Indian Kanoon - Search engine for Indian Law

Mr. F.S. Nariman, learned senior counsel appearing for the Elphinstone Spinning and Weaving Mills Company Ltd., emphatically urged that Article 31 A (1)(b) was introduced by the Constitution IVth Amendment Act of 1955 which enables to make law for taking over of the management of any property by the State for a limited period either in the public interest or in order to secure proper management of the same. The law made by the Parliament is the Textiles Undertakings (Taking over of Management) Act, 1983. The said law permits take over only when the financial condition became unsatisfactory by reason of mis-management of the affairs of the Textile Undertakings. And, this being the position, if there is no material to establish that financial losses is on account of mis-management then the taking over of the management of the mill by taking recourse to the impugned Act must be held to be invalid and the High Court in fact has held it to be invalid. According to Mr. Nariman mere losses will not entitle to take over of the management of mill, inasmuch as, all the mills have suffered loss and, therefore, there must be some other factors on account of which it will be possible for the Government to take over the management of only 13 mills as included in the First Schedule to the Act. He also further urged that in view of the language of Article 31A (1)(b) the law for taking over of the management must be for a limited period and the expression pending nationalisation in the impugned Act cannot be construed to be a definite limited period and, therefore, the Act in question is not referable to Article 31A (1)(b). It is in this connection he cited the decision of Raman Lal as well as the decision of the Delhi High Court in ILR 74 (1) Delhi 311 and also a decision of Andhra Pradesh High Court in AIR 1977 A.P. 420. Mr. Nariman also argued that in the impugned Act there is intrinsic evidence to indicate that the taking over of management was not for a limited period as it would be apparent from Sections 33, 34, 36 and Sections 6, 8 and 11(1), and essentially it constitutes acquisition and not take over of management for a limited period. Mr. Nariman also urged that the legislative declaration of facts are not beyond judicial scrutiny in the constitutional context of Articles 14 and 16 and the Court can always tear the veil to decide the real nature of the statute if the facts and circumstances warrant such a course. A mere declaration in the legislation would not be permissible so as to defeat the fundamental right. If the legislation in question was merely a pretence and the object was discrimination the validity of the statute could be examined by the Court notwithstanding the declaration made by the legislature and, therefore, the High Court was fully justified in examining the facts and coming to the conclusion that in grouping the three mills alongwith other 13 mills for the purpose of taking over the management constitutes an infraction of Article 14 of the Constitution. In support of this contention he places reliance on the decision of this Court in Indira Sawhney vs. Union of India and others (2000) 1 Supreme Court Cases 168. Mr. R.F. Nariman, learned senior counsel pursued the arguments advanced by Mr. F.S. Nariman and contended that the classification itself may be valid but while choosing the mills to be included in such classification and clubbing the Elphinstone Mill within the group of 13 is discriminatory in as much as a well managed mill is being clubbed with a mis-

managed mill. According to Mr. R.F. Nariman categorisation of the Elphistone mill as a mis-managed mill is contrary to the facts available on record, and as such, it violates Article 14. Mr. R.F. Nariman also further urged that a machinery available under IDR Act for an inquiry not having been resorted to it contravenes Article 19(1)(g). According to learned counsel the Parliament chose to adopt a procedure without any urgency being there and without any machinery to look into the facts on the basis of which categorisation could be made, the classification is bad in law. Mr. Nariman also contended that in view of Article 300A the law must be reasonable and fair and in view of the judgment of this Court in Dwarkadas Shrinivas of Bombay vs,. The Sholapur Spinning & Weaving Co. Ltd. and others 1954 Supreme Court Reports 674, the impugned action is bad in law. Mr. RF Nariman also contended that it was open for the Writ Petitioners to place and establish that the legislative facts are incorrect and in fact the petitioners have discharged that burden by placing materials on record and the High Court, therefore, was fully justified in arriving at its decision on the materials produced. He placed reliance on the decision of this Court in Dr. K.R. Lakshmanan vs. State of T.N. and another (1996) 2 Supreme Court Cases 226 in support of aforesaid contention. According to Mr. Nariman the following facts establishes that the Elphinstone Mill was not a mis-managed mill and Parliament erroneously clubbed the same with other mis- managed mills. Those facts are :- (a) IDBI viability study report (b) Task Force Report (c) Approval of the Central Government itself to appoint a Managing Director (d) Sanction of loan by IRCI AND IDBI in September 1993 (e) No investigation done under Section 15 and 15(a) of IDR Act, and (f) No action of any kind under the provisions of Companies Act, and on this score the conclusion of the High Court is unassailable.

Mr. R.F.Nariman, learned senior counsel had strongly relied upon the decision of this Court in Madras Race Club case 1996 (2) Supreme Court Cases, 226, whereunder the Court struck down the provisions of Madras Race Club (Acquisition and Transfer of Undertakings) Act, 1986, on a conclusion that the declaration made in the Act that the Act was made to implement Article 39 (b) & (c) was a mere cloak and there was no nexus between the Act and the objects contained in Article 39 (b) & (c), and as such the Act is arbitrary. But a reading of the aforesaid case would make it clear that the facts and features of that case were completely different from the facts and features of the present case. In the Madras case the objects and reasons, as indicated in the Act, was that the acquisition is for a public purpose but in fact there was no material to show that any inquiry or investigation had been held by the State Government in the affairs of the Club and the Court held that no public purpose is being served by the acquisition and transfer of the undertaking of the Club by the Government. But in the case in hand, as has been noticed by this Court in Sitaram Mills Case, the Government had before it several viability surveys made by different authorities like, Ahmedabad Textile Industries Research Association, Textile Commissioner Office, SR Batliboi and Company and an independent survey by the IDBI itself. These surveys had been directed in ascertaining whether companies textile undertaking was a techno economically viable unit or not and whether it was desirable to provide the company with the working capital. The Government in the Ministry of Commerce had constituted a Task Force to look into the affairs of the Category III strike affected mills. On the basis of all these informations it was decided as a matter of policy that it was desirable to achieve the process of nationalisation, initially by taking over the management of the mills and thereafter by enacting suitable legislation to nationalise the same. The objects and reasons of the Act unequivocally indicated that the basic decision of nationalisation having been taken a genuine apprehension having arisen in the Governments mind that unless the management of the concerned undertakings was taken over on immediate basis, there might be large scale flittering away of assets which would be detrimental to the public interest and it thus became urgently necessary for Government to take over the management of the undertakings in the public interest. In this state of affairs, we have no doubt in our mind that the decision in Madras Race Club case will have no application to the case in hand.

Apart from answering the five points, formulated by us, we may also deal with some other ancillary points, which have been raised in course of arguments. Mr. R.F. Nariman had argued on the basis of Article 300A of the constitution and relied upon the judgment of this Court in Dwarkadas Shrinivas of Bomay vs. The Sholapur Spinning & Weaving Co. Ltd. and Ors. 1954, S.C.R. 674, but we find from the impugned judgment that the said contention had not been pressed before the High Court and, therefore, we are not called upon to examine the contention to find out whether the Act can be held to be reasonable and fair. That apart, the impugned Act merely takes over the management of the property by a legislation permitted under Article 31A(1)(b) of the Constitution. This being the position, Article 300A will have no application.