of the period covered by the notifications issued under section 3(2) of the Kerala Act. The court also denied the petitioners' oral request for certificates under Article 133(1) to appeal to the Supreme Court, as the cases did not involve any substantial question of law of general importance.

 

 

 

 

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