- (1.) BY this petition, the petitioners are challenging some of the provisions of the Textile Undertakings (Taking Over of Management) Act, 1983 which repealed the Textile Undertakings (Taking Over of Management) Ordinance, 1983. A few facts leading to the present controversy may be stated as under.
(2.) THE first petitioner is a partnership firm duly registered under the provisions of the Indian Partnership Act, 1932 carrying on business as dealers and suppliers of yarn. The second petitioner is the partner of the first petitioner firm. On 7th October, 1983, the first petitioner supplied a consignment comprising 497. 27 Kgs. of Standard Polyster Texturised Nirlon Yarn to the third respondent-company which is a textile undertaking covered by the said 1983 Act. The said consignment was covered by the first petitioners delivery order and invoice dated 7th October, 1983 and was valued at Rs. 83,819. 58. In respect of this consignment, the third respondent had, on 17th October, 1983, issued a cheque bearing No. 038378 drawn on 5th respondent-Bank of Baroda for Rs. 83,820/ -. On 12th October, 1983, the petitioners supplied the second consignment comprising 493. 58 Kgs. , of Standard Polyster Texturised Nirlon Yarn to the third respondent. This second consignment was covered by delivery order and invoice dated 12th October, 1983 and was valued at Rs. 96,982/ -. The payment in respect of this second consignment was made by the third respondent under cheque dated 18th October, 1983 bearing No. 208489 for Rs. 26,982/ -. on 18th October, 1983, the Textile Undertakings (Taking Over of Management) Ordinance, 1983 was promulagated to take effect from that date. This Ordinance has subsequently been replaced by the Textile Undertakings (Taking Over of Management) Act, 1983. By virtue of sub-section (1) of section 3, of the said Act, on and from the appointed day, the management of all the textile undertakings stood vested in the Central Government. Under sub-sections (1) and (3) of section 3, it has been provided as under: Section 3 (1 ). On and from the appointed day, the management of all the textile undertakings shall vest in the Central Government; Section 3 (2 ).---Section 3 (3 ). Any contract, whether express or implied, or other arrangement, in so far as it relates to the management of the business and affairs of the textile undertaking and in force immediately before the appointed day, or any order made by any Court in so far as it relates to the management of the business and affairs of the textile undertaking and in force immediately before the appointed day shall be deemed to have terminated on the appointed day. Similarly sub-section (7) of section 3 of the said 1983 Act, reads as under: section 3 (7 ). For the removal of doubts, it is hereby declared that any liability incurred by a textile company in relation to the textile undertaking before the appointed day shall be enforceable against the concerned textile company and not against the Central Government or the Custodian.
(3.) IT is also necessary to refer to section 6 of the said Act and in particular section 6 (1) (b) appearing in Chapter III under the heading "power to Provide Relief to the Textile Undertakings". Section 6 (1) (b) reads as under: Section 6 (1): The Central Government may, if satisfied, in relation to any of the textile undertakings or any part thereof, the management of which has vested in it under this Act, it is necessary so to do in the interests of the general public with a view to preventing any fall in the volume of production of such undertaking, by notification, declare that - (a) :. . . . . . (b) : the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing, orders or other instruments in force (to which such textile undertaking or the textile company owning such undertaking is a party or which may be applicable to such textile undertaking or textile company) immediately before the date of issue of the notification shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable subject to such adaptations and in such manner as may be specified in the notification. " Section 11 (1) deals with the contracts etc. , held to have been entered into in bad faith which may be cancelled or varied by the Central Government. Section 11 (1) of the said 1983 Act reads as under; section 11 (1): If the Central Government is satisfied, after such inquiry as it may think proper, that any contract or agreement entered into at any time within three years, immediately preceding the appointed day between any of the textile companies or managing or other director of any such textile company and any other person in relation to any service, sale or supply to, or by, its textile undertaking and in force immediately before the appointed day, has been entered into in bad faith, or is detrimental to the interests of the textile undertaking of the concerned textile company, it may make, within one hundred and eighty days from the appointed day, an order cancelling or varying (either unconditionally or subject to such conditions as it may think fit to impose) such contract or agreement and thereafter the contract or agreement shall have effect accordingly".;