Sabyasachi Mukharji, J. - (1.) By the order passed by us on 29th March, 1988, we had dismissed this petition under Art. 32 of the Constitution. We had, further, observed that we will indicate our reasons by a separate judgment. We do so herein.
(2.) This petition under Art. 32 of the Constitution challenges the constitutional validity of the Swadeshi Cotton Mills Limited (Acquisition and Transfer of Undertakings) Act, 1986 (hereinafter called 'the Act'). It appears that there was an order made by the Central Government under S. 18AA(1)(a), Industries (Development and Regulation) Act, 1951 (hereinafter called 'the IDR Act') for taking over the management of the six undertakings of Swadeshi Cotton Mills, namely, (i) Swadeshi Cotton Mills, Kanpur, (ii) Swadeshi Cotton Mills, Pondicherry, (iii) Swadeshi Cotton Mills, Naini, (iv) Swadeshi Cotton Mills, Maunath Bhanjan, (v) Udaipur Cotton Mills, Udaipur and (vi) Rae Bareli Textile Mills, Rae Bareli for a period of five years. There were several proceedings in the High Court of Delhi and in other High Courts. It is not necessary in view of the judgment of this Court in SLP (Civil) Nos. 4826 and 7045 of 1987 M/s. Doypack Systems Pvt. Ltd. v. Union of India dated 12th February, 1988 to set out in extenso all these facts, By the aforesaid judgment it was held that the 10,00,000 shares in Swadeshi Polytex Limited and 17,18,344 shares in Swadeshi Mining and Manufacturing Company Limited held by the Swadeshi Cotton Mills vested in the Central Government and National Textile Corporation (hereinafter called 'NTC') under Ss. 3 and 4 of the Act. It was further held that in view of the amplitude of the language used, the immovable properties, namely, the Bungalow No. 1 and the Administrative Block, Civil Lines, Kanpur, had also vested in N.T.C. Directions were given by this Court in the said judgment to enter the name of the NTC in its register of members of the said companies and to treat the NTC as their shareholder instead of other erstwhile shareholders.
(3.) This petition under Art. 32 of the Constitution has been filed by the petitioners who claim to be shareholders of respondent 4, Swadeshi Cotton Mills Company Limited as they have an interest in the business, affairs and properties of the Swadeshi Cotton Mills Company Limited and Swadeshi Mining and Manufacturing Company Limited. It was contended that the effect of the aforesaid decision was to take away valuable assets of respondent 4, namely, Swadeshi Cotton Mills Limited without paying any compensation whatsoever therefor and further it imposed upon respondent 4 liabilities without any corresponding assets available to discharge the liabilities. It was the contention in this writ petition that the said acquisition virtually amounted to confiscation of the shares of respondent 5 and respondent 6 held by respondent 4 and substantially damaged the rights of the sharesholders of respondent 4. In the premises, it was submitted that they have the locus to challenge the vires and constitutional validity of Ss. 3 and 4 of the said Act in so far as these seek to divest respondent 4 of the shares in respondent 5 and respondent 6 and certain other excluded assets. It was submitted that so far as the said Act provided for the vesting of shares held by respondent 4 in respect of respondents 5 and 6 it constituted a fraud on legislative power. It was submitted that there was no public purpose in such acquisition. It is taxation and appropriation and not nationalisation. It was further urged that it was contrary to the preamble to the Act because according to the preamble it was to ensure continuance of the manufacture, production and distribution of different varieties of cloth and yarn which were vital to the needs of the country. The industrial undertaking of respondent 5 produces sugar. The industrial undertaking of respondent 6 produces synthetic fibre. Therefore, both these companies or undertakings are producing neither cloth nor yarn. Therefore, it was submitted that in any event, the stated public purpose has no nexus with the acquisition of shares of respondent 5 and respondent 6 and as such, the acquisition of the shares of respondents 5 and 6 is without there being any public purpose. It was submitted that if the Act was so read then it was violative of Art. 14 and Art. 19(1)(g) of the Constitution. It was submitted that the acquisition must be for a public purpose and there must be some compensation paid for that acquisition. It was submitted that implicit in the concept of acquisition which is akin to the power of eminent domain is the concept of payment of compensation. It was urged that after the legislative change made by the Constitution (Seventh Amendment) Act, 19 56, the power of the State as well as of the Union to enact any law governing acquisition of property must necessarily be governed by the provisions of entry 42 in List III of the Seventh Schedule to the Constitution. After the amendment, there was no specific entry in List III which empowered the Union or the States to enact law for payment of compensation, so it is now implicit in the concept of acquisition and requisition of property. It was further urged that under Art. 300A of the Constitution, no person could be deprived of his property save by the authority of law. It was further submitted that the law contemplated by this Article was obviously a law providing for acquisition of property and, therefore, it was interlinked with entry 42 of List III of the Seventh Schedule to the Constitution. All these contentions, in our opinion, are not tenable because all these contentions were directly or indirectly dealt with in the aforesaid judgment. The preamble to the Act provides as follows: "An Act to provide for the acquisition and transfer of certain textile undertakings of the Swadeshi Cotton Mills Co. Ltd., with a view to securing the proper management of such undertakings so as to subserve the interests of the general public by ensuring the continued manufacture, production and distribution of different varieties of cloth and yarn and thereby to give effect to the policy of the State towards securing the principles specified in Cls. (b) and (c) of Art. 39 of the Constitution and for matters connected therewith or incidental thereto. WHEREAS the Swadeshi Cotton Mills Co. Ltd. has, through its six textile undertakings, been enagaged in the manufacture and production of different varieties of cloth and yarn; AND WHEREAS the management of the said textile undertakings was taken over by the Central Government under S. 18AA, Industries (Development and Regulation) Act, 1951; AND WHEREAS large sums of money have been invested with a view to making the said textile undertakings viable; AND WHEREAS further investment of very large sums of money is necessary for the purpose of securing the optimum utilisation of the available facilities for the manufacture, production and distribution of cloth and yarn by the said textile undertakings of the Company; AND WHEREAS such investment is also necessary for securing the continued employment of the workmen employed in the said textile undertakings; AND WHEREAS it is necessary in the public interest to acquire the said textile undertakings of the Swadeshi Cotton Mills Company Ltd. to ensure that the interests of the general public are served by the continuance by the said undertakings of the Company of the manufacture, production and distribution of different varieties of cloth and yarn which are vital to the needs of the country; AND WHEREAS such acquisition is for giving effect to the policy of the State towards securing the principles specified in clauses (b) and (c) of Art. 39 of the Constitution.;