Banerjee, J. - (1.) These appeals are directed against an order passed by the Hon'ble Single Judge making the rule absolute obtained by Pashok Tea Company Limited. The case made out by the petitioner Pashok Tea Company Ltd., is that on 12th October, 1976 two letters were received by the petitioner, each dated the 13th October, 1976, one in respect of the Pashok Tea Estate and the other in respect of Looksan Tea Estate addressed to the Company by the Tea Trading Corporation of India Ltd. The said two letters are identical in nature except as to the name of the Tea Garden and the contents of the letters concerning the Pashok Tea Estate are as follows:-- "By an order dated 11th October, 1976 published in the Gazette of India Extraordinary dated llth October, 1976 the Government of India has authorised the Tea Trading Corporation of India Ltd., of 225-E, Acharya Jagadish Chandra BOM Road, Calcutta-20 being the authorised person to take over the management of the above unit on the terms and conditions referred to in the above order". The said order is in the following terms:-- "Whereas the Central Government is satisfied from the documentary and other evidence in its possession that the persons in charge of the tea unit known as Pashok Tea Estate P. O. Pashok District Darjeeling (hereinafter referred to as the suit Unit) owned by M/s. Pashok Tea Company Limited, 10, Pollock Street, Calcutta, have by the creation of in-cumbrances on the assets of the said unit have brought about a situation which is likely to affect the production of tea manufactured or produced by the said unit and that immediate action is necessary to prevent such a situation. Now, therefore, in exercise of the powers conferred by Clause (a) of Sub-section (1) of Section 16E of the Tea Act, 1953 (2 of 1953) the Central Government hereby authorised the Tea Trading Corporation of India Limited, 225E, Acharya Jagadish Chandra Bose Road, Calcutta-20 (hereinafter referred to as the authorised person) to take over the management of the whole of the said unit subject to the following terms and conditions, namely : (i) The authorised person shall comply with all the directions issued from time to time by the Central Government. (ii) the authorised person shall hold office for a period of five years from the date of publication of this order in the official Gazette : (iii) the Central Government may terminate the appointment of the authorised person earlier if it considers necessary to do so. This order shall have effect for a period of five years commencing from the date of its publication in the official Gazette, A copy of the said letters as also a copy of the letter relating to the Looksan Tea Estate are annexed hereto and including in Annexure "A" hereof, ft is clear from the said order that the power was exercised by the President under Section 16E of the Tea Act, 1953, Section 16E along with the other sections were introduced into the Tea Act by (Amendment) Act, 1976. The petitioner contended that the impugned order purporting to take over the management of the said Tea Estate of the Company have been sought to be passed on the allegation that the Company by creation of incumbrances on the assets of the Tea Estate have brought about a situation which is likely to affect the production of tea manufactured or produced by the said Tea Estates and that immediate action was necessary to prevent such a situation. The petitioner states that in any case the condition precedent for passing the order has not been complied with. It is alleged that the said order was passed in abuse of power, mala fide and no reasonable person on the materials on record could have passed the said impugned orders. It is stated that the only incumbrances that were created in respect of the said two tea Estates were the equitable mortgage of the said two tea estates by deposit of title deeds and hypothecation of the tea gardens lor the season 1973-74 created in favour of the Oriental Bank of Commerce Ltd., as security for overdrafts which the company had with the said Bank. It is stated further that such overdrafts facilities were taken from the said Bank by the Company in the year 1968 which were renewed from time to time, the last agreement for overdraft being made in February 1973. The equitable mortgages were created in respect of the Pashok Tea Estate and in respect of the Looksan Tea Estate on or about 28th February, 1973, and the hypothecation of the tea crop for the season 1973-74 was also made by the agreement dated the 28th February, 1973 under which the overdraft facilities of Rs. 43 lakhs were given by the said Bank. It is stated that apart from the said overdraft facilities, no other credit facilities from any Bank or financial institution were taken. It is further stated that such facilities were taken in the usual course of business and such facilities are normally taken by every trading company including companies owning tea garden on similar mortgages and hypothecation. All such overdrafts facilities were granted by the said Bank up to 31st March, 1974 and in or about September, 1974, the said Bank filed a suit in the Court of the Subordinate Judge at Darjeeling, being O. C. Suit No, 48 of 1974 against the company and its guarantees for a decree of Rupees 35,71,047.91 p. as the alleged outstanding dues in the overdraft account and for enforcement of the said equitable mortgages. The said suit was also for enforcement of another mortgage created by one of the guarantors of the said overdraft, being a Director of the Company. Written statement has been filed in the said suit at Darjeeling by the company denying liabilities as in fact the Company has no liability to the Bank, Sometime in 1972, at the instance of the said Bank, the management of the Tea Garden had been handed over to J. Thomas & Co. Ltd., and the Tea Consultancy and Plantation Services (India) Private Ltd., for proper management of the Tea Estates and liquidation of the dues of the Bank with the sale proceeds of the tea. The said agents of the Bank totally mismanaged the affairs of the tea gardens and incurred heavy losses and the company is entitled to be reimbursed for such losses and ia entitled to set off the same against the dues if any, of the Bank. Various disputes and differences exist with regard to the alleged liability of the company to the Bank which the company is denying and several proceedings are pending in the District Court of Darjeeling and in the Original Side of the High Court. It is alleged that the Company had not created any incumbrances on the assets of the said tea gardens far less any reckless incumbrances on such assets. The said impugned order could not have been passed by any person properly instructed. It is stated that after J. Thomas & Co. Pvt. Ltd., failed to vitalise the Tea Estate, the petitioner took back the management of the garden and with the sale proceeds of the tea garden and from their own resources they are continuing the management and there has been an increase of the production of tea at the tea gardens during the year ending as follows :-- -------------------------------------------------------------------------------- Year ending Production in Kg. -------------------------------------------------------------------------------- 31st Dec. 1974 Looksan 3,44,813 Kgs Pashok 77,159 Kgs. 31st Dec. 1975 Looksan 3,46,468 Kgs. Pashok 83,095 Kgs. 30th Sept. 1976 Looksan 3,41,896 Kgs. Pashok 1,20,963 Kgs. -------------------------------------------------------------------------------- It is further stated that the financial condition of the Company is sound. The Company has published balance sheets up to the year ended on 31st Mar., 1973. The financial position of the Company as on 30th September, 1976, will appear from the Pro forma statement of Income and expenditure as on that date showing a sum of Rs. 22,63,436.10.p. as balance surplus amount. It is further stated that it was incumbent upon the Central Government to give a hearing to the petitioner before issuing the impugned orders and the said impugned orders have been passed in breach of the principles of natural justice, equity and fair play and the same are illegal, inoperative, void and/or nullity. On the basis of these facts, it is stated that the order under Section 16E of the Tea Act, 1953 as amended by 1976, cannot be sustained and must be quashed,
(2.) In the affidavit-in-opposition filed by the respondent, it is stated, inter alia, that the management of the said two tea Estates, namely, Looksan Tea Estate and Pashok Tea Estate, were taken over under an order of the Central Government made under Section 16E (1) (a) of the said Act by Notified Order dated the 11th October, 1976, and from the said date the management had been vested with the Tea Trading Corporation of India Ltd., a Government of India undertaking. On and from October 11, 1976, all the powers and functions of the petitioner No. 1 and its Board of Directors in respect of or over the said two Tea Units were vested in the said Tea Trading Corporation of India Ltd., and therefore the petitioner became disentitled in law to initiate or commence any legal proceeding like the present writ proceeding in respect of the said two tea estates or tea units. It is further stated that the petitioner No. 2 ceased to be a Director of the petitioner No. 1 and as such has no right whatsoever in law either to make the present writ petition or verify it on behalf of the petitioner No. 1, It is stated further that the order passed by the Central Government was in accordance with law. After the Central Government carefully considering the records, documents and reports concerning the said two tea units formed a bona fide opinion that the conditions necessary for the exercise of powers under Section 16E of the Tea (Amendment) Act, 1976 were actually in existence and that in the interest of the general public and for preventing fall in production and manufacture of Tea and ruin of the said two Tea Units it was necessary to take immediate action to take over the management of the said two tea units. It is denied that there were no materials or evidence on which the Central Government could be satisfied in relation to the said two Tea Units of the Company that the person-in-charge of the same had by creation of the incumbrances on the assets of the said Tea Units brought about a situation which was likely to affect the production of Tea, manufactured or produced by the said Tea Units, It is also stated that the said order was in accordance with law.
(3.) Before we deal with the question raised in this appeal, it is convenient for us to set out Sections 16B, 16C, 16D and 16E of the Act which are as follows :-- "16B. (1) Where the Central Government is of opinion in respect of a tea undertaking or a tea unit that -- (a) the tea undertaking or, as the case may be, the tea unit, has made losses in three out of five years immediately preceding the year in which such opinion is formed; or (b) the average yield of the tea undertaking, or, as the case may be, the tea unit, during three years out of five years immediately preceding the year in which such opinion is formed, has been lower than the district average yield by twenty-five per cent, or more or (c) the persons owning the tea undertaking, or, as the case may be, the tea unit, have habitually made default in the payment of wages, or provident fund dues of workers and other employees, or rent of the land, or duties of excise, or such other dues as they are under an obligation to pay under any law for the time being in force; or (d) the tea undertaking, or, as the case may be, the tea unit, is being managed in a manner highly detrimental to the tea industry or to public interests, the Central Government may make, or cause to be made, a full and complete investigation into the affairs of the tea undertaking or, as the case may be, the tea unit, by such person or body of persons as it may appoint for the purpose. (2) Where a company owning a tea undertaking is being wound up by or under the supervision of the Court and the business of such company is not being continued, the Central Government may, if it is of opinion that it is necessary, in the interests of the general public, and, in particular, in the interest of production, supply or distribution of tea, to investigate into the possibility of running or restarting the tea undertaking, make an application to the Court, praying for permission to make, or cause to be made, an investigation into such possibility by such person or body of persons as that Government may appoint for the purpose; and, where such an application is made, the Court shall, notwithstanding anything contained in the Companies Act, 1956, or in any other law for the time being in force, grant the permission prayed for. (3) The person or body of persons appointed make any investigation under Sub-section (1), or, as the case may be, Sub-section (2), shall have the same powers as are specified in Section 18 of the Industries (Development and Regulation) Act, 1951. 16C. (1) If, after making or causing to be made any such investigation as is referred to in Sub-section (1) of Section 16B, the Central Government is satisfied that action under this section is desirable, it may issue such directions to the tea undertaking or tea unit concerned, as may be appropriate in the circumstances, for all or any of the following purposes, namely :-- (a) regulating the production of tea by the tea undertaking or, as the case may be, tea unit and fixing the standards of production; (b) requiring the tea undertaking or, as the case may be, tea unit to take such steps as the Central Government considers necessary to stimulate the production, manufacture or plantation, of tea; (c) prohibiting the tea undertaking or, as the case may be, tea unit from resorting to any act or practice which might reduce its production, capacity or economic value; (d) controlling the prices, or regulating the distribution, of tea produced or manufactured by the tea undertaking or, as the case may be, tea unit. (2) Where a case relating to any tea undertaking or tea unit is under investigation, the Central Government may issue, at any time, any direction of the nature referred to in Sub-section (1) to the tea undertaking or the tea unit concerned and any such direction shall have effect until it is varied or revoked by the Central Government. 16D. (1) If the Central Government is of opinion that - (a) a tea undertaking or tea unit, to which directions have been issued in pursuance of Section 16C, has failed to comply with such directions, or the tea undertaking, or, as the case may be, the tea unit, has made losses in three out of five years immediately preceding the year in which such opinion is formed; or (b) the average yield of the tea undertaking, or, as the case may be, the tea unit, during three years out of five years immediately preceding the year in which such opinion is formed, has been lower than the district average yield by twenty-five per cent, or more or (c) the persons owning the tea undertaking, or, as the case may be, the tea unit, have habitually made default in the payment of wages, or provident fund dues, of workers and other employees, or rent of the land, or duties of excise, or in the payment of such other dues as are obligatory under any law for the time being in force; or (d) the undertaking, or, as the case may be, the tea unit, is being managed in a manner highly detrimental to the tea industry or to public interest, the Central Government may, by notified order, authorise any person or body of persons to take over the management of the whole or any part of the tea undertaking or tea unit, as the case may be, or to exercise in respect of the whole or any part of the tea undertaking or, as the case may be tea unit, such functions of control as may be specified in the order. (2) Any notified order issued under Sub-section (1) shall have effect for such period, not exceeding five years, as may be specified in the order : Provided that if the Central Government is of opinion that it is expedient in the public interest that any such notified order should continue to have effect after the expiry of the period of five years aforesaid it may from time to time issue directions for such continuance for such period not exceeding one year at a time, as may be specified in the direction, so, however, that the total period of such continuance (after the expiry of the said period of five years) does not exceed two years; and where any such direction is issued, a copy thereof shall be laid, as soon as may be, before both Houses of Parliament. (3) Any notified order issued under Sub-section (1) shall have the same effect as if it were an order made under Sub-section (1) of Section 18A of the Industries (Development and Regulation) Act, 1951, and the provisions of Section 18B of that Act shall apply accordingly. (4) Notwithstanding anything contained in any law for the time being in force, no person, who ceases to hold any office by reason of the provisions contained in Clause (a), or whose contract of management is terminated by reason of the provisions contained in Clause (b), of Section 18B of the Industries (Development and Regulation) Act, 1951, as applicable to a tea undertaking or tea unit by virtue of the provisions of Sub-section (3), shall be entitled to any compensation for the loss of office or for the premature termination of his con-tract of management : Provided that nothing contained in this section shall affect the right of any such person to recover from the tea undertaking or the tea unit, as the case may be, monies recoverable otherwise than by way of such compensation. 16E. (1) Without prejudice to any other provision of this Act, if, from the documentary or other evidence in its possession, the Central Government is satisfied, in relation to a tea undertaking or tea unit, that - (a) the persons in charge of such tea undertaking or tea unit have, by reckless investments or creation or incumbrances on the assets of the tea undertaking or tea unit, or by diversion of funds, brought about a situation which is likely to affect the production of tea, manufactured or produced by the tea undertaking or tea unit, and that immediate action is necessary to prevent such a situation; or (b) it has been closed for a period of not less than three months (whether by reason of the voluntary winding up of the Company owning the tea undertaking or tea unit or for any other reason) and such closure is prejudicial to the concerned tea undertaking or tea unit and that the financial condition of the company owning the tea undertaking or tea unit and the plant and machinery of such tea undertaking or tea unit are such that it is possible to restart the tea undertaking or tea unit and such restart-Ing is necessary in the interests of the general public' it may, by notified order, authorise any person or body of persons to take over the management of the whole or any part of the tea undertaking or tea unit or in exercise in respect of the whole or any part of the tea undertaking or tea unit such functions of control as may be specified in the order. (2) On the issue of a notified order under Sub-section (1) in respect at a tea undertaking or tea unit, -- (a) the provisions of Sub-sections (2), (3) and (4) of Section 16D, and the provisions of Section 16G, shall apply to a notified order made under Sub-section (1) as they apply to a notified order made under Sub-section (1) of Section 16D; and (b) the provisions of Sub-sections (3) and (4) of Section 18AA of the Industries (Development and Regulation) Act, 1951, shall apply to the tea undertaking or tea unit, as the case may be, to the same extent as they apply to an industrial undertaking". Under Section 16B it has been provided that the Central Government is given power, if the Central Government is of the opinion, to cause investigation to be made in relation to the Tea Undertaking or Tea Unit, After the investigation is made by a person appointed under Section 16B (3), the Central Government may issue such direction under Section 16C as provided in the said section. After the investigation it is also provided under Section 16D that if the Central Government is of the opinion on any grounds stated in Section 16B and 16C of the Act, it may by order authorise any person or body of persons to take over the management of the undertaking for such period not exceeding 5 years. Under Section 16N of the Act it has been stated that until any rule is made in relation to any matter referred to in this Chapter, that is, Chapter 11A of the Act, the rules made by the Central Government under the Industries (Development and Regulation) Act, 1951, in relation to such matter shall, as far as may be, apply to the extent they are not repugnant to any provision of this Act or any rule made thereunder and references in such rules to the provisions of that Act shall be construed accordingly it appears, therefore, that when a question of representation and the question of natural justice are to be followed as is to be followed, in the matter of Section 16D, the representation of the aggrieved person must be considered before the report is made under Section 16B of the Act. In Section 16E of the Act however the power to take over the Tea Undertaking has been given to the Central Government if the Central Government is satisfied from the documentary and other evidence in its possession in relation to a tea undertaking that the persons-in-charge of such tea undertaking or tea unit have (1) by reckless investments or (2) creation of incumbrances on the assets of the tea undertaking or tea unit, or (3) by diversion of funds, brought about a situation which is likely to affect the production of tea, manufactured or produced by the tea undertaking or tea unit, and (4) that immediate action is necessary to prevent such a situation, the Central Government may take over the management of the undertaking on issue of a notified order under Sub-section (1). In that view of the matter, we now consider that arguments advanced by Mr. Somen Bose and Mr. D. N, Das appearing for the appellant;