REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO……………/2011 (ARISING OUT OF SLP(C) NO. 11162 of 2008)

 Custodian of Textiles Undertaking, Bombay …..Appellant  

                                         Versus

Hall & Anderson Ltd. & Ors.                           …..Respondents

J U D G M E N T  

Dr. B.S. CHAUHAN, J.

1. Leave granted.

2. This appeal has been preferred against the judgment and order  

dated 14.12.2007 in FMA No.761/05 and CAN No.7885/07 passed by  

the High Court of Calcutta affirming the judgment and order of the  

Learned  Single  Judge  dated  6.1.2005  in  CR No.  10289(W)/83  by  

which the Learned Single Judge has held that the appellant  cannot  

take  the  management  or  possession  of  the  suit  premises,  No.31,  

Chowringhee Road, Calcutta, in view of the provisions of the Textile  

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Undertakings (Taking Over of Management) Act, 1983, (hereinafter  

called the `Act 1983’).

3. Facts and circumstances giving rise to this case are that Hall &  

Anderson  Ltd.  (hereinafter  called  ‘Hall’),  incorporated  under  the  

Indian Companies Act, 1913, came into existence on 8.11.1946 and  

started  primarily  a  departmental  store  business  on  the  premises  at  

No.31, Chowringhee Road (hereinafter called the premises styled as  

Hall & Anderson).  Hall purchased the textile mill situated at Globe  

Mills  Passage (Lower  Parel)  from M/s.  Madhusudan Mills  Ltd.  on  

12.6.1950 and commenced business of manufacturing and selling of  

cotton.  The name of the company M/s. Hall & Anderson Ltd. was  

changed to M/s Shree Madhusudan Mills Ltd., having its registered  

office at the premises on 21.7.1959.  Amalgamation of Profit & Loss  

Account was prepared henceforth for M/s Shree Madhusudan Mills  

Ltd.  from 1970.  

4.  In 1976, the business of departmental store was stopped due to  

economic loss and after winding up of the said business, the premises  

was let out on rent.  In 1989, because of strike by workers of textiles  

mills, several mills suffered losses and it became difficult to run the  

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business and therefore, the Government after having due deliberations  

with Reserve Bank of India and other authorities first came with the  

Ordinance and later on it was replaced by Act 1983.   

5. The  respondent  No.1  herein  filed  Writ  Petition  No.10289/83  

before the Calcutta High Court challenging the provisions of the Act  

1983 and an  injunction was granted by the  High Court  vide order  

dated  26.10.1983  restraining  the  present  appellant  from interfering  

with bank accounts relating to the property business as well as textile  

undertaking business.   It  was during pendency of the business that  

Textile  Undertaking  Nationalisation  Act,  1995 came into  existence  

and the mills stood acquired.  M/s Shree Madhusudan Mills Ltd.  was  

renamed as Hall on 11.2.1999.  Learned Single Judge allowed the said  

writ petition vide judgment and order dated 6.1.2005 holding that the  

suit  premises  situated  at  Calcutta  was  by  no  means  related  to  the  

textile undertakings and therefore, it could not be part and parcel of  

textile undertakings and not covered by the said Acts 1983 or 1995.   

6. Being  aggrieved,  the  present  appellant  preferred  the  FMA  

No.761/05 which has been dismissed by the Division Bench, and in  

concurrence with the learned Single Judge.  Hence, the present appeal.

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7. Shri G.E. Vahanvati,  Learned Attorney General for India has  

submitted  that  the  Division  Bench,  as  well  as  the  Learned  Single  

Judge of the High Court of Calcutta, failed to appreciate the purpose  

of taking over the management of textile undertakings.  Because of  

mismanagement  and  strike  of  workers,  the  textile  undertakings  

became unworkable and the Government of India in public interest  

and taking recourse to the provisions of Articles 39B & 39C of the  

Constitution appointed a Committee  to examine the issue and after  

considering its report with consultation and considering the guidance  

of the Reserve Bank of India, it took up a decision to take over the  

management  of  the  same  units  of  the  textile  undertakings.   The  

present textile industry was in category III, and it was evident that the  

undertaking made viable  after  investment  of  a  huge amount which  

could be raised by selling the extra land with the textile industries.  In  

the instant case, the accounts of the textile undertakings and of the  

premises  stood amalgamated  in  1970.   The  courts  below failed  to  

appreciate the law laid down by this Court in various judgments and  

held  that  the  premises  was  not  related  to  textile  industries  by  any  

means and was a separate and independent entity and the business of  

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letting out the premises was totally separate business having no nexus  

to the textile undertakings.  Thus, the appeal deserves to be allowed.

8. On the contrary, S/Shri R.F. Nariman, L. Nageswar Rao, U.U.  

Lalit  and  Ranjit  Kumar,  learned  senior  counsel  appearing  for  the  

respondents, have opposed the appeal contending that the judgments  

cited  by  the  Learned  Attorney  General  in  the  cases  of  National  

Textile Corporation Ltd. & Ors etc. v. Sitaram Mills Ltd. & Ors.  

etc.,  AIR 1986 SC 1234 and  M/s. Doypack Systems Pvt.  Ltd.  v.  

Union of India & Ors., AIR 1988 SC 782  have no bearing in this  

case for the reason that the facts therein are quite distinguishable.  In  

the case of  Sitaram Mills (supra) there had been the finding of fact  

recorded by this Court reversing the finding of the courts below that  

the real estate division of that company was not having separate and  

independent business and the income of real estate division came into  

existence from the funds of the company itself.  Therefore, it was the  

assets of that company, namely, Sitaram Mills.  In the instant case as  

the Calcutta High Court has held that the premises had totally separate  

entity having no nexus to the textile undertakings or its activities had  

not  come into  existence  from the  funds  of  textile  undertakings,  it  

could not be the asset of the said company.  More so, the premises had  

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been mortgaged wherein the mortgagee had already sold this property  

because it could not be redeemed.  In fact, the mortgage became the  

liability and under the Act 1995, it is the only assets which have been  

taken over and not the liabilities of the nationalised company.  The  

appeal lacks merit and is liable to be dismissed.

9. We  have  considered  the  rival  submissions  made  by  learned  

counsel for the parties and perused the records.

10. The  pleadings  in  the  writ  petition  before  the  High  Court  

revealed the factual matrix of the case and it is evident from the same  

that  the  respondent  initially  started  the  business  of  selling  various  

goods and articles   from the departmental  store operating from the  

premises under the name and style of M/s Hall  & Anderson.  The  

Company  purchased  the  textile  mill  in  Bombay  on  12.6.1950  and  

commenced  the  additional  business  of  manufacturing  and  selling  

cotton  textile.   The  departmental  store  continued  its  business  upto  

1976.  Subsequent thereto, the building was developed as an income  

yielding asset and as such started the business of letting out various  

portions of the said building to different business organizations.  The  

total area of the premises is about 4 acres and on an area of 345 sq. ft.  

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the  registered  office  of  the  company  is  situated.   The  business  of  

textile mill remained completely separate from the premises business  

of letting out.  They had not been interconnected  and the premises  

business has no connection with running the textile undertakings.  The  

accounts of the property business were separately and independently  

maintained.   Staff  engaged  in  the  property  business  were  also  not  

connected.  They had no concern with the working of the textile mill,  

except the Secretary of the Company, as he had to be the same person  

in view of the requirement of the provisions of Companies Act, 1961.  

No amount for the textile mill business had ever been borrowed from  

any financial institution or utilized for its running.  Profit and Loss  

accounts of both the business have been prepared separately in spite  

of  amalgamation  since  1970.   The  books  of  account  had  been  

maintained for both the business separately.  The premises had been  

mortgaged with the Central Bank of India, Bombay by deposit of title  

deeds with a view to secure advance granted by the Central Bank of  

India to the Company for the purpose of running the textile mill, but it  

stood only as a security.   It has not become an integral part of the  

textile  industries  or  had any nexus or  relation with the working of  

textile mill.  In the counter affidavit, reference has been made to the  

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report of the Committee that disposal of immovable property of the  

Company, i.e., premises would provide substantial amount for making  

the undertaking viable within a few years provided, the said premises  

was sold.  Further reference had been made to the observations made  

by the task force under the terms of reference that Company would be  

viable with the sale of land.   

11. After  considering  the  pleadings  as  well  as  the  submissions  

made on behalf of the parties, a learned Single Judge as well as the  

Division Bench recorded the following findings:

i)     M/s Hall and Anderson premises at Calcutta deals with  

different business and cannot be treated as part and parcel  

of the textile undertaking at Bombay.

ii)     The company was engaged in multifarious activities.

iii)     The textile undertaking at Bombay carries no other  

business other than the textile business.

iv)    The bank accounts and balance-sheets of both the units  

are different.

v)    The  lump  sum  compensation  to  the  tune  of  

Rs.2,70,85,000/- has been fixed and paid under the Act  

1995.   415  acres  of  land,  building  and  the  material  

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acquired  at  Bombay  leaving  aside  the  premises  at  

Calcutta.  

vi)     The textile mill at Bombay had been purchased as an  

asset of M/s Hall & Anderson as it had been purchased  

totally out of the resources of M/s Hall & Anderson. The  

premises at Calcutta by no means can be part and parcel  

having any nexus or related to the textile undertaking at  

Bombay.

   12. The judgment in Sitaram Mills (supra) was distinguishable as  

it had been argued in that case that the land appurtenant to the said  

mill was not a part of the textile undertaking.  However, this Court  

came to the conclusion that as a result of modernization resulted in a  

formation  of  mill  of  a  much  smaller  size,   the  land  had  become  

surplus.  It was lying vacant.  It was not in dispute that the surplus  

land was under the ownership of the textile undertaking.  It was in fact  

the  land  on  which  the  different  division  of  the  old  mill  had  been  

functioning.  Thus, this Court held that the land was an integral part of  

the textile undertaking.  In the instant case, position is otherwise.   The  

textile mill has been under the ownership of M/s Hall & Anderson at  

Calcutta.  

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13.   In  M/s Doypack Systems Pvt.  Ltd.  v.  Union of  India &  

Ors., AIR 1988 SC 782, this Court while interpreting the provisions  

of Section 3 of the Swadeshi Cotton Mills (Acquisition and Transfer  

of  Undertaking)  Act,  1986,  observed that  the  provisions  of  such a  

statute  require  broad  and  liberal  interpretation  in  consonance  and  

conformity with the principles enshrined in Articles 39B and 39C of  

the Constitution.  

In the said case, the issue was whether shares purchased using  

funds of the textile company could be held to be covered under the  

terms of said provision. The ratio of the said case has no application in  

the present case, as, admittedly, in that case the shares in question had  

been purchased from the funds of the textile company. In the instant  

case,  the  fact  situation  is  the  other  way  around.  M/s  Shree  

Madhusudan Mills  Ltd.,  Bombay,  had  been purchased  using funds  

generated from the premises at Calcutta.  

14. We have gone through the provisions of the Act 1995.  Section  

8  thereof,  provides  for  payment  of  amount  to  owners  of  textile  

undertaking:  

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“8.  Payment  of  amount  to  owners  of  textile   undertakings –  The  owner  of  every  textile   undertaking  shall  be  given  by  the  Central   Government,  in  cash  and  in  the  manner   specified in Chapter VI, for the transfer to, and   vesting in, it, under sub-section (1) of section 3,   of such textile undertaking and the right, title   and interest  of  the  owner in  relation  to  such  textile  undertaking,  an  amount  equal  to  the   amount  specified  against  it  in  the   corresponding entry in column (4) of the First   Schedule.”

However,  the column (4) of the First  Schedule,  so far as the  

present textile industry is concerned, reads as under:

Sl.  No.

Name  of  the  textile  undertaking

Name  of  the  owner

Amount (in rupees)

(1)                        (2)              (3) (4)

11. Shree  Madhusudan  Mills,  Pandurang  Budhkar  Marg,  Bombay

Shree Madhusudan  Mills  Ltd.,  31,  Chowringhee  Road,Calcutta – 16

2,70,85,000

       From the above, it is evident that what has been acquired is the  

property at Bombay.  Column 3 makes it clear that it was under the  

ownership of M/s Shree Madhusudan Mills Ltd., Calcutta, and after  

the property acquired at Bombay, a sum of Rs.2,70,85,000/- had been  

paid  as  compensation.  No  compensation  has  been  paid  for  the  

premises at Calcutta.

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15. The  relevant  part  of  the  judgment  in  Sitaram Mills (supra)  

reads as under:

“The  High  Court  completely  ignored  the   fact that all the assets of the company were held in   relation  to  the  textile  business.   The  company   required  all  its  real  estate  in  the  nineteenth   century when it was formed for carrying on textile   business and, admittedly, no new assets had been  acquired by it thereafter………

Even for determining the total compensation   to be paid on nationalization, the Task Force takes   values into account the total surplus lands of the   company and does not exclude any land belonging  to the so-called Real Estate Division……”

Therefore,  it  is  evident  that  in  the  said  case,  the  land  

appurtenant  to  the  textile  undertaking  and  belonging  to  it,  was  

converted into real estate and even on nationalisation, for the purpose  

of determining the compensation, the said land had been included in  

the assets. In the instant case, a contrary picture emerges as explained  

hereinabove. More so, the chart quoted from the Act, does not show  

that for determining the compensation, premises property at Calcutta  

had also been included.  As the premises in Calcutta does not form  

part of or has been appurtenant to the textile industry, the judgment in  

M/s Doypack  Systems Pvt. Ltd. (supra) is also distinguishable.  

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16.   This Court in  Minerva Mills Ltd. v. Union of India, AIR  

1986 SC 2030, dealt with judgment of this Court in  Sitaram Mills  

(supra) and held as under:

“25. The  learned  Counsel  for  the  petitioners   has  placed  reliance  upon an observation  of  this   Court in  National Textile Corpn. Ltd. v.  Sitaram  Mills Ltd. The question that was involved in that   case was whether surplus land in the precinct of   the  taken-over  undertaking  was  an  asset  in   relation to the undertaking. It was observed: (SCC  p. 133 bottom) “The test is whether it was held for  the  benefit  of,  and utilised  for,  the  textile  mill”.   Relying upon this observation, it is contended by  the learned Counsel for the petitioners that as the   vacant  land,  in  the  instant  case,  has  not  been   utilised for the undertaking, it is not an asset of the   undertaking. We do not think that in Sitaram Mills   case this  Court  really  meant  to  lay  down  a   proposition that in order that a piece of land be  considered as the asset of the textile undertaking,   it must be held for the benefit of and utilised for   the undertaking in question. Can it be said that a  piece of land which is held for the benefit of but   not  utilised for the textile  undertaking,  as in the   instant  case,  is  not an asset of the undertaking?   The answer must be in the negative.  In  Sitaram  Milks  case that  observation  was  made  in  the   context  of  facts  of  that  case,  namely,  that  the   surplus land was held for the benefit of and also  utilised for the textile undertaking.”

                                               (Emphasis added)            

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17. In view of the above, we do not see any cogent reason not to  

concur with the view expressed by the High Court.  The appeal lacks  

merit and is, accordingly, dismissed. In the facts and circumstances of  

the case, there will be no order as to costs.  

                        ………………………J.             (P. SATHASIVAM)

          ………………………..J.            (Dr. B.S. CHAUHAN)

New Delhi, January 17,   2011

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