The Union Of India vs Sree Rajendra Mills Ltd on 15 July, 2010

[Cites 4, Cited by 1]

Madras High Court

The Union Of India vs Sree Rajendra Mills Ltd on 15 July, 2010

The Writ Appeal arises out of the order of learned single Judge dated 29.7.2002 made in W.P.No.30174 of 2002 directing the 2nd Respondent to consider the 1st Respondent's application dated 27.5.2002 by suspending the operation of the impugned notice dated 11.7.2002 issued by the 1st Appellant and that 1st Appellant can pass appropriate orders depending upon the outcome of the orders to be passed by the 2nd Respondent.

2. In the Writ Petitions, Petitioners/Mills seek writ of certiorarified mandamus to quash the notification of the 1st Respondent in Order/Notification No.16/TDRO/8/1/2000/76 dated 31.3.2000 and quash clause 10 thereof and consequently forbear the Respondents from taking any action against the Writ Petitioners for non-compliance with the said notification insofar as the hank yarn obligations. Since the points for determination involved in the Writ Appeal and Writ Petitions are one the same, with the consent of the counsels on record, the Writ Petitions were heard together with the Writ Appeal. For convenience, the parties are referred as per their rank in the Writ Petitions.

3. In exercise of powers conferred on Textile Commissioner, for the protection of handloom industry and ensuring that the yarn in Hank form is available in adequate quantities at reasonable price to the handloom industry, the 1st Respondent issued hank yarn packing notification No.16/TDRO/8/1/2000/76 dated 31.3.2000 stipulating that every producer of yarn, who packs yarn for civil consumption, shall pack yarn in hank form in each quarterly period and fulfil his obligation. Clause (6) deals with the extent of hank yarn obligation and fulfilment thereof, which reads as under:

"6. Extent of obligation and fulfilment thereof:

(1) Every producer of yarn who packs yarn for civil consumption shall pack yarn in hank form in each quarterly period commencing from April June, 2000 and in every subsequent quarterly period, in proportion of not less than fifty percent (50%) of total yarn packed by him during each quarterly period for civil consumption;

Provided that in regard to yarn containing cotton including cotton waste to the extent of 90% or more by weight, not less than eighty percent of the yarn required to be packed in hank form shall be of counts 40s and below.

(2) A producer of yarn who is unable to pack yarn in hank form for any reason or who does not have reeling capacity to pack yarn in hank form, up to the extent of stipulation made/proportion prescribed under sub clause (1) shall fulfil his obligation prescribed under this clause in either of the following manners:-

(a) A producer of yarn, with the written permission of the concerned Central Excise Department and the Regional Office of the Textile Commissioner, shall get his yarn reeled into hank form, by another producer having surplus reeling facility or through independent reeling unit(s) which is (are) in the records of the respective Regional Office of the Textile Commissioner. A producer of yarn who avails of this facility shall produce a certificate in the 'Form-A' appended to this notification, duly certified by a Chartered/Cost Accountant, to the concerned Regional Office of the Textile Commissioner along with the quarterly hank yarn packing return, i.e., Annexure-I, appended to the HYN 2000, for every concerned quarterly period.

Or

(b) The shortfall in respect of one producer of yarn (called as the transferor) for a particular quarter shall be met by another producer (called as the transferee) after fulfilling his (transferee's) own hank yarn packing obligation to the satisfaction of the concerned Regional Office of the Textile Commissioner, and in this regard, the information shall be furnished by the transferor in Annexure-II appended to HYN 2000, so as to reach the jurisdictional Regional Office of the Textile Commissioner and the Consumer Service Section of the office of the Textile Commissioner, M/o Textiles, Govt. Of India, New C.G.O. Building, 48, New Marine Lines, Mumbai 400 020, on or before the end of the second month after the expiry of each quarterly period, by Registered Post A.D. Or by acknowledged hand delivery."

4. Clause (7) of Notification deals with "carry forward of obligation". As per Clause (7), any short-fall in hank yarn packing obligation may be carried forward to the immediately following quarterly period of the same should be fulfilled in the same following quarterly period either by own packing or by transfer. Clause (8) deals with "Carry forward of excess packing". As per Clause (8), surplus hank yarn packing in a quarterly period can be carried forward by a mill only to the following quarterly period for the purposes of fulfilment of its own short-fall in hank yarn packing obligation. Every producer of yarn shall furnish hank yarn returns in the prescribed format giving the true and accurate information regarding packing of hank yarn in compliance with directions, provisions and guidelines contained in the hank yarn packing obligation. Hank Yarn Packing Notification also contains Annexures containing the formats for filing returns of quarterly hank yarn packing and fulfilment of obligations.

5. Clause (10) of the Notification deals with "Exemption", which reads as under:

"Exemption:

(1) A spinning mill declared through an appropriate notification or order as a 'relief undertaking' by the concerned State government shall be exempted from the fulfilment of hank yarn packing obligation for the periods specified in the notification or order.

(2) The spinning mill declared as 'relief undertaking' shall submit a certified copy of such order/notification of the State government to the Consumer Service Section of the office of the Textile Commissioner, Mumbai, with a copy to the jurisdictional Regional Office of the Textile Commissioner within one month from the date of such notification or order, failing which, the exemption from fulfilment of the hank yarn packing obligation will be admissible from the actual date of submission thereof to the aforesaid authorities.

(3) Notwithstanding the fact that a spinning mill has been exempted from fulfilment of hank yarn packing obligation under this clause, it shall be required to furnish the Hank Yarn Packing Return (Annexure-I) in terms of clause-5 of H.Y.N. 2000."

6. The Writ Petitions were filed challenging Clause (10) of the Notification on the ground that there cannot be discrimination between a mill declared as sick by a State Government and a mill declared as sick by the Central Government. According to the Writ Petitioners, the Writ Petitioners - mills are declared as sick companies by BIFR, the details of the case Number and the date of order of declaration by BIFR in respect of writ petitioners/mills are as under:

"Case No. Name of Petitioner BIFR Order Case No. W.A.2175/02 Union of India rep.by __________ Secretary, Ministry W.P.30174/02 of Textiles, New Delhi and another Vs. Sri Rajendra Mills 311/2000 18.9.2001 WP.33944/2002 Salem Textiles Ltd. .... ....

WP.44044/2002	Sree Uma Parameswari   12/2001   18.03.2002
WP.716/2003	Rajendra Mills Ltd.         311/2000  18.9.2001
WP.893/2003	Kongarar Spinners Ltd.   279/2000  21.11.2000
WP.2110/03        Balasubramania Mills       79/2001   19.03.2002
WP.2989/03        Gem Sinners India Ltd.    66/99      12.07.1999
WP.3344/03	Sarvaray Textiles Ltd.     203/98    22.12.1998
WP.16749/03      Uma Maheswari Mills       250/02     27.06.2002"

7. The learned counsel for the Writ Petitioners Mr.Parthiban contended that the writ petitioners - mills have been declared as sick mills and therefore exemption should be given to the Writ Petitioners from the hank yarn obligation. It was further contended that the action of the 1st Respondent in classifying sick mills on the basis of sickness being declared by the State Government or by a Central Agency is arbitrary, illegal and violative of Article 14 of the Constitution. It was further contended that the proceedings before the BIFR are judicial proceedings, where all parties were heard before a decision is taken to declare a particular mill/company as a sick industrial company and BIFR itself is empowered to deal with this issue as to whether a particular mill should be declared as a sick company or not. The contention of the Writ Petitioners is that the State Government on receipt of a report on a particular industry, merely passes a notification declaring the particular industry as a sick industry and those proceedings are not quasi-judicial, but are merely based on the report. There should not be any discrimination between the mills, which are declared as a "relief undertaking" by the State Government and mills, which are declared to be sick by the Central Government.

8. Per contra, the learned Additional Central Government Standing Counsel appearing for the Respondents Mr.Udayakumar contended that the hank yarn packing obligation notification has been issued to protect the handloom industry to make available sufficient quantity of hank yarn at reasonable price to the handloom industry for the livelihood and sustenance of the handloom weavers and millions of other people depending on handloom industry all over the country. It was further submitted that any contravention of hank yarn packing obligation is a violation of Textiles (Development and Regulation) Order and the respondent, being the implementing authority, has powers to issue notices and take necessary action under the Essential Commodities Act. The learned counsel has further contended that the State Government is the appropriate agency for declaring the spinning mill as "relief undertaking" and merely because the Writ Petitioners have approached BIFR that cannot be a reason for granting exemption under clause (10) of the notification. In support of his contention, learned counsel placed reliance upon a Judgment of the Supreme Court in G.T.N.TEXTILES VS. ASSISTATN DIRECTORS, R.O.T.COMMISSIONER ((1993) 3 SCC 438) and a judgment of the Division Bench of this Court in W.A.Nos.963 to 965 of 1996 (SHREE JANARDHANA MILLS LTD. AND OTHERS VS. THE TEXTILE COMMISSIONER AND ANOTHER).

9. We have carefully considered the materials on record and the submissions. The points falling for our consideration are, (1) whether the Writ Petitioners are to be granted exemption under clause 10 on the ground that they are sick units brought up before BIFR.

(2) Whether there is any discrimination in granting exemption to the units declared as "relief undertaking" by the State Government and the "sick units" declared by BIFR.

10. The fabric in the country is manufactured in mill sector, powerloom sector and handloom sector. From the submissions of learned counsel for Respondents and the averments in the counter affidavit, it is seen that the handloom sector second largest producer of fabrics is contributing 19% of the total production. More than 3.9 million handlooms spread all over the country out of which 3 million are engaged in the production of cotton cloth. The handloom sector provide direct employment to 10 million and indirect employment to millions of people. The handloom sector uses cotton hank yarn as raw material. The Handloom sector, being weak sector, finds it very difficult in sourcing the raw materials in sufficient quantities at reasonable price.

11. For the protection of handloom industry (a rural based industry) by way of ensuring that the yarn in hank form is available in adequate quantity at reasonable prices to the handloom industry, which caters to the employment and earning capacity of lakhs of poor handloom weavers and their family members, the Hank yarn packing notification dated 31.3.2000 was issued for the purpose to make statutory provisions and for securing compliance to the statutory provisions by all concerned, regulate, monitor, direct the Textile industry, trade and other related associations, federations, firms, persons, non-Governmental organisations, Councils, bodies, co-operatives and public sector undertakings and to secure co-ordination from the Central and State Government Departments/ Offices/Organisations and the semi-government/government undertaking organisations.

12. With a view to make availability of hank yarn, which is primarily used in the handloom sector, the Textile Commissioner of Central Government issued a notification dated 14.1.1974 making it obligatory on the part of producers of yarn to pack hank yarn for civil consumption with effect from February, 1974 for a period of five years. In continuation, Hank Yarn Notification No.CER/17/79 dated 29.6.1979 and subsequently different Hank Yarn Packing Notifications were issued by the Textile Commissioner from time to time. Most of the spinning mills have been complying and packing hank yarn as prescribed in the notification.

13. The notification No.CER/23/90-CLB dated 29.3.1990 issued by the Textile Commissioner came to be challenged before the Andhra Pradesh High Court. By its order dated 29.10.1991, the Andhra Pradesh High Court upheld the validity of the said notification, which was challenged before the Supreme Court contending that the Respondents cannot compel the mills to perform hank yarn obligation as the appellants thereon have not installed the necessary machinery and other superstructures and the notification infracts their fundamental right under Article 19(1)(g) of the Constitution of India. Rejecting the said contention and holding that the Textile Control Order and Hank Yarn Notification are valid and issued in the interest of public and also in the larger interest of textile industry, in G.T.N. Textiles Ltd. v. Asstt. Directors, R.O.T. Commr., (1993) 3 SCC 438, the Supreme Court has held as under:

"9. ..... The Textile Industry in this country is the second largest industry, next to agriculture, providing employment to millions of people. This industry is accounting for 20% of the total industrial output......

10. The textile industry consists of three sectors namely, Mill Sector, Powerloom Sector and Handloom Sector. The primary product in the industry is yarn. It is produced only by the Mill Sector. The Powerloom and Handloom Sectors manufacture fabrics and they depend upon the Mill Sector for yarn. The yarn is packed in two forms namely, cone form and hank form. The cone form is consumed entirely by the Powerloom Sector and the hank form by the Handloom Sector. ..... In order to achieve this target 561 million kgs. of hank yarn is required. Against the said requirement only 355 million kgs. of cotton yarn is being packed in hank form. According to the respondents there is a big gap between the demand and supply. This causes scarcity of yarn in the market and results in spiralling of prices. It further results in unemployment in Handloom Sector. In order to make available sufficient quality of hank yarn at reasonable prices and also for the sustenance of Handloom workers, it became necessary to reserve hank yarn for Handloom Sector by making it obligatory on the part of the manufacturers of yarn to pack a certain percentage of their production packet for civil consumption in the form of hanks."

14. The importance of performance of hank yarn obligation has to be understood in the light of public interest and interest of all handloom weavers and their family members, who need to be provided with adequate quantity of yarn in the hank form at reasonable price on an assured basis. The contention of the Writ Petitioners is that they have been declared as sick unit and therefore they cannot perform their hank yarn obligation. Further contention of appellants/writ Petitioners is that they have been declared as sick unit by BIFR and while so they cannot be discriminated against the mills, where State has declared Mills as "relief undertaking". The contention of the Writ Petitioners is that BIFR is certainly empowered to deal with the issue as it has also acquired knowledge and experience whether a particular mill should be declared as sick company or not. On the other hand, the State Government issues notification merely on the basis of report. Further contention of Writ Petitioners is that the proceedings of the State Government are not quasi judicial, but merely based on the report and therefore there should not be any discrimination between the mills, which are declared as "relief undertaking" by the State Government and mills, which are declared to be sick by the Central Government. There is no force in the contention that there is discrimination between the mills declared as "relief undertakings" by the State Government and declared sick by BIFR. Any order passed by the BIFR declaring a unit as sick is only to appoint an Operating Agency/Nodal Agency to formulate a scheme to make the unit viable and to formulate a scheme to rehabilitate and revive the sick company. Therefore, the argument of the other side that the Mills should be relieved of their Hank Yarn Obligation cannot be correct as it would render the notification meaningless.

15. In the matters pending before the BIFR, it has to only frame a scheme and to see whether the unit can be made viable. Just because BIFR has passed an order and that the mills are temporarily sick, it cannot be presumed that the Writ Petitioners/mills are chronically sick mills or that they are sick for ever. It is pertinent to note that that even in cases, where few units of National Textile Corporation (Government of India undertakings) and Cooperative units, which had become sick units, had approached the office of Textile Commissioner, Mumbai seeking exemption from the hank yarn packing obligations, but were not granted exemption. No distinction has been made between the Writ petitioners - mills and NTC mills and also Cooperative mills, which had become sick. A uniform yardstick has been applied both for the Writ Petitioners as well as to some of the units of National Textile Corporation.

16. In identical facts and situation, in W.A.No.963 to 965 of 1996, the Appellant Mills therein had sought for certioriarified mandamus to quash the proceedings of the Textile Commissioner and to grant exemption to them in respect of Hank Yarn obligation as AAIFR has framed rehabilitation scheme, pointing out that the spirit behind rehabilitation package is to somehow revive the sick company and that any failure to perform the hank yarn obligation would affect the workers of handloom industry. Rejecting the contention of Appellants, the Division Bench has held as under:

".... It is true that the spirit behind the rehabilitation package is to somehow revive the sick company. But, at the same time, we cannot forget the hank yarn obligation imposed on the 1st petitioner and if the 1st petitioner has failed to perform its statutory obligation, such a conduct would affect the workers of the other industries and would also render the scheme framed by the Central government in public interest purposeless. It is also a matter of record that even in the case of National Textile Corporation mills, many of which are sick, the Government has not granted exemption as a policy despite their appeals. ....

The principle underlying the above is that no individual mill or person's temporary sickness should weigh against the policy provisions protecting poor handloom weavers in this country. Just because the 1st petitioner mill was temporarily sick earlier and was brought up before BIFR, it should not be presumed that the 1st petitioner mill is a chronic sick mill or that it is sick forever. The temporary sickness of a mill should not considered for a decision weighing against the Government policy protection given to the poor handloom weavers for supply of hank yarn, which would be the bread winner to them. Therefore, the 1st petitioner mill's posture of sickness for exemption from the hank yarn obligation scheme is totally devoid of merit."

The above observation of the Division Bench squarely applies to the case on hand. It is true that BIFR has allowed petitions filed by the Writ petitioners and steps had been taken to rehabilitate the Writ Petitioners - units by formulating a scheme. Such posture of sickness for exemption from performance of hank yarn obligation scheme is devoid of merits.

17. The main contention of Writ Petitioners is that there is a discrimination between sick company declared as "relief undertaking" by the State government and which are declared to be sick by the Central Government. Contending that there cannot be discrimination and differential treatment, learned counsel Mr.Parthiban placed reliance upon a decision of the Supreme Court in M/S.JAIN EXPORTS PVT.LTD. VS. UNION OF INDIA (AIR 1991 SC 1721). In the said case, Central Government reduced duty after import of caustic soda by certain importer. But the similar concession was refused to another importer after import of the said item. In the said case, Union of India has not entered appearance explaining the circumstances under which a differential treatment was meted out to the Appellant thereon for whom the concession in duty was refused. In such special facts and circumstances of the case, the Supreme Court observed that the Appellant is entitled to the relief as nothing was placed before the Supreme Court to justify the discrimination. The said decision is not of any assistance to the Writ Petitioners. As we pointed out earlier, even some of the units of National Textile Corporation and Cooperative units were denied the exemption. As such, we do not find any such discrimination.

18. The State government can study the factual situation as to whether the unit has become sick and whether any relief undertaking has to be taken. In our considered view, we do not find any discrimination between the mills, which are declared as "relief undertakings" by the State Government and the mills, which are declared to be sick by the BIFR. Though steps are taken by the BIFR to formulate rehabilitation package, the writ petitioners cannot claim exemption from performance of their hank yarn obligation. As per the notification, it is open to the writ petitioners to transfer their hank yarn obligations to other mills, who are in excess. The writ petitioners are not entitled to the relief sought for in the writ petitions and all the writ petitions are liable to be dismissed.

18. Insofar as the Writ Appeal, Sri Rajendra Mills Limited has also been declared as sick in B.I.F.R.case No.311 of 2002 and I.C.I.C.I.Bank operating agency has been appointed. The 2nd Respondent had issued first and second show cause notices on 3.6.2002 and 18.6.2002 calling upon the Appellant mill to submit quarterly periods - Annexure I duly fulfilling hank yarn packing obligation/short-fall in hank yarn packing obligation for the quarterly January March 2002. Insptie of issuance of notice, the Appellant mill has not performed the statutory obligation of submitting the Annexures-I and II fulfilment of hank yarn packing obligation. On the other hand, the Appellant mill had sent a letter dated 21.6.2002 stating that they have been declared as sick industrial company in B.I.F.R.Case No.311/2000 and that they approached the State Government to avail the concession granted to the sick industries. Thereafter the impugned proceedings dated 11.7.2002 was issued by the 2nd Respondent directing the Appellant to fulfil the short-fall in hank yarn within seven days.

19. In the Writ Petition challenging the said proceedings, the learned single Judge directed the State government to dispose of the representation of the Appellant dated 27.5.2002 within three months and till such time suspending the operation of the impugned notice dated 11.7.2002. The learned single Judge further observed that depending upon the outcome of the orders to be passed by the State Government, the 1st Respondent can pass appropriate orders.

20. As per clause (13) (2) of Textile (Development and Regulation) Order 2001, dated 19.12.2001, any person aggrieved by the order of the Officer may prefer an appeal to the Central Government within thirty days of the said communication of such order passed by any Officer. As per Clause 13(1) of the said Order, an appeal against any order passed by the Officer, authorised to exercise powers delegated to him either by the Textile Commissioner or by a State Government shall be preferred to the Textile Commissioner by an aggrieved person within thirty days of the communication of the Order passed by such Officer and as per clause (13)(2), any person aggrieved by an Order of the Textile Commissioner made under this Order, may prefer an appeal to the Central Government within thirty days of the date of communication of such order, and the decision of the Central government thereon shall be final.

21. As against the impugned proceedings dated 11.7.2002 issued by the Enforcement Inspector/Regional Office of the Textile commissioner, Coimbature, the Appellant ought to have preferred an appeal as contemplated under clauses 13(1) and (2) referred above. In view of efficacious remedy available, the Writ Petition filed by the Appellant was not maintainable. In our considered view, the learned single Judge ought not to have passed the order suspending the operation of the impugned proceedings dated 11.7.2002.

22. However, it was submitted by the learned counsel that the Respondents that as per the order in W.P., the application of the Writ Petitioner dated 27.5.2002 was considered by the 3rd Respondent - Handloom Handicrafts Textiles and Khadi Department of Government of Tamil Nadu and the 3rd Respondent vide its letter No.10863/C2/02-6 dated 18.11.2002, informed the Respondent Mill that the "question of registering their Company by the State government for availing the concession available to the Sick Industries as requested does not arise." As per the order of the learned single Judge, since the State government has also passed order that concession applicable to the sick industries does not arise in respect of the Respondent mill, the Writ petitioner Mill Sri Rajendra Mills is not entitled to any relief/exemption.

23. The performance of hank yarn obligation is in the interest of public justice and in the interest of handloom industry, which caters to the employment and earning capacity of lakhs of poor handloom weavers and their family members, who are to be provided with adequate quantity of yarn in hank form at reasonable price and on assured basis. As per the notification, the purpose of obligation is a statutory obligation. It is very unfortunate that the writ petitioners have filed writ petitions and also obtained interim orders thereby evading their statutory obligation. Insofar as the non-performance of hank yarn obligation by the Writ Petitioners, it is open to the authorities to take appropriate action in accordance with law.

24. In the result, all the Writ Petitions are dismissed with costs. In the light of the subsequent orders passed by the authorities pursuant to the order of the learned single judge dated 29.7.2002, no further orders need be passed in the Writ Appeal and the Writ Appeal is disposed of. Interim stay granted in all the Writ Petitions stand vacated. It is open to the authorities to take appropriate action in accordance with law.

usk Copy to:

1. The Secretary Ministry of Textiles Union of India, New Delhi

2. The Enforcement Inspector, Regional Office of the Textile Commissioner, Coimbatore

3. The Secretary to Government, Handloom Handicrafts Textiles & Khadi Department, State of Tamilnadu Fort St.George, Chennai 600 009

Unlock Advanced Research with PRISMAI

Madras High Court