B. MEHTA AND CO. Vs. PURANMAL BUBNA AND ORS.

JUDGEMENT

(1.) BY this report the official liquidator seeks, inter alia, a direction as to whether he should obtain consent of the Central Government under s. 35 of the Sick Textile Undertakings (Nationalisation) Act, 1974, for continuance of liquidation proceedings in respect of Edward Textiles Ltd. in liquidation (hereinafter called "the company"). He also seeks directions as to whether he should withdraw misfeasance summons which he had taken out against erstwhile officers and directors of the company having regard to the impact of the directions of the National Textile Corporation as also the Central Government. Notices were issued to the National Textile Corporation and the Central Government. They appeared before me through their counsel and have made submissions in respect of the directions sought for by the official liquidator.

(2.) ON 4th August, 1967, the company was directed to be wound up by this court under the provisions of the Companies Act, 1956. On 4th July, 1972 the official liquidator took out a misfeasance summons against former directors and officers of the company under s. 543 of the Companies Act, 1956. The said misfeasance summons is pending in this court. By an Ordinance promulgated by the President of India on 23rd December, 1972, being Ordinance No. 17 of 1972, the management of textile companies designated as sick textile undertakings was taken over and transferred to the Central Government. The said Ordinance, viz., "The Sick Textile Undertakings (Taking over of Management) Ordinance, 1972" took within its sweep management of a sick textile undertaking "which is being wound up whether voluntarily or by or under the supervision of any court". Thus, the said Ordinance applied to the company which was being wound up under the supervision of this court. In fact, the company is listed as one of the sick textile undertakings set out in the First Schedule to the said Ordinance. It is mentioned as item No. 12 in the said Schedule. S. 3 of the said Ordinance by its non obstante provision overrides all provisions of law as also judgments, decrees or orders of any court or tribunal or other authority as are inconsistent with the provisions of the Ordinance. S. 4(3) of the said Ordinance by its deeming provision, inter alia, provides not only for tangible properties to be included in the sick textile undertakings but also "all other rights and interest in, or arising out of, such property as were immediately before the appointed day, in the ownership, possession, power or control of the textile company". All the provisions of the said Ordinance may not be noticed but of significance is s. 7(b) which confers authority upon the Central Government to stay operation of all any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force. Equally significant are the provisions of s. 8 of the Ordinance Sub -s. (1) of s. 8 of the Ordinance enjoins that "no proceedings for the winding up of a textile company, within the meaning of this Ordinance, shall lie in any court or be continued whether by or under the supervision of or voluntarily, except with the consent of the Central Government". Sub -s. (2) of s. 8 ordains that "in computing the period of limitation prescribed by any law for the time being in force for any application which may be made in the course of winding up of any textile company in respect of any matter arising out of any transaction in relation to a sick textile undertaking, the time during which this Ordinance is in force shall be excluded". Relevant are the two concepts found in the two sub -sections "proceeding for the winding up of a textile company" or "continuance thereof" and "any application which may be made in the course of winding up of any textile company". These two concepts are two different legal categories. They embody legislative scheme of dichotomy between proceedings which result in winding -up order. The latter proceedings are more appropriately designated as the "proceedings in the course of winding -up".

(3.) THE taking over of the management as it turned out was precursor to the nationalisation of the sick textile undertakings. The President promulgated on 21st September, 1974, the Sick Textile Undertakings (Nationalisation) Ordinance, 1974. Under the said Ordinance, the rights of the owners in respect of sick textile undertakings were abrogated with effect from the appointed day which was the 1st April, 1974. The "owner" as defined in the said Ordinance in s. 2(g) thereof includes a liquidator of a sick textile undertaking. S. 3 of the Ordinance transfers and vests in the Central Government absolutely the right, title and interest of an owner in relation to every sick textile undertakings as and from the appointed day. S. 4 of the Ordinance by sub -s. (1) thereof provides for general effect of vesting and, inter alia, ordains that not only the assets, rights, leaseholds, powers, authorities and privileges or properties or equipment or machinery but also "all other rights and interests in, or arising out of, such property as were immediately before the appointed day in the ownership, possession, power or control of the textile company in relation to sick textile undertakings" shall be deemed to be the sick textile undertaking within the meaning and for the purposes of the said Ordinance. Sub -s. (6) of s. 4 provides that no suit or appeal or other proceedings of the description mentioned therein shall abate or be discontinued or be, in any way, prejudicially affected by reason of the transfer of the sick textile undertaking of the textile company or of anything contained in the said Ordinance. The said sub -section further ordains that such suit or appeal or the proceeding might be continued, prosecuted and enforced by or against the National Textile Corporation. Sub -section (7) of s. 4 directs handing over of possession of books of account, registers and all other documents as well as the whole or any part of any sick textile undertaking of which the management could not be taken over by the Central Government prior to the promulgation of the Ordinance. S. 8 of the Ordinance provides for payment of compensation. The amount of compensation is quantified in the First Schedule. The company is listed as a sick undertaking which is nationalised under the said Ordinance in the said Schedule at item No. 33. The compensation that is specified in the said Schedule for the company is Rs. 66,28,000. S. 10 of the Ordinance provides for accountability of the owners in certain circumstances. The said section is not material. S. 35 of the Ordinance provides for the proceeding for the winding up of a textile company, the right, title and interest whereof in relation to the sick textile undertaking owned by it have vested in the National Textile Corporation under the Ordinance "shall lie in any court except with the consent of the Central Government. "The provisions of s. 35 of the Ordinance thus make a departure from the corresponding provisions of s. 8(1) of the 1972 Ordinance of the 1972 Act.