Madhya Pradesh High Court
Pilani Investment And Industries ... vs Union Of India (Uoi) And Ors. on 2 February, 1988
Equivalent citations: AIR1988MP181, AIR 1988 MADHYA PRADESH 181, (1988) JAB LJ 251 (1988) MPLJ 266, (1988) MPLJ 266
JUDGMENT C.P. Sen, J.
1. By this Order, M.P. No. 95 of 1981 The Bombay Hospital Trust and Ors. v. The Union of India and another is also disposed of as common questions are involved and similar reliefs claimed. In both these petitions the petitioners are seeking a declaration that provisions of Hind Cycles Limited and Sen-Raleigh Limited (Nationalisation) Act, 1980 (hereinafter referred to as Act No. 70 of 1980) are ultra vires of the Constitution and are also seeking a writ in the nature of Mandamus directing the respondents to forthwith clear off the dues of the petitioners.
2. Petitioner M/s. Pilani Investment and Industries Corporation Limited is an investment holding company carrying on business of investment and financing monies for business and commercial purposes. Respondent 2 M/s. Hind Cycles Limited is a company which has its factories at Worli, Bombay and another at Ghaziabad in Uttar Pradesh. The respondent 2 is carrying on business of manufacturing of bicycles, auto-engines and bicycle parts. The said industry is a scheduled industry under Industries (Development and Regulation) Act, 1951, (hereinafter referred to as Act No. 65 of 1951). The petitioner company advanced a loan of rupees 8.5 lacs to the respondent 2 repayable wit h interest at the rate of 10% per annum on 19-6-1970 and further advanced a loan of rupees five lacs on 20-2-1971 with interest at 10 1/2% per annum. The loans were taken for speedy construction work. Besides, the petitioner stood as guarantor for respondent 2 on 29-10-1970 to obtain a loan on cash credit facilities with a limit of rupees 15 lacs with the State Bank of India, respondent 3. On 3-1-1974 the Central Government by virtue of the power conferred on it under Section 18(a) of the Act of 65 of 1951 authorised the Board of Management to take over bicycle undertakings of the respondent 2 at Bombay as well as at Gaziabad for a period of five years by issuing 2 orders. The aforesaid period was extended from time to time and ultimately up to 1st January 1981. The Central Government also issued two orders on 29-1-1974 under Section 18FB of Act No. 65/61 notifying that all contracts, assurances of property, agreements, settlements etc. in force immediately before the date of issue of the order to which the respondent 2 company is a party shall remain suspended for a period of one year which was extended from time to time. Respondent 3 State Bank filed Civil Suit No. 1081 of 1973 in the original side of the Bombay High Court for recovery of Rs. 15,44,485.50 and interest at 12% per annum against the petitioner on the basis of agreement of guarantee given by the petitioner in favour of respondent 2 for cash credit loan. The petitioner filed Civil Suit No. 2-B of 1975 in the Court of Additional District Judge, Gwalior for recovery of Rs. 19,22,260-97p. towards loan advanced with interest. The suit was dismissed as not maintainable. On 30-7-1977 as 5 years was about to lapse, the petitioner filed another civil suit in the Courtof District Judge, Gwalior, forrecovery of Rs. 24,26,696/- towards loan and interest. In the meanwhile, Ordinance No. 6 of 1978 was promulgated whereby period of 5 years was substituted by period of 8 years and this was replaced by Act No. 17 of 1979. Faced with these difficulties, the petitioner filed M.P. No. 850 of 1979 challenging the validity of Sections 18FB and 29D of the Act of 65 of 1951 and also the two orders issued by the Central Government on29-l-1974, which was allowed by this Court on 17-9-1980 holding that Section 18FB is saved by Article 31 A and B of the Constitution and also the two orders issued thereunder but held that Section 29D gave preference to post-management debts over the pre-management debts which offends Article 14 of the Constitution and thus damages one of the basic features of the Constitution and is beyond the constituent power and it cannot claim protection under Article 31 A and B merely because the Act is included in item No. 88 in the 9th Schedule of the Constitution. Immediately after the judgment was delivered, Hind Cycles Ltd. and Sen-Raleigh Ltd. (Nationalisation) Ordinance, 1980, was promulgated on 25-10-1980 which was subsequently made Act No. 70 of 1980, taking over the management and ownership of the bicycle factories of respondent 2-company by the Central Government. By notification dated 28-10-1980 the Central Government transferred the ownership and management of the factories to the Government company known as National Bicycle Corporation of India Limited. The petitioner after serving a notice for demand of justice, filed the present petition.
3. The petitioner in M.P. No. 95 of 1981 Bombay Hospital Trust is a Charitable Trust created by a decree in Civil Suit No. 2656 of 1948 dated 6-9-1949 by the High Court of Bombay and this trust is running the hospital in the name and style of Bombay Hospital and Medical Research Centre at Bombay. Petitioners 2 to 8 are legal representatives of late Dr. J. Section Mishra who was the sole surviving trustee of debenture trust created under Debenture Trust Deed. 20,000 Debentures of 7.3/4% of the face value of Rs. 100/- were issued by the respondent 2 M/s. Hind Cycles Ltd.. redeemable at par on or before 22-2-1985. Under Clauses 9 to 12 and 17 of the said Debenture Trust Deed, security was created in favour of thedebenture trustees for securing the debenture debt as mentioned in the said Deed, the security consisting of land, factory, other buildings, structures etc. of the respondent 2. Faced with the difficulty of realising its dues, the petitioners filed this writ petition.
4. The petitioners in both the petitions contend that Sections 18, 19, 20(1), 21(1) and 23(1) as well as Third Schedule of Act No. 70 of 1980 are bad, illegal, unconstitutional and ultravires of Articles 14, 19(1)(g), 21,300A and 301 of the Constitution. Categorisation of debts as post-takeover management debts and pre-takeover management debts is clearly arbitrary, discriminatory and totally unreasonable. It also deprives the petitioners of its right to recover its debts without paying compensation inasmuch as up to 31st March 1979 the outstanding debts of respondent 2 were shown as 374.21 lacs while the respondent 2 will be paid rupees 241.47 lacs under Section 7 and Rs. 56,000/- under Section 8 of Act No. 70/80 for transfer of the undertakings to the Central Government. In view of categorisation of debts under Section 19 and the Third Schedule, the petitioners' debts will come under category No. VI(a)(iii) or VIII (a) or (e) of the Third Schedule. Section 19 gives priority of claims in accordance to which a particular debt is placed in which category. So categories Nos. 1 to V will have precedence over category No. 6 and categories Nos. 1 to VII will have priority over category No. VIII and, therefore, the debts of the petitioners will abate and there are no chances of recovery in view of the limited sources. Act No. 70 of 1980 has been enacted mala fide so as to defeat the effect of the judgment of this Court in M.P. No. 850 of 1979, striking down Section 29D and putting the identical or similar nature of classification of pre-takeover management debts and post-takeover management debts and further making categories for payment on priority basis and putting the petitioners company's dues under lower category. The said enactment is not entitled to protection under Article 31C of the Constitution and besides it is open to this Court to find out whether the aims and objects of the enactment are just for the purposes of enforcing the directive principles under Articles 39 {b) or (c) of the Constitution.
5. The respondent 1 union of India in its return and additional return has submitted that the provisions of Act No. 70/1980 are protected under Article 31C of the Constitution which provides that no law giving effect to the policy of the State towards securing the principles laid down in Article 39 (b) or (c) of the Constitution shall be deemed to be. void on the ground that the said provisions are inconsistent or violative of Article 14 or 19 of the Constitution. Further any declaration made to that effect in the Act shall not be called in question on the ground that the said declaration does not give effect to such policy. In fact, the Statement of Objects and Reasons of the Act go to show that the Act was enacted to ensure continued manufacture, production and distribution of bicycles and their components and accessories so as to subserve the interest of the general public in order to meet the needs of the economy of the country. Therefore, there is a direct and reasonable nexus between the impugned law and Clauses (b) and (c) of Article 39. The expression "material resources of the community" embraces all national wealth inclusive of all public and private sources to meet the material needs. Provisions of Sections 18, 19, 20(1), 21(1), 23(1) and Schedule 3 fixing categories, post-takeover management debts and pre-takeover management debts, cannot be said to be violative of Article 14 or 19 of the Constitution on the ground of either discrimination or being unreasonable. In view of these submissions, no question of violation of Article 300A or 301 arises. The impugned Act is a valid piece of legislation enacted by the Parliament in pursuance of the principles enshrined in Part IV of the Constitution. The provisions of Act No. 70 of 1980 are in pari materia with other Nationalisation Acts whose constitutional validity has been upheld by the Supreme Court in various decisions. The classification which has been made in Section 19 is based on intelligible differentia which distinguishes things which are grouped together and those that are keptapart. These classifications cannot be made a ground of a challenge under Articles 14.19(1)(g), 300A and 301 of the Constitution. Section 189 is an ancillary provision to enable the Central Governrnent to continue the business of their undertakings to subserve the interest of general public by ensuring continued production, manufacture and distribution of bicycles and their components and accessories to meet the needs of the economy of the country in the interest of general public. Therefore, the petitions are misconceived and are liable to be dismissed with costs.
6. Article 31C which was inserted by 25th Constitution amendment with effect from 29 1-1972 enacts that notwithstanding anything contained in Article 13, no law giving effect to the policy of the State towards securing all or any of the principles laid down in Part IV shall be deemed to be void on the ground that it is inconsistent with, or takes away or abridgesany oftherightsconferredby Article 14 or Article 19 and no law containing a declaration that it is for giving effect to such policy. In Keshavananda Bharti v. State of Kerala, AIR 1973 SC 1461 the first part of Article 31C was held to be valid and if a law fulfils the requirements of Article 31C it will be immune from attack on the ground of contravention of Articles 14 and 19. The second part of Article 31C is invalid because it seeks to take away Court's power of judicial review, which is an essential feature of the Constitution. The words "principles specified in Clause (b) or (c) of Article 39" were substituted by the words "all or any of the principles laid down in Part IV" by 42nd amendment of the Constitution. This insertion has been held to be invalid by the Supreme Court in Minerva Mills v. Union of India, AIR 1980 SC 1789 holding that extending of Article 31C to all directive principles was beyond the amending power of Parliament because it gave primacy to the directive principles over fundamental rights and destroy the basic structure of the Constitution. The result is to restore Article 31C to pre 1976 position, namely, to protect only laws which seek to implement Article 39 (b) and (c), subject, of course to judicial review. Under Article 39(b) the State shall, in particular, direct its policy towards securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good. The Supreme Court in State of Karnataka v. Ranganatha Reddy, AIR 1978 SC 215 held that everything of value or use in the material world is material resources and that the private resources are part of the material resources of the community. It was further observed that nationalisation itself is a distributive process for the good of the community within the meaning of Article 39(b). Again in Sanjeev Coke Mfg. Co. v. Bharat Coking Coal Ltd., AIR 1983 SC239 it has been held that Coking Coal Mines (Nationalisation) Act is a legislation for giving effect to the policy of the State towards securing the principle specified in Article 39(b) of the Constitution and is, therefore, immune under Article 31C, from attack on the ground that it offends the fundamental right guaranteed by Article 14. Nationalisation of coal mines in whole or in part is a law for implementation of Article 39(b).
7. The Supreme Court in State of Tamil Nadu v. L. Abu Kavur Bai, AIR 1984 SC 326, held:-
"Article 31C as introduced by 25th Amendment is held to be constitutionally valid by previous decisions of the Supreme Court and it is beyond challenge. Another important facet of Article 31C which has been emphasised by the Supreme Court is that there should be a close nexus between the statute passed by the legislature and the twin objects mentioned in Clauses (b) and (c) of Article 39. In approaching this problem and considering the question of nexus in a narrow approach ought not to be made because it is well settled that the courts should interpret a constitutional provision in order to suppress the mischief and advance the object of the Act. The doctrine of nexus cannot be extended to such an extreme limit that the very purpose of Articles 39 (b) and (c) is defeated. By requiring that there should be nexus between the law and Articles 39 (b) and (c) what is meant is that there must be a reasonable connection between the Act passed and the objects mentioned in Clauses (b) and (c) before the Article can apply. If the nexus is present in the law then the protection of Article 31C becomes complete and irrevocable. Furtheremore, the fact that there is a declaration in the Act regarding the purpose mentioned in Articles 39 (b) and (c) may generally be evidence of the nexus between the law and the objects of Articles 39 (b) and (c). There no particular magical tinsel or ritualistic formula in the term 'nexus' which may be closed in a strait-jacket. Even a nationalisation scheme meant for the purpose of distribution or preventing concentration of wealth, as in the instant case, would be sufficient nexus to attract the operation of Articles 39 (b) and (c)."
Recently, the Supreme Court in the second case of Minerva Mills Ltd. v. Union of India, AIR 1986 SC 2030 while considering Sick Textile Undertakings (Nationalisation) Act, 1974, held:-
"As the Act has been enacted with a view to reorganising and rehabilitating the sick textile undertakings so as to subserve the interests of the general public by the augmentation of the production and distribution, at fair prices, of different varieties of cloth and yarn, and for matters connected therewith or incidental thereto, as stated in the preamble, it 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, the Act comes under the protective umbrella of Article 31C. As such, the constitutional validity thereof cannot be challenged on the ground of violation of the provisions of Articles 14 and 19 of the Constitution. The Act hence cannot be said to damage the basic structure of the Constitution."
8. Undoubtedly, bicycle is a common man's vehicle and means of transport and the production of Hind Cycles Limited and Sen-Raleigh Limited was about 10 lacs of bicycles per annum which was 1/6 of the total production of bicycles in the country. Statement of Objects and Reasons reveals that the management of the company was taken over as it was incurring heavy losses though nationalised banks and public financial institutions have been advancing large amounts of money, the companies were facing acute shortage of liquid funds for their working capital requirements. Funds were also required for modernisation of the plant and machinery of the two companies. But pending nationalisation of these two companies it was not possible for Government to invest any more money in these companies. Studies made of the financial condition of (he companies revealed that the companies were not fit for reconstruction as the capital base had been eroded many times over and the companies could be restarted with unencumbered assets only after total elimination of the external liabilities through a process of nationalisation and that it would not be appropriate in the public interest to allow these units to close down and the closure of the units would have thrown out a labour force of over six thousand. In view of this, u was decided to acquire the undertakings of the two companies so that fresh capital could be invested by Government. The Preamble says that the Act is to provide for acquisition of the undertakings of Hind Cycles Limited and Sen-Raleigh Limited with a view to securing the proper management of such undertakings so as to subserve the interests of the general public by ensuring the continued manufacture, production and distribution of bicycles and their component parts and accessories which are essential to the needs of the economy of the country and for matters connected therewith or incidental thereto. It is, therefore, clear that the Act has been enacted in pursuance of the directive principles contained in Article 39(b) of the Constitution and there is a clear nexus between the object to be achieved through the various provisions contained in the Act and, therefore, the Act is protected under Article 31C of the Constitution even if there is contravention of Articles 14 and 19(1)(g). It has been enacted for continued manufacture, production and distribution of bicycles and their components and accessories so as to ubserve the interest of the general public and in order to meet the needs of the economy of the country. The Supreme Court in A. V. Nachane v. Union of India, AIR 1982 SC 1126 has held that apart from anything else, a claim based on Lhe 1974 settlements is certainly not a fundamental right that could be enforced through this Court. As regards Article 21, the first premise of the argument that the word 'life' in that Article includes livelihood was considered and rejected in In Re : San! Ram. AIR 1960 SC 932. The Supreme Court was considering validity of the amendment in Life Insurance Corporation Act, 1956, by the amending Act of 1981. Again the Supreme Court in State of Maharashtra v. Basantibai. AIR 1986 SC 1466 has held : --
"Then in the end we have to consider the argument based on Article 21 of the Constitution which is urged on behalf of the respondents. Article 21 essentially deals with personal liberty. It has little to do with the right to own property as such. Here we are not concerned with a case where the deprivation of property would lead to deprivation of life or liberty or livelihood. On the other hand land is being acquired to improve the living conditions of a large number of people. To rely upon Article 21 of the Constitution for striking down the provisions of the Act amounts to a clear misapplication of the great doctrine enshrined in Article 21. We have no hesitation in reject ing the argument. Land ceiling laws, laws providing for acquisition of land for providing housing accommodation, taws imposing ceiling on urban property etc. cannot be struck down by invoking Article 21 of the Constitution.
Therefore, the provisions of the Act cannot offend Article 21 of the Constitution. Since the Act has been held to be valid, there is no contravention of Article 300A or 301. With the result, the provisions of the Act are held to be intra vires of the Constitution.
9. Though in the petition the petitioners have only challenged validity of Sections 18, 19, 20(1), 21(1), 23(1) and Third Schedule but during the course of arguments validity of Sections 5,6,8 and 17 has also been questioned. In the absence of any specific averments regarding Sections 5, 6, 8 and 17 the objection regarding these sections cannot be considered. Under Section 5 owners of the two companies are to be liable for certain prior liabilities while post-takeover management liabilities are to be of the Central Government or the Government company. Section 6 empowers the Central Government to direct vesting of these undertakings in separate Government companies. Surprisingly, though these undertakings have been now vested in the Government company National Bicycle Corporation of India Ltd, on 28-10-1980, i.e. prior to filing of these petitions, it has not been joined as a party. There is an application by the company for permission to intervene. It was permitted to intervene and its counsel was heard. Under Section 7, on transfer or vesting of the undertakings, the Central Government shall pay in cash an amount equal to that specified in the First Schedule. Besides, under Section 8 it shall pay further amount as calculated at the rate specified in the Second Schedule. Under Section 17 the Central Government or the concerned Government company shall be entitled to receive, up to the specified date, to the exclusion of all the other persons, any money due to either of the two companies in relation to the undertakings which have vested notwithstanding that the realisation pertains to a period prior to the appointed day. Under Section 18 every person having a claim against either of the two companies with regard to any of the matters specified in the Third Schedule shall prefer such claim before the Commissioner of Payment. Section 19 prescribes priority of claims. Category I shall have precedence over all other categories. Similarly Category II shall have precedence over Category III and others and so on. The question of discharging any liability with regard to a matter specified in a lower category shall arise only if a surplus is left after meeting all the liabilities of the higher categories. Under Section 20(1) the Commissioner is required to arrange the claims in order of priorities specified in the Third Schedule and under Section 21(1) the Commissioner will require proof of the claim. Under Section 23(1} if there is a balance left out of the moneys received by the Commissioner, the amount shall be disbursed to the concerned company.
10. Large sums of loans were guaranteed by the,Central Government and advanced by Industrial Reconstruction Corporation of India Limited and the State Bank of India after the management of Hind Cycles Limited was taken over by the Central Government under the Act No. 65/61. As the objective of taking over M/s. Hind Cycles Limited was to revive the undertakings and to bring them back to a state of health so as to maintain continued production, it was necessary for the Central Government to step in and help pump in funds for rehabilitation of these undertakings, having regard to the fact that in the absence of such financial support, the undertakings could not have been revived. Even so, post-takeover liabilities of Central Government, State Governments, Banks and financial institutions are placed in Category II in the Third Schedule while Category I deals with wages and salaries of the employees and the deductions made towards provident fund. Category III deals with post-takeover management credits for the purposes of carrying on any trading or manufacturing operations and Category IV-is about Revenue, taxes, cesses etc. Pre-takeover management liabilities are in Category V while secured loans are in Category VI. Unsecured loans of the Central Government, Banks and financial institutions are in Category VII while Category VIII is regarding other loans. So secured loaas of financial institutions have a precedence over unsecured loans of the Government and Banks.
11. The petitioners pointed out that the provisions of Coal Mines (Nationalisation) Act, and Sick Textile Undertakings (Nationalisation) Act are not akin to those of the Hind Cycles (Nationalisation) Act and differences in the relevant provisions were highlighted. No two Acts can be identical and there are bound to be distinguishing features in each enactment as the object and purpose to be achieved in each enactment being different. It was also pointed that all the coal mines were nationalised and at one and the same time 57 textile mills were taken over, while only 2 cycle companies were taken over and so it could not be said that interest of the general public will be served and needs of the economy fulfilled in order to ensure manufacture and supply of bicycles by nationalising only two companies and not the entire cycle industry. Evidently all the textile mills were not nationalised but only sick textile mills were taken over and here also two sick cycle companies were taken over to ensure manufacture and supply from these two companies and to save the large number of employees from being rendered idle. So the interest of the general public is served and needs of the economy fulfilled by continuing the manufacture and supply by taking over the management of these two companies. But after finding that due to financial constraints and indebtedness, it was not possible to invest anything on modernising the plant and machinery and streamline the production and even to maintain the manufacture and supply of the bicycles : so it became necessary to put a moratorium on old debts till the two companies are in a position to recover fully to stand on their own legs. Therefore, the two companies had to be nationalised and priorities about repayments fixed in order to easure uninterrupted production and supply of bicycles. As such, priority has to be given regarding payments of wages to workers, to supply of materials and the financial help extended by the Government and financial institutions after the management was taken over, otherwise the factories could have closed down.
12. The learned counsel for the petitioners mainly relied on a decision of this court of G. P. Singh, C.J. in P. Invest. Corpn. v. Union of India, 1981 MPLJ62: (AIR 1981 MadhPra 140) holding that Section 29D inserted by the Amendment Act 72 of 1971 in the Industries (Development and Regulation) Act, 1951, is not protected by Article 31A(1)(b) of the Constitution and is violative of Article 14. No protection is available merely by including the Act in 9th Schedule. The effect of the section is that the debts incurred after the taking over of the management have priority over all debts whether secured or unsecured which were incurred before the management was taken over. Further such debts are regarded as preferential debts within the meaning of Section 530 of the Companies Act. The effect of Section 29D is to create a classification between debts incurred prior to the taking over of the management and debts incurred after the taking over of management. The operation of Section 29D in creating such a discrimination is automatic. The operation does not depend upon the passing of any order that such a favoured treatment to the post-takeover debt is necessary for continuing the production of the scheduled industry or in the interest of the general public. Section 29D is not conterminous with order of Central Government, if any suspending the debts under Section 18FB(1)(b). Such a blanket provision as made by Section 29D cannot be regarded an ancillary or incidental provision for carrying out the object of taking over management of an undertaking dealing with scheduled industry under Sections 18A, 18AA and 18FA. Section 29D cannot, therefore, claim the protection of Article 31A(1)(b). The discrimination so brought about between debts has no reasonable nexus to the object of taking over of management. The classification made under Section 29D is arbitrary and is violative of Article 14 of the Constitution. That case is clearly distinguishable. Section 29D in Act No. 65/51 was inserted by Amendment Act No. 72 of 1971 which came into force on 29-1-1974 while Article 31C was introduced by 25th Constitution amendment on 29-1-1972 though Section 29D was actually brought into force on 1-11-1974, therefore, Article 31C was not in existence when Section 29D was inserted in the Act of 65/61. Therefore, the effect of Article 31C on such a provision in fulfilment of the directive principles in Article 39 (b) or (c) was not considered but after the order was passed by this Court Ordinance No. 16/80 was promulgated nationalishing the undertakings. The Ordinance and subsequently the Act have not overruled the decision of this Court but it has made the order of this Court irrelevant in view of nationalisation of the undertakings and the protection available under Article 31C. The Supreme Court in Smt. Indira Nehru Gandhi v. Raj Narain, (AIR 1975 SC 2299) has held that the Legislature cannot directly overrule a judicial decision. What it is competent to do is to render ineffective the judgment of a competent Court by changing the basis of the legislative enactment upon which the judgment has been founded and thus remove the cause or inactiveness of the proceeding in which the decision has been made. Subsequently Singh, J. had the occasion to consider Caltex (Acquisition of Shares of Caltex Oil Refining (India) Limited and of the Undertakings in India of Caltex (India) limited) Act, 1977 in Manoharsingh v. Caltex (India), 1981 MPLJ 202 (203) : (AIR 1981 Madh Pra 123) wherein it was held that though the Act is not directly dealing with nationalisation it is protected by Article 19(5) and Article 31C of the Constitution as it is an ancillary or incidental provision for carrying out the object of nationalisation of the undertakings of Caltex (India). Reliance was placed on a decision of the Supreme Court in Raghubir Singh v. State of Ajmer, AIR 1959 SC 475 that while dealing with Article 31A protection is not limited to the provisionsin an Act which are directly related to the acquisition by the State of any estate or of any rights therein or the extinguishment or modification of any such rights and that the protection also extends to the ancillary provisions enacted for the purposes of carrying out the object of the Act. In another decision in Kalyanmal Mills Ltd. v. Union of India and others, M.P. No. 64 of 1975 decided on 5-2-81 Singh, C.J. upheld validity of Sick Textile Undertakings (Takingover of Management) Act, 1974. While dealing with Section 21 of the said Act which is analogous to Section 19 of the present enactment it has been held that the impugned Act is protected under Article 31C, being enacted to secure the policy of the State as stated in Article 39(b) of the Constitution. The Court observed that Section 21 deals with the priority of claims and though it is ancillary to nationalisation, is protected under Article 31C. The obvious object of the Act is nationalisation of sick textile undertakings so as to subserve the interest of the general public by augmentation of the production and distribution at fair prices of different varieites of cloth and yarn.
13. Under the circumstances, both the petitions fail and they are dismissed. There shall be no order as to costs. The outstanding security amount be refunded to the petitioners.