PILANI INVESTMENT CORPORATION LTD Vs. UNION OF INDIA
LAWS(MPH)-1980-9-47
HIGH COURT OF MADHYA PRADESH
Decided on September 17,1980

PILANI INVESTMENT CORPORATION LTD Appellant
VERSUS
UNION OF INDIA Respondents




JUDGEMENT

- (1.)BY this petition under Article 226 of the Constitution, the petitioners challenge two orders issued by the Central Government under section 18 F B (1) (b) of the Industries (Development and Regulation)Act, 1951 and four orders issued under section 18fb (2) extending the operation of the said orders upto 1st January 1981. The petitioners also challenge the constitutional validity of sections 18 F B and 29 D of the Act.
(2.)PETITIONER No. 1 is an investment holding company and carries on the business of investment and financing monies for business and commercial purposes. Petitioner No. 2 is a share-holder of the petitioner-company. Respondent No. 3 is a company having a factory at Worli, Bombay, and another factory at Ghaziabad in Uttar Pradesh. The respondent company carries on the business of manufacturing bicycles, auto-engines and bicycle parts. The said industry is a scheduled industry under the Act. In June 1970, the petitioner company advanced a clean loan of Rs. 8. 5 lacs to the respondent-company repayable on demand on interest at the rate of 10 per cent per annum. Another loan of Rs. 5 lacs was advanced by the petitioner-Company on the same terms in February 1971. Besides these loans the petitioner company in October 1970 executed a guarantee in favour of the State Bank of India upto limit of Rs. 15 lacs in respect of loans advanced by State Bank to the respondent company on cash credit facilities. By two orders passed on 3rd January 1974 under section 18a of the Act, the management of the whole of the undertakings of the respondent company at Bombay and ghaziabad was taken over for a period of five years. This period was extended from time to time. The undertakings of the respondent company are still managed by the Board of Management authorised under section 18a of the act by the Central Government. By two separate Orders issued on 29th january 1974, under section 18 FB (l) (b) of the Act, the Central Government suspended the operation of all contracts, agreements, etc. in force immediately before the date of issue of the orders (other than those relating to secured liabilities to banks and financial institutions) to which the said industrial undertakings of the respondent company or the company was a party for a period of one year. The orders in so far as relevant read as follows:-
"and whereas the Central Government is satisfied that in relation to the said industrial undertaking it is necessary so to do in the interests of the general public with a view to preventing fall in the volume of production of the scheduled industry, namely Bicycles and Bicycle chains industry; now, therefore, in exercise of the powers conferred by clause (b) of sub-section (1) of section 18 F B of the Act, the Central Government hereby declares that the operation of all contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force immediately before the date of issue of this Order (other than those relating to secured liabilities to banks and financial institutions) to which the said industrial undertaking or the owning such industrial undertaking is a party or which may be applicable to such industrial undertaking or company shall remain suspended for a period of one year and that all the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date shall remain suspended for the said period. "
The period of continuance of the aforesaid orders was extended from time to time upto 2nd January 1979 under section 18 FB (2 ). By two orders passed on 1st January 1979, the period of the operation of these orders was extended upto and inclusive of 1st January 1980. On 19th January 1975 the petitioner company filed a suit in the Court of the District Judge, Gwalior, against the respondent company for recovery of Rs. 19,22,260. 97, the amount due on the two loans. The District Judge by his order dated 30th July, 1977 rejected the plaint under Order 7, rule 11 of the Code of Civil Procedure on the ground that the suit was barred by the orders of suspension of contracts issued by the Central Government under section 18 FB (l) (b ). In the hope that the orders would expire on 2nd January 1979, the petitioner company again filed a suit on 7th November 1978 in the Court of the District Judge for recovery of Rs. 24,26,969 which was the amount then due on the loans. The Central Government, however, on 1st January 1979 issued two orders extending the period of the operation of the orders of suspension upto 1st January 1980. Under section 18 F B (2) as it then stood, an order of suspension passed under section 18 F B (1) (b) could remain in operation only for an aggregate period of five years. By Ordinance No. 6 of 1978 which came into force on 30th December 1978 the maximum aggregate period of five years under section 18 F B (2) (b) was raised to eight years. The ordinance was replaced by the Amending Act No. 17 of 1979. The petitioner then filed the present petition on 2nd April 1979. During the pendency of this petition the Central Government issued two orders on 28th December 1979 extending the period of the operation of the orders of suspension of contracts etc. under section 18fb (l) (b) upto and inclusive of 1st January 1981. The petitioner then amended the petition so as to include the relief for challenging these orders also.
(3.)THE Industries (Development and Regulation) Act, 1951, as originally enacted by Act No. 65 of 1951, came into force on 8th May 1952 by a notification of the same date issued under section 1 (3) of the Act. Chapter III-A of the Act which provides for direct management or control of industrial undertakings by the Central Government in certain cases, was inserted in the Act by No. 26 of 1953. Section 18a in this Chapter authorises the Central Government to assume management or control of an industrial undertaking in respect of which an investigation has been made under section 15. Chapter III-A was included at Item 19 in the Ninth Schedule to the Constitution by section 5 of the Constitution (Fourth Amendment) Act, 1955. The Act was again drastically amended by Act No. 72 of 1971 which came into force on 1st November 1974. This Act added section 18aa in chapter III-A authorising the Central Government to take over the management of industrial undertakings without investigation under section 15. The amending Act also added Chapter III-AA which contains section 18fa empowering the Central Government to authorise with the permission of the high Court to take over management or control of industrial undertakings owned by companies in liquidation. The Amending Act further added chapter III-AB which bears the heading "power to provide relief to certain industrial undertakings". Chapter III-AB so added consists of only one section, namely section 18fb which reads as follows:
"18-FB. Power of Central Government to make certain declarations in relation to industrial undertakings, the management or control of which has been taken over under section 18-A, section 18-A A or section 18-FA.- (1) The Central Government if it is satisfied, in relation to an industrial undertaking or any part thereof, the management or control of which has been taken over under section 18-A whether before or after the commencement of the Industrial (Development and Regulation) Amendment Act, 1971, or under section 18-AA or section 18-FA, that it is necessary so to do in the interests of the general public with a view to preventing fall in the volume of production of any scheduled industry, it may, by notified order declare that:- (a) all or any of the enactments specified in the Third Schedule shall not apply or shall apply with such adaptations, whether by way of modification, addition or omission (which does not, however, affect the policy of the said enactments) to such industrial undertaking, as may be specified in such notified order, or (b) the operation of all or any of the contracts, assurances of property agreements, settlement, awards, standing orders or other instruments in force (to which such industrial undertaking is a party or which may be applicable to such industrial undertaking or company) immediately before the date of issue of such notified order 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 with such adaptations and in such manner as may be specified in the notified order. (2) The notified order made under sub-section (1) shall remain in force, in the first instance, for a period of one year, but the duration of such notified order may be extended from time to time by a further notified order by a period not exceeding one year at a time: provided that no such notified order shall, in any case, remain in force- (a) after the expiry of the period for which the management of the industrial undertaking was taken over under section 18-A, section 18-AA or section 18-FA, or (b) for more than five years in the aggregate from the date of issue of the first notified order, whichever is earlier. (3) Any notified order made under sub-section (i) shall have effect notwithstanding anything to the contrary contained in any other law, agreement, or instrument or any decree or order of a Court, tribunal, officer or other authority or of any submission, settlement or standing order. (4) Any remedy for the enforcement of any right, privilege, obligation or liability referred to in clause (b) or sub-section (1) and suspended or modified by a notified order made under sub-section shall, in accordance with the terms of the notified order, remain suspended or modified, and all proceedings relating thereto pending before any Court, tribunal, officer or other authority shall accordingly remain stayed or be continued subject to such adaptations, so, however, that on the notified order ceasing to have effect- (a) any right, privilege, obligation or liability so remaining suspended or modified shall become revived and enforceable as if the notified order had never been made; (b) any proceedings so remaining stayed shall be proceeded with, subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings become stayed. (5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability referred to in clause (b) of sub-section (1), the period during which it or the remedy for the enforcement thereof remained suspended shall be excluded. "
The Amending Act No. 72 of 1971 also inserted section 29-D in Chapter IV bearing the title "miscellaneous". Section 29-D is as follows:
"29d. Debts incurred by the authorised persons to have priority.-Every debt arising out of any loan obtained by the authorised person for carrying on the management of, or exercising functions of control in relation to, an industrial undertaking or part thereof, the management of which has been taken over under section 18-A or section 18-A A or section 18-FA- (a) shall have priority over all other debts, whether secured or unsecured, incurred before the management of such industrial undertaking was taken over; (b) shall be a preferential debt within the meaning of section 530 of the Companies Act, 1956 (1 of 1956); and such debts shall rank equally among themselves and be paid in full out of the assets of the industrial undertaking unless such assets are insufficient to meet them, in which case they shall abate in equal proportions. "



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