UNION OF INDIA Vs. SEKSARAI COTTON MILLS LTD
LAWS(BOM)-1972-7-6
HIGH COURT OF BOMBAY
Decided on July 04,1972

UNION OF INDIA Appellant
VERSUS
SEKSARAI COTTON MILLS LTD. Respondents

JUDGEMENT

Tulzapurkar, J. - (1.) This is a judges summons dated 12th January, 1972, taken out by the applicants (the Union of India) seeking permission or leave of this court to make or cause to be made investigations into the possibility of restarting the industrial undertaking of the 1st respondent (the Seksaria Cotton Mills Ltd. (in liquidation) in the interest of the general public and particularly in the interest of productions of cotton textiles, under section 15A of the Industries (Development and Regulation) Act, 1951, as amended by the Amending Act No. 72 of 1971.
(2.) The fact giving rise to the application by way of judge's summons may be stated : The Seksaria Cotton Mills Ltd. (hereinafter referred to as "the 1st respondent-company"), a public limited company incorporated under the Indian Companies Act, VII of 1913, used to run textile mills situate at Delise Road, Parel, Bombay. It ceased production and actually stopped its business since about 18th October, 1967. On a creditor's petition, being Company petition No. 139 of 1967, filed on 7th December, 1967, the 1st respondent-company was ordered to be wound up by this court on 2nd March, 1969, and the official liquidator (respondent No. 2) was appointed liquidator thereof with necessary powers under the Indian Companies Act, 1956, to take charge of the assets of the company and to conduct its affairs in the course of winding-up and to distribute its assets in accordance with the provisions of the Companies Act. However, it appears that on 14th September, 1962, the 1st respondent-company had executed two debenture trust deeds - one in favour of Gobindram Seksaria Charity Trust to secure the advance of Rs. 39 lakhs and interest thereon (respondents Nos. 4, 5 and 6 being the trustees thereof) and the other in favour of the Trustees of Hashimara Industries Ltd. (respondents Nos. 7, 8 and 9 being the trustees thereof) to secure the advance of Rs. 45 lakhs and interest thereon; the second debenture deed was subject to the first debenture deed and by the second debenture trust deed the properties of the miles belonging to the company including the lands, buildings and machinery and plant were conveyed to the trustees of the second debenture trust deed. It further appears that pursuant to power contained in that behalf in the second debenture trust on defaults being committed in payment of certain installments, the trustees (respondents Nos. 7, 8 and 9) on 7th October, 1967, appointed one Sumat Prasad as a private receiver to take possession of the mills and its assets and to exercise the power of sale and to recover the amount due under the second debenture trust deed and accordingly the 3rd respondent took possession of the mills on 17th October, 1967, and on the very next day, i.e., on 18th October, 1967, the management retrenched all the workers of the mills and the mills ceased to function on and from that date and remained entirely closed ever since. Since the secured creditors did not join in the winding-up proceedings and the private receiver was in possession and control of the mills and its assets, this court while passing winding-up order and appointing the official liquidator as the liquidator of the company gave specific directions that, "this winding-up order will not in any way prejudicial affect the rights of the secured creditors nor will the appointment of the official liquidator displace the private receiver, who, however, will have no power to run the mill but will enjoy all powers for the purpose of realising the security by sale thereof for the benefit of secured creditors".
(3.) After the 1st respondent-company was ordered to be would up as aforesaid, the State of Maharashtra in or about March, 1968, started negotiations with the 3rd respondent (private receiver) and the official liquidator (2nd respondent) for taking over the said mills for being run on leave and licence basis as part of the unemployment relief scheme. But the negotiations ultimately railed in April, 1970, inasmuch as the State of Maharashtra withdrew its offer on the ground that the workers were unwilling that the management should receive yearly licence fee of Rs. 8 lakhs as demanded. Thereafter, on 2nd June, 1970, the Central Government passed an order under section 15 (a) (i) of the Industries (Development and Regulation) Act, 1951, appointing a committee of investigators for making a full and complete investigation into the circumstances resulting in the fall in the production of the textile goods manufactured by the company. Respondent No. 3, the private receiver appointed by respondents Nos. 7, 8 and 9 (being the trustees of the second debenture trust deed), filed a petition in this court, being Misc. Petition No. 4 of 1971, challenging the said order passed by the Central Government on 2nd June, 1970. It appears that the committee of investigators had submitted its report to the Union of India on or about 5th January, 1971, and the said report was also challenged by the 3rd respondent in the said writ petition. Mr. Justice Chandrachud who ultimately heard the writ petition by his judgment and order passed on 9th October, 1971, set aside the order dated 2nd June, 1970, and the Central Government was directed not to take any steps in pursuance of the said order or in pursuance of the said report submitted by the committee of inspectors on the ground that the order under section 15 of the said Act could not have been made in June, 1970, when the mills had been closed and remained closed since October, 1967. Thereafter, the Industries (Development and Regulation) Amendment Ordinance No. XX of 1971 was promulgated on 1st November, 1971, and by that Ordinance, inter alia, two new sections, being sections 15A and 18FA were introduced in the said Act of 1951. Under the former new section (section 15A) power to investigate into the affairs of a company in liquidation for certain purposes and upon fulfillment of certain conditions was conferred upon the Central Government while under the latter new section (section 18FA) power to point authorised persons to take over management or control of industrial undertakings in respect of which an investigation has been made under section 15A on fulfilment of certain conditions was conferred upon the Central Government. On 24th December, 1971, the Amending Act, being Act No. 72 of 1971, was passed by Parliament incorporating substantially the provisions of the Ordinance in the original Act of 1951 and the Amending Act was deemed to have come into force on the 1st day of November, 1971. According to the applicants (the Union of India) after the promulgation of the aforesaid Ordinance and the coming into force of the said new sections, the Central Government formed an opinion that it was necessary in the interest of the general public and in particular in the interest of production of cotton textiles to investigate the possibility of restarting the industrial undertaking of the 1st respondent-company and in pursuance of that opinion so formed the applicants have taken out the present judges summons on 12th January, 1972, under section 15A of the said Act seeking permission of the court to make or cause to be made an investigation into such possibility by such person or body of persons as the applicants may appoint for the purpose.;


Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.