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TMI Blog1991 (8) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... vementioned application in the suit. Defendant No. 1 in the suit, National Rubber Manufacturers Ltd., is an existing company within the meaning of the Companies Act, 1956. Defendant No. 5 claims to be the managing director of defendant No. 1 company. Defendant No. 1 owned two factories and/or undertakings, one of which is located at Tangra, Calcutta, and the other at Kalyani in the District of Nadia. By two notifications dated December 23, 1977, and February 10, 1978, respectively issued under section 18AA and under section 18A of the Industries (Development and Regulation) Act, 1951, the management of the said two factories and/or undertakings was taken over by the Central Government. It was mentioned in the said two Notifications that the orders contained therein would have effect for a period of five years commencing from the date of their publication in the Official Gazette. By the first notified order, the Central Government appointed a body of persons, referred to in the notification as the "authorised persons", to take over the management of the industrial undertaking of defendant No. 1 at Tangra in Calcutta. By the second notified order, the Central Government appoint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to remain with the board of directors of the said company. It was contended on behalf of the appellant that, since the company itself had not been taken over, the said Nikus Kumar Sarkar, has no authority and/or locus standi to sign the vakalatnama and/or the written statement on behalf of the company, describing himself as the secretary thereof. It was, therefore, prayed that the vakalatnama dated July 29, 1980, executed by the said Nikus Kumar Sarkar, as also the written statement verified by him on February 10, 1980, be taken off the file and/or rejected. While the said application was pending hearing, the Inchek Tyres Limited and the National Rubber Manufacturers Limited (Nationalisation) Act, 1984, was enacted by the Central Government, whereby, on the appointed date, i.e., February 14, 1984, the undertakings of defendant No. 1 company and the right, title and interest of the said company in relation to its undertakings stood transferred to and vested in the Central Government. The learned single judge accepted the arguments advanced on behalf of the plaintiff-bank to the effect that, since the two undertakings of defendant No. 1 company at Tangra and at Kalyani were the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany unless a part thereof is clearly referred to." In view of the aforesaid observations made in the above case, the learned judge held that the expressions "industrial undertaking which is a company" included within its scope the expression ' industrial undertaking ' which is owned by a company. According to the learned single judge, all the three aforesaid expressions used in the different sections of the Industries (Development and Regulation) Act, 1951, really indicated industrial undertakings belonging to a company, and not to a firm or other proprietary concern. The learned single judge was, therefore, of the view that once the management of an undertaking "of a company" was taken over by the Central Government under the provisions of the above-mentioned Act, the management of the company itself was also taken over. In the above premises and in view of the enactment of the Inchek Tyres Limited and the National Rubber Manufacturers Limited (Nationalisation) Act, 1984 (Act XVII of 1984), hereinafter referred to as "the Nationalisation Act", the learned single judge held that the points urged on behalf of the appellant had become academic and all the pending suits against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted (Nationalisation) Act, 1984, where a clear distinction has been made between the undertakings of the company and the company itself. Referring to the relevant provisions of the Industries (Development and Regulation) Act, 1951, Mr. Chatterjee pointed out that the expressions ( i ) industrial undertaking "being a company", ( ii ) industrial undertaking "which is a company", and ( iii ) industrial undertaking "owned by a company", had been used in different sections of the aforesaid Act in different contexts. Mr. Chatterjee submitted that each of the said three expressions have a distinctly separate meaning and the learned single judge had committed an error in equating the three different expressions to mean the same thing. Mr. Chatterjee pointed out that, in section 18A, the expression which has been used in the Explanation is "industrial undertaking which is a company". In section 18AA(3), the expression used is "industrial undertaking owned by a company". The expression used in section 18B(1)( c ) is "industrial undertaking which is a company". The expression used in section 18B(1) is "industrial undertaking being a company". Mr. Chatterjee submitted that each of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf. Mr, Chatterjee pointed out that the said distinction would be clear from the provisions of clause ( e ) of subsection (1) of section 18B itself, whereby the persons authorised to take over the management of an industrial undertaking "which is a company" would, for all purposes, be the directors of the industrial undertaking duly constituted under the Indian Companies Act, 1913, and would alone be entitled to exercise all the powers of the directors of the industrial undertaking, where such powers were derived from the said Act or from the memorandum or articles of association of the industrial undertaking or from any other source. According to Mr. Chatterjee, such distinction would not have been necessary, if the provisions of section l8B(1)( a ) were applicable to all industrial undertakings covered by the three expressions referred to hereinabove. Mr. Chatterjee further submitted that, similarly, the provisions of section 18E(1) of the said Act were applicable only in respect of an industrial undertaking "being a company" and not to industrial undertakings "owned by a company". Mr. Chatterjee submitted that the intention of the Legislature in using the three different exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied to either of the two companies after the management of its undertakings had been taken over by the Central Government would, on and from the appointed day, be the liability of the Central Government or of the existing or new Government company and would be discharged by that Government or, as the case may be, the existing or new Government company, as and when the payment for such supplies became due and payable. Mr. Chatterjee submitted that the provisions of sub-section (6) of section 4 and the provisions of sub-section (1) of section 5 make it amply clear that the Legislature intended to differentiate between the company itself and its undertakings, and the learned single judge was wrong in holding that the company itself had been nationalised. Mr. Chatterjee laid emphasis on the provisions of sub-section (1) of section 5 which, according to him, clearly envisaged the continued existence of the company. In support of his aforesaid contentions, Mr. Chatterjee relied on two decisions of the Supreme Court, as well as the Full Bench decision of the Punjab and Haryana High Court which had been relied upon by the learned single judge. The first of the two cases referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ab and Haryana High Court in the case of Radha Ram Badri Nath v. Amritsar Sugar Mills Company Ltd. [1977] 47 Comp Cas 625 ; AIR 1978 P H 129, wherein the Full Bench was considering the question whether the proceedings for winding up of an industrial undertaking which is a company as defined in the Companies Act, 1956, could be commenced or continued under section 433 of that Act, without the consent of the Central Government required under clause ( e ) of sub-section (1) of section 18E of the Industries (Development and Regulation) Act, 1951, if the management of a part only of such undertaking (one of its factories) had been taken over by the Central Government under section 18AA(1) of the said Act of 1951. While deciding the said question, the Full Bench had occasion to consider the various provisions of the Industries (Development and Regulation) Act, 1951.. In the said case, the Full Bench of the Punjab and Haryana High Court was required to consider the aforesaid issue in the light of the fact that, of the two undertakings of the Amritsar Sugar Mills Company Ltd., the management of the Vanaspati Ghee factory in Amritsar, was taken over by the body of persons appointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... njab and Haryana High Court, the same did not reflect the correct legal position and was liable to be set aside. Mr. Chatterjee invited us to hold that Nikus Kumar Sarkar was not authorised to act on behalf of defendant No. 1 company and the vakalatnama executed by him as also the written statement verified by him were liable to be taken off the file and/or rejected. In reply to the submissions made on behalf of the appellant, Mr. C.R. Datta, learned advocate appearing for the plaintiff-bank, firstly submitted that one defendant in a suit was not entitled in law to pray for the rejection of a written statement filed by another defendant. Mr. Datta submitted that each defendant in a suit was entitled to file his or her independent written statement and it was up to the learned court concerned to consider the evidence led by the respective parties on the basis of the pleadings, in arriving at a decision in the suit. Mr. Datta next contended that a shareholder or director or managing director of a company may have a right to move a writ application in respect of any executive action concerning the company which was likely to adversely affect the interest of an individual sharehold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e application filed by the appellant was entirely misconceived, as he had no right or authority to represent the company. Mr. Datta then submitted that, apart from the above, the appellant could not challenge the competence of Nikus Kumar Sarkar to represent the company so long as the two notified orders were not set aside. Mr. Datta further submitted that the appellant had not questioned the action of the authorised persons in authorising Nikus Kumar Sarkar to act on his behalf. According to Mr. Datta, since such authorisation by the persons who were competent to manage the affairs of the company under the two notified orders had not been questioned by the appellant in the application filed by him, such application was liable to be dismissed on that score also. Mr. Datta submitted that, on both the two aforesaid grounds, the application filed by the appellant is not maintainable and the learned single judge had rightly dismissed the same. Mr. Datta next submitted that, by virtue of the two notified orders, the management of the two undertakings of defendant No. 1 company had been taken over along with all its assets. Mr. Datta submitted that the effect of the two notified orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the industrial undertaking and any managing agent or any director thereof holding such offices immediately before the issuance of the notified orders would be deemed to have been terminated. Mr. Datta next referred to the provisions, of section 18B(1)( e ) of the said Act and submitted that, under the provisions of section 18B(1)( e ), the persons authorised under section 18A and/or 18AA of the aforesaid Act, authorised to take over the management of the industrial undertaking would, for all purposes, be the directors of the industrial undertaking duly constituted under the Companies Act, and would alone be entitled to exercise all the powers of the directors of the industrial undertakings, where such powers are derived from the said Act or from the memorandum or articles of association of the industrial undertaking or from any other source. Mr. Datta emphasised the fact that an industrial undertaking could not, of its own, have a board of directors for its management and that the necessary implication was that the industrial undertaking referred to in section 18B(1)( e ) meant the company itself. The industrial undertaking could not be separated from the company itself as, ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been made for making a complete inventory of all the assets of the undertaking, including books of account and all borrowings, liabilities and obligations of whatever kind of the company. It would not also have been necessary to prepare a list of members and a list of creditors of the company as on the date of taking over of the management of the industrial undertaking, unless it necessarily meant the take over of the management of the company also. In support of his aforesaid contention, Mr. Datta referred to the case of Rashtriya Mill Mazdoor Sangh v. Model Mills, Nagpur, AIR 1984 SC 1813, and also to the case of Food Corporation of India Workers' Union v. Food Corporation of India, AIR 1985 SC 488. The first case is an authority on the point that, even after the take over of the management of an industrial undertaking under the provisions of the Industries (Development and Regulation) Act, 1951, it did not become one engaged in industries carried on under the authority of the departments of the Central Government and neither were its employees excluded from the operation of the Bonus Act. In the second case, the Supreme Court was called upon to consider certain pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8A, authorising the taking over of the management of an industrial undertaking, all persons in charge of the management, including persons holding office as managers or directors of the industrial undertaking immediately before the issue of the notified order shall be deemed to have vacated their offices. Sub-clause ( e ) of section 18B(1) relates to the take over of the management of an industrial undertaking "which is a company". It provides that the authorised persons appointed under section 18A to take over the management of an industrial undertaking "which is a company", shall for all purposes be the directors of the industrial undertaking duly constituted under the Indian Companies Act and shall alone be entitled to exercise all the powers of the directors of the industrial undertaking, where such powers, are derived from the said Act or from the memorandum or articles of association of the industrial undertaking or from any other source. It appears to us that the Legislature was consciously making a distinction in respect of industrial undertakings "which are companies" within the meaning of the Indian Companies Act and industrial undertakings "which are owned" by the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G relate to the undertaking only in cases where the industrial undertaking is owned by a company. In our view, the three expressions referred to hereinabove, have been consciously used by the Legislature to differentiate between industrial undertakings which are themselves companies within the meaning of the Companies Act, and such industrial undertakings which are owned by companies. In cases where an industrial undertaking is owned by a company, the management of the undertaking after take over becomes severed and separated from the company itself. This necessitates the establishment of an infrastructure for management of the industrial undertaking when it is taken over and comes under the control of a new management, namely, the "authorised person", referred to in section 18A of the aforesaid Act. The aforesaid view taken by us will be further strengthened by the provisions of the Nationalisation Act of 1984. Section 3 of the Nationalisation Act provides that, on the appointed day, the undertakings of the two companies covered by the Act and the right, title and interest of each of the two companies in relation to its undertakings shall stand transferred to and shall vest in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er provides that any liability arising in respect of materials supplied to National Rubber Manufacturers Ltd. after the undertakings had been taken over by the Central Government would, on and from the appointed day, be the liability of the Central Government or of the existing or new Government company and shall be discharged by the Government or the existing or new Government company. On the basis of the view taken by us, we are inclined to accept the contention of Mr. Chatterjee that the management of the company itself had not been taken over by the Central Government and we are of the view that the learned single judge erred in proceeding on the footing that defendant No. 1 company itself had been nationalised under the Nationalisation Act, 1984, and that the management of defendant No. 1 company itself had been taken over by the Central Government. In fact, Mr. Datta conceded that, despite the issuance of the two notified orders and the promulgation of the Nationalisation Act, 1984, the company continued to exist. Having come to such a conclusion, the learned single judge misinterpreted the provisions of sub-section (6) of section 4 and section 5 of the Nationalisation Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the three expressions referred to above in different sections of the Industries (Development and Regulation) Act, 1951. In our view, instead of supporting the case sought to be made out by the plaintiff-bank, the Full Bench decision of the Punjab and Haryana High Court supports the contention advanced on behalf of the appellant. For the aforesaid reasons, we hold that the National Rubber Manufacturers Ltd. continued to have a separate existence, even after the publication of the two notified orders dated December 23, 1977, and February 10, 1978, respectively, and despite the promulgation of the Nationalisation Act, 1984. We also hold that, in view of the provisions of sub-section (6) of section 4 of the Nationalisation Act, 1984, the suit will not abate if it relates to and concerns any of the two undertakings of defendant No. 1 company which have vested in the Central Government, and the plaintiff-bank can continue the same against the Central Government, but as the management of the company itself has not been taken over by the Central Government and the company continues to have a. separate existence, neither the Central Government nor its representative, in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X
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