PETITIONER:
PANIPAT WOOLLEN & GENERAL MILLS CO. LTD.& ANOTHER
Vs.
RESPONDENT:
UNION OF INDIA & OTHERS
DATE OF JUDGMENT26/09/1986
BENCH:
DUTT, M.M. (J)
BENCH:
DUTT, M.M. (J)
REDDY, O. CHINNAPPA (J)
CITATION:
1986 AIR 2082 1986 SCR (3) 937
1986 SCC (4) 368 JT 1986 573
1986 SCALE (2)536
CITATOR INFO :
F 1989 SC1331 (5)
ACT:
Sick Textile Undertakings (Taking over of Management)
Act, 1972, ss. 2(a), 2(d) and 4(1)-Management of undertaking
taken over by Central Government-Undertaking specified in
First Schedule as a 'sick - textile undertaking-Whether
opportunity of hearing should be given to the owner before
such 'taking over'.
Sick Textile Undertakings (Nationalisation) Act, 1974
Constitutional validity of-Art. 31, 31C & 39 (b) of
Constitution of India.
HEADNOTE:
A provisional liquidator was appointed in respect of
two textile undertakings of the petitioner-company since
they had gone into huge loss and had to be closed sometime
in May 1972. As the textile undertakings of the petitioner-
company were 'sick textile undertakings' within the meaning
of sub-clause (i) of s. 2(d) of the Sick Textiles
Undertakings (Taking-over of Management) Act 1972 (for
short, Take over Act) and have also been specified in the
First Schedule to the Take-over Act, they vested in the
Central Government as 'sick textile undertakings' by virtue
of s. 4(1) of the Take-over Act.
The petitioner-company challenged before the Supreme
Court the taking over of the management of the aforesaid two
textile mills under the Take-over Act and also the
constitutional validity of the Take-over Act and the Sick
Textile Undertakings (Nationalisation) Act 1974 on the
grounds (a) that the Company should have been given an
opportunity of being heard before the management of its
undertakings was taken over as 'sick textiles undertakings'
and if such an opportunity had been given, the company could
have shown that its undertakings were not sick undertakings;
(b) that the legislature, having itself decided the question
whether an undertaking is sick textile undertaking or not
without giving any opportunity to the owner of such
undertaking to make a representation, has damaged the basic
structure of the Constitution
938
namely separation of power between the legislature, the
executive and the judicially; and (c) that the Nationalisa-
tion Act is consititutionally invalid on the ground of
inadequacy of compensation.
Dismissing the petition,
^
HELD 1.1 In the First Schedule to the Take-over Act,
the undertakings of the company have been specified as sick
textile undertakings. In other words, the Legislature has
itself decided the undertakings of the Company to be sick
textile undertakings. Indeed, in the First Schedule all the
sick textile undertakings have been specified. Thus, it is
apparent that the Legislature has not left it to the
Executive to decide whether a particular textile undertaking
is a sick textile undertaking or not. If under the Take-over
Act the question whether a textile undertaking is a sick
textile undertaking or not had been directed to be decided
by the executive authorities, the owner of such undertaking
could claim an opportunity of being heard. But when an
undertaking has been specified in the First Schedule to the
Take-over Act as a sick textile undertaking, the question of
giving an opportunity to the owner of the undertaking does
not at all arise. [942C-F]
1.2 In including the sick textile undertakings in the
First Schedule, the Legislature has not acted arbitrarily,
for it has also laid down the criteria or tests for such
inclusion. If any undertaking which has been so specified in
the First Schedule does not satisfy the tests under s. 2(d)
of the Take-over Act, the owner of it is entitled to
challenge such inclusion or take-over in a court of law,
although such challenge has to be founded on a strong
ground. Thus, there is no finality or conclusiveness in the
legislative determination of an undertaking as a sick
textile undertaking. Such determination is neither judicial
nor quasi judicial. Therefore, the question of damaging or
altering the basic structure of the Constitution namely,
separation of powers among the Legislature, the Executive
and the Judiciary, does not at all arise. So also the
question of the validity of the constitutional amendments by
which the Take-over Act and the Nationalisation Act have
been included in the Ninth Schedule on the ground that by
such amendments the basic structure of the Constitution is
damaged, as contended on behalf of the petitioners, does not
arise. [943F-H; 944A-B]
2. The Nationalisation Act gives effect to the policy
of the State towards securing the ownership and control of
the material resources of the community which are so
distributed as best to subserve the common
939
good, as contained in Art. 39(b) of the Constitution. It
falls within the provision of Art. 31C of the Constitution
before it was amended by the Constitution (Forty-Second
Amendment) Act, 1976. Even assuming that the Nationalisation
Act violates the provision of Art. 31, no challenge to its
validity can be made on that ground. [944E-G]
Minerva Mills Ltd. & Ors. v. Union of India & Ors.,
Writ Petition Nos. 356-361 of 1977, decided on September 9,
1986, relied upon.
In the instant case, the compensation that has been
awarded to the Company is neither inadequate nor illusory.
It is not in dispute that the paid-up share capital of the
Company was Rs.60 lakhs and it paid dividend from 1965 to
1970. It will not be unreasonable to presume that in
specifying the compensation, the Legislature has taken these
facts into consideration. There is, therefore no substance
in the contention of the petitioners that the compensation
specified in First Schedule to the Nationalisation Act in
respect of the undertakings of the Company is illusory.
[944G-H; 945A]
JUDGMENT:
ORIGINAL JURISDICTION: Writ Petition (Civil) No. 1129
of 1977
Under Article 32 of the Constitution of India.
M . R. Sharma and Dalveer Bhandari for the Petitioner.
B.Datta Additional Solicitor General, Ms. A.Subhashini,
A.K. Goel, T.V.S.N. Chari, R.K. Jain, Dr. N.M. Ghatate, D.N.
Mishra and H.S. Parihar for the Respondents.
The Judgment of the Court was delivered by
DUTT, J. In this writ petition the petitioner, Panipat
Woollen & General Mills Co. Ltd., hereinafter referred to as
‘the Company’, has challenged the taking over of the
management of its two textile mills under the Sick Textile
Undertakings (Taking over of Management) Act, 1972 (for
short ‘Take-over Act’) and also the constitutional validity
of the Take-over Act and the Sick Textile Undertakings
(Nationalisation) Act, 1974 (for short ‘the Nationalisation
Act’).
It appears that the Company had falled on evil days
resulting in initiation of liquidation proceedings against
the Company and the
940
appointment of a provisional liquidator. The mills of the
Company were closed sometime in May, 1972. On the
application by the Industrial Finance Corporation of India,
the Punjab & Haryana High Court directed the Board of
Directors of the Company to hand over possession of the two
mills to the Corporation to which the Company was indebted
for a huge sum of money. The Corporation was also directed
by the High Court to lease out the mills, and it appears
that Padmashree Textile Industries Ltd. was granted the
lease of the mills, that is to say, the textile undertakings
of the Company.
At this stage, it may be mentioned that the lessee, the
said Padmashree Textile Industries Ltd., also filed a writ
petition before this Court, inter alia, challenging the
Take-over Act and the Nationalisation Act. That writ
petition has since been disposed of by this Court upon
settlement between the parties.
Section 4(1) of the Take-over Act provides that on or
before the appointed day, the management of the sick textile
undertakings specified in the First Schedule shall vest in
the Central Government. Under Section 2(a) “appointed day”
means 31st day of October, 1972. Section 2(d) defines “sick
textile undertaking” as follows:
“S. 2(d). “sick textile undertaking” means the textile
undertaking which falls within one or more of the following
categories, namely:-
(i) which is owned by a textile company which
is being wound up, whether voluntarily or by or
under the supervision of any Court, or in respect
of which a provisional liquidator has been
appointed by a Court,
(ii) which had remained closed for a period
of not less than three months immediately before
the appointed day and the closure of which is
prejudicial to the textile industry, and the
condition of the undertaking is such that it may,
with reasonable inputs, be re-started in the
interests of the general public,
(iii) which has been leased to Government or
any other person or the management of which has
been taken over by Government or any other person
under any leave or licence granted by any Receiver
or Liquidator by or under the orders of, or with
the approval of, any Court,
941
(iv) the management of which was authorised
by the Central Government, by a notified order
made under section 18A, or in pursuance of an
order made by the High Court under section 18FA,
of the Industries (Development and Regulation)
Act, 1951, to be taken over by a person or body of
persons, but such management could not be taken
over by such person or body of persons, before the
appointed day,
(v) the management of which ought to be
[according to the report made after investigation
by any person or body of persons appointed after
the 1st day of January, 1970, under section 15 or
section 15A of the Industries (Development and
Regulation) Act, 1951] taken over under section
18A of that Act, but in relation to which no
notified order authorising any person or body of
persons to take over the management of such
undertaking was made before the appointed day,
(vi) in respect of which an investigation was
caused to be made, before the appointed day, by
the Central Government under section 15 or section
15A of the Industries (Development and Regulation)
Act, 1951, and the report of such investigation
was not received by the Central Government before
the appointed day;
and includes any textile undertaking which is
deemed, under sub-section (2) of section 4, to be
a sick textile undertaking;”
In view of sub-clause (i) of section 2(d), as a
provisional liquidator was appointed in respect of the
textile undertakings of the Company, they were sick textile
undertakings. Moreover, the sick textile undertakings of the
Company have been specified in the First Schedule to the
Take-over Act and by virtue of section 4(1) of the Take-over
Act, the undertakings of the Company have vested in the
Central Government as sick textile undertakings.
It is vehemently urged by Mr. Sharma, learned Counsel
appearing on behalf of the petitioners, that before actually
taking possession of the undertakings of the Company, the
Company should have been given an opportunity of being
heard. It is submitted that if such an
942
opportunity had been given, the Company could have shown
that its undertakings were not sick undertakings. Counsel
submits that the intention of the Legislature to give such
an opportunity of being heard is apparent from the
provisions of clauses (iv), (v) and (vi) of section 2(d) of
the Take-over Act which relate to the taking over of manage-
ment of an undertaking under the Industries (Development and
Regulation) Act, 1951. In support of this contention, the
learned Counsel has placed reliance upon three decisions of
this Court in A. K. Kraipak & Ors. v. Union of India & Ors.,
[1970] 1 SCR 457, Maneka Gandhi v. Union of India, [1978] 2
SCR 621, and Smt. Indira Nehru Gandhi v. Shri Raj Narain,
[1976] 2 SCR 347.
In our opinion, none of the above decisions is
applicable to the facts and circumstances of the instant
case. In the First Schedule to the Take-over Act, the
undertakings of the Company have been specified as sick
textile undertakings. In other words, the Legislature has
itself decided the undertakings of the Company to be sick
textile undertakings. Indeed, in the First Schedule all the
sick textile undertakings have been specified. Thus, it is
apparent that the Legislature has not left it to the
Executive to decide whether a particular textile undertaking
is a sick textile undertaking or not. If under the Take-over
Act the question whether a textile undertaking is a sick
textile undertaking or not had been directed to be decided
by the executive authorities, the owner of such undertaking
could claim an opportunity of being heard. But when an
undertaking has been specified in the First Schedule to the
Take-over Act as a sick textile undertaking, the question of
giving an opportunity to the owner of the undertaking does
not at all arise. We are unable to accept the contention
of the petitioners that sub clauses (iv), (v) and (vi) of
section 2(d) indicate that principles of natural justice
should be complied with. The provisions of these sub clauses
are some of the categories under any one of which the
undertaking may fall and, in that case, it will be a sick
textile undertaking. There is, therefore, no substance in
the contention made on behalf of the petitioners that the
Company should have been given an opportunity of being heard
before the management of its undertakings was taken over as
sick textile undertakings.
It is next urged by the learned Counsel for the
petitioners that the Legislature having itself decided the
question whether an under taking is a sick textile
undertaking or not without giving any opportunity to the
owner of such undertaking to make a representation, has
damaged the basic structure of the Constitution of India,
namely,
943
separation of power between the Legislature, the Executive
and the Judiciary. Our attention has been drawn to the
observations made by Sikri, CJ, in Kesavananda Bharati v.
State of Kerala, [1973] 2 Supp. SCR 1, and that of Mathew,
J, in Smt. lndira Nehru Gandhi v. Shri Raj Narain, [1976] 2
SCR 347 at page 503 to the effect, inter alia, that
separation of powers among the Legislature, the Executive
and the Judiciary, is one of the basic structures of the
Constitution. It is, accordingly, submitted on behalf of the
petitioners that the doctrine of separation of powers
implies that the Legislature should define civil or criminal
wrong or a default and create an independent machinery,
judicial or quasi-judicial, to determine the liability of
the status of an individual. Further, the Legislature itself
cannot give a judgment and, in any case, if such a judgment
is given by the Legislature, it must act in accordance with
the principles of natural justice.
The above submissions of the petitioners, in our
opinion, are misconceived. There can be no doubt that in
respect of each sick textile undertaking, a Take-over Act
and a Nationalisation Act could be passed and, in that case,
a large number of enactments would come into existence to
the inconvenience of all concerned. In order to avoid such
cumbersome course and for the sake of convenience, the
Legislature has mentioned in the First Schedule in both the
Take-over Act and the Nationalisation Act the names of all
sick textile undertakings in the country. By including
certain textile undertakings as sick textile E undertakings
in the First Schedule to the Take-over Act, the Legislature
has not made any judicial or quasi-judicial determination,
nor has the Legislature given any judgment, as contended on
behalf of the petitioners, although such inclusion is
sometimes loosely expressed as ‘legislative judgment’. In
section 2(d), the Legislature has laid down the criteria for
a sick undertaking. The sick textile undertakings have been
specified in the First Schedule on the basis of the tests
laid down in section 2(d). In including the sick textile
undertakings in the First Schedule, the Legislature has not
acted arbitrarily, for, it has also laid down the criteria
or tests for such inclusion. If any undertaking which has
been so specified in the First Schedule does not satisfy the
tests under section 2(d) of the Take-over Act, the owner of
it is entitled to t challenge such inclusion or take-over in
a court of law, although such challenge has to be founded-on
a strong ground. Thus, there is no finality or
conclusiveness in the legislative determination of an under
taking as a sick textile undertaking. Such determination is
neither judicial nor quasi-judicial. Therefore, the question
of damaging or altering the basic structure of the
Constitution, namely, separation of
944
powers among the Legislature, the Executive and the
Judiciary, does not at all arise. So also the question of
the validity of the constitutional amendments by which the
Take-over Act and the Nationalisation Act have been included
in the Ninth Schedule on the ground that by such amendments
the basic structure of the Constitution is damaged, as
contended on behalf of the petitioners, does not arise. The
contentions are misconceived and are rejected.
As a last resort, the petitioners have challenged the
validity of the Nationalisation Act on the ground of
inadequacy of compensation. The Company had two
undertakings, namely, Panipat Woollen Mills and Kharar
Textile Mills. In the third column of the First Schedule to
the Nationalisation Act, a sum of Rs. 6,40,000 has been
specified for the Panipat Woollen Mills and a sum of Rs.
12,89,000 has been specified for the Kharar Textile Mills by
way of compensation for the acquisition of these two
undertakings. It is the contention of the petitioners that
the amounts of compensation, which have been specified for
the acquisition of these two undertakings, are inadequate.
We are afraid, as on the date the Nationalisation Act had
come into force, Article 31 of the Constitution was not
repealed, the validity of the Nationalisation Act cannot be
challenged on the ground of inadequacy of compensation. In
Minerva Mills Ltd. & Ors. v. Union of India & Ors., Writ
Petition Nos. 356-361 of 1977, decided on September 9, 1986,
it has been already held by us that the Nationalisation Act
gives effect to the policy of the State towards securing the
ownership and control of the material resources of the
community which are so distributed as best to subserve the
common good, as contained in Article 39(b) of the
Constitution. In the circumstances, the Nationalisation Act
falls within the provision of Article 31C of the
Constitution before it was amended by the Constitution
(Forty-Second Amendment) Act, 1976. Even assuming that the
Nationalisation Act violates the provision of Article 31, no
challenge to its validity can be made on that ground. Apart
from that, we are of the view that the compensation that has
been awarded to the Company is neither inadequate nor
illusory as contended on behalf of the petitioners. It is
not in dispute that the paid-up share capital of the Company
was Rs.60 lakhs and it paid dividend up to 1965. Thereafter,
the Company did not pay any dividend from 1965 to 1970. It
will not be unreasonable to presume that in specifying the
compensation, the Legislature has taken these facts into
consideration. There is, therefore, no substance in the
contention of the petitioners that the compensation
specified in First Schedule to the Nationalisation Act in
respect of the undertakings of
945
the Company is illusory. The contention is rejected. No
other point has been urged on behalf of the petitioners.
For the reasons aforesaid, the writ petition is
dismissed and the rule nisi is discharged. There will,
however, be no order as to costs.
M.L.A. Petition dismissed.
946