R.M. Sahai, J. - (1.) In what an unfortunate moment M/s. Bist Industrial Corporation Ltd. (hereinafter referred to as Company) was formed by D.S. Bist and sons of Nainital in whose favour an industrial licence was granted in 1956 to set up a sugar factory of two thousand tonnes capacity a day at Kichcha on Bareilly -Kathgodam road to meet crying need of the cultivators, of sugar -cane of Haldwani and Phoolbagh in district Nainital, that it did not run even for a day and was ultimately taken over by Government, by an ordinance issued on 12th September, 1970 which was replaced by Bist Industrial Corporation Limited (Acquisition of Undertaking) Act, No. 7 of 1971 (hereinafter referred to as Act). Although the company was formed on 20th March, 1957, after State Government had sanctioned a loan of Rs. 40 lakhs on 19th March, 1957 building was constructed between 1959 -60, some machines were imported and for others orders had been placed, but the project came to a standstill as loan of Rs. 80 lakhs sanctioned by Industrial Finance Corporation in 1959 to complete the project, enhanced to Rs. 1 crore under revised agreement entered with Sri W.L. Kohli in 1964 who had purchased majority share capital of the company in 1963, was never released and it was ultimately cancelled in 1968. Efforts to start the company under Government control also did not materialise. Talks for purchase of equity share of company also failed. And in 1969 the Government issued notice for recovery of loan with interest and penal interest Subsequent to cancellation of loan by Industrial Corporation the underwriters namely Life Insurance Corporation Bombay, the Oriental Fire and Insurance Company Bombay and U.P. State Industrial Development Corporation Lucknow filed suits for recovery of their money. Punjab National Bank, another secured creditor also filed a suit at Delhi and two suits in the Court of Civil Judge Nainital. Placed thus in an impossible situation of facing recovery suits on one hand and taking over of the undertaking for Rs. 1 crores and 31 lakhs reduced by Rs. 40 lakhs principal and Rs. 42 and odd lakhs interest and penal interest of Government although outstanding dues were Rs. 340.90 lakhs, Sri Kohli approached the Supreme Court under Article 32 of Constitution of India challenging validity of the Act being beyond legislative competence and violative of Articles 14, 19 and 31. Another petition was filed by Punjab National Bank. By the time these petitions matured for hearing, 42nd constitutional amendment had come into force and therefore, these petitions were returned by the Hon'ble Court and they were presented in this Court in 1977. Although principal question in these petitions namely whether determination of compensation was illusory and arbitrary and whether State Government had priority over other debtors are different yet questions relating to invalidity under Articles 14 and 19 and 31 being common both are being disposed of by this order.
(2.) What and where went wrong in chain of events spreading over nearly thirteen years resulting in takeover of the undertaking is not necessary to be adjudicated upon. Even the attack on legislative competence and violation of Articles 14 and 19 and 31 which might have been of consequence in 1971 has lost its thrust as the Supreme Court in Ishwari Khetan Sugar Mills v/s. State of U.P. : AIR 1980 S.C. 1955 : (1980 All. L.J. 950) repelled similar challenge while upholding validity of Act 27 of 1971 by which a number of sick mills had been taken over by the State. Learned counsel also pressed these submissions half heartedly rather feebly more for purposes of record than any hope of success.
(3.) Another facet of same attack was lack of public purpose. It was urged that acquisition being with objective of realisation of loan advanced by State Government by depriving other creditors of their substantial dues, it was mala fide and unreasonable. And the exercise of power being colourable it was vitiated. Reliance was placed on State of Karnataka v/s. Ranganatha Reddy : AIR 1978 S.C. 215 and it was urged that the question whether acquisition was for public purpose or otherwise was justiciable. Needless to say that objective of taking over cannot be decided by picking up one Sec. or the other. It has to be judged in the background in which it became necessary for government to intervene, and the objective it sought to achieve. It will have to be seen if in pith and substance the legislation was to realise government loan only. The Ordinance was issued to provide for the acquisition of idle plant and other property belonging to or held by the company for purpose of enabling the State Government in public interest to commission the said plant with a view to bringing to use to the fullest extent possible the surplus sugar -cane grown in and around Tarai area and thereby to help the sugar -cane growers for production of sugar which was essential commodity and for providing employment to a considerable number of people and to manage the undertakings so as to sub -serve the common good. It describes both the background and purpose of acquisition. It cannot be disputed that purpose for which the licence was granted to M/s. Bist & sons namely to help the cultivators was being frustrated. The legislation was enacted not to deprive the petitioner of the undertaking or to realise the loan advanced by State Government but for social and general betterment. As mentioned earlier the Industrial Finance Corporation had cancelled the loan and there was no fund with petitioner which he could utilise in making the factory a running concern. The petitioner agreed for government control. The talks for purchase of equity share failed because of dispute of its valuation. Due to lack of fund factory became stagnant. Petitioner had failed in its effort to accumulate sufficient fund. It cannot, therefore, be said that when the Government intervened after waiting for nearly 14 years it was acting in a mala fide manner or that exercise of power was colourable. In fact there was no option but to take over the undertaking. To argue, therefore, that the undertaking was taken over for paying government loan is being uncharitable.;