CUSTODIAN OF TEXTILE UNDERTAKING,BOMBAY Vs HALL & ANDERSON LTD .
Bench: P. SATHASIVAM,B.S. CHAUHAN, , ,
Case number: C.A. No.-000666-000666 / 2011
Diary number: 8542 / 2008
Advocates: Vs
LEGAL OPTIONS
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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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