ORDER 1. The first petitioner, viz the Pashok Tea Company Limited, owns the Pashok Tea Estate in the District of Darjeeling and the Loeksan Tea Estate in the District of Jalpaiguri. By two orders both dated October 11, 1976 and published in the Gazette of India Extraordinary of the same date the Central Government in exercise of its powers conferred by clause (a) of sub-section 1 of S. 16E of the Tea Act, 1953 (hereinafter the Act), authorised the Tea Trading Corporation of India Limited to take over the management of the two aforesaid gardens for a period of five years. These two orders, copies whereof are annexure 'B' to the petition, are the subject matter of challenge in this Rule. 2. The main submissions made on behalf of the petitioners are:- (a) The reason for the take over is the purported creation of incumbrances on the assets of the tea units. The reason is not germane to the exercise of the power because the creation of incumbrances has to be reckless, as on a plain reading of S. 16E (1)(a) of the Act it will be apparent that the word reckless governs both investments and creation of incumbrances. (b) There were no materials or evidence in the possession of the Central Government which could form the basis for the satisfaction for the take over and the materials disclosed in the affidavit-in-opposition are extraneous and not germane for the exercise of the power under S. 16E (1)(a) of the Act. (c) Violotion of the principles of natural justice as the petitioners were not given an opportunity before the take over to explain that the financial and other conditions of the gardens were not such as to necessitate the passing of the impugned orders. 3. According to the learned Advocate General, appearing on behalf of the Respondents the word reckless used is S. 16E (1)(a) of the Act governs only investments and as the petitioners had created incumbrances which had affected the production of tea in the two gardens, the take over was justified. 3. According to the learned Advocate General, appearing on behalf of the Respondents the word reckless used is S. 16E (1)(a) of the Act governs only investments and as the petitioners had created incumbrances which had affected the production of tea in the two gardens, the take over was justified. The further submission of the learned Advocate General was that by creating imcumbrances on the assets of the gardens the petitioner had brought about such a situation that workers were not being paid, Government dues were not being satisfied, outstanding Provident Fund payments were piling up and as a result a situation had arisen when there was every likelihood of the production of tea in the two gardens being completely stopped. Paced with such a situation the Central Government had no other option but to take recourse to the drastic action under S. 16E (1)(a) of the Act. As regards the opportunity to make a representation, it was contended that the petitioners had sufficient opportunities, which they had availed of by making representations after the take over and the Central Government had considered and rejected such representations and had also approved of the take over. As such there could not have been any violation of the principles of natural justice. 4. On June 11, 1976 Parliament enacted the Tea (Amendment) Act, 1976 by virtue of which a new Chapter IIIA was inserted after Chapter III of the Act. The object of the amendment was to empower the Central Government to take over for a limited period the management or control of tea undertakings or the units which had become sick or uneconomic and make such undertakings or units viable. 5. Before taking over the Central Government can cause investigation to be made in relation to a tea undertaking or tea unit (section 16B) and issue necessary directions after such investigation (section 16C) and under S. 16D of the Act it can assume management and control if its directions are not complied with and also in certain other cases as laid down in the section. Under S. 16E of the Act the Central Government is empowered to take over without any investigation under certain circumstances. As the impugned orders have been passed under this section it will need careful consideration. Under S. 16E of the Act the Central Government is empowered to take over without any investigation under certain circumstances. As the impugned orders have been passed under this section it will need careful consideration. The section reads as follows:- "16E (1) Without prejudice to any other provision of this Act, if, from the documentary at 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 of incumbrances on the assets of the tea undertaking or tea unit, of 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. (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 restarting 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 to 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 of a tea undertaking or tea unit:- (a) The provisions of sub-sections (2), (3) and (4) of S. 16D, and the provisions of S. 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 S 16D. (b) The provisions of sub-sections (3) and (4) of S. 18A 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." 6. Except for the names and particulars of the tea units sought to be taken over, both the impugned orders being S.O. 670E and S.O. 671 E of October 11, 1976 are identical; reference may therefore be made to any one of them. The order relating to Pashok Tea Estate is as follows:- "S.O. 670(E). 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, Darjeeling (hereinafter referred to as the said unit) owned by M/s. Pashok Tea Company Limited. 10, Pollock Street, Calcutta, have by the creation of incumbrances 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 S. 16E of the Tea Act, 1953 (29 of 1953), the Central Government hereby authorise the Tea Trading Corporation of India Limited, 225-E, 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. 2. This order shall have effect for a period of five years from the date of its publication in the Official Gazette." 7. The conditions pre-requisite for the exercise of the powers under S. 16E (1) (a) are therefore:- (a) Documentary or other evidence in the possession of the Central Government. 2. This order shall have effect for a period of five years from the date of its publication in the Official Gazette." 7. The conditions pre-requisite for the exercise of the powers under S. 16E (1) (a) are therefore:- (a) Documentary or other evidence in the possession of the Central Government. (b) Satisfaction from such documents or evidence that:- (i) There has been reckless investments or creation of incumbrances or diversion of funds by the tea unit or undertaking. (ii) Such action has brought about a situation which is likely to affect the production or manufacture of tea in the tea unit or undertaking. (iii) Immediate action is necessary to prevent such a situation. According to the impugned orders the situation for immediate action has been brought about because of the creation of incumbrances on the assets of the tea units. 8. It cannot be disputed and it is a well known fact that every tea unit or undertaking has to take periodical advances, mainly from Banks, by hypothecation of its crops or the mortgage of its assets. If mere creation of incumbrances be the ground for taking over no tea unit or undertaking would be secure from executive interference. This also could not have been the intention of the legislature when enacting sub-clause (a) of S. 16E (1) of the Act. That the adjective reckless qualifies both investments and creation of incumbrances is clear from the use of the comma before the first by in the sub-clause and the second comma and the words or by before the words diversion of funds. If this was not so there would have been a comma after investments instead of the word or and the word by would not occur before the words diversion of funds. As such the mere creation of incumbrances on the assets of a tea unit not being a ground for a take over of the said unit by the Central Government under S. 16E (1) (a) of the Act, both the impugned orders are illegal and have to be struck down. 9. Assuming that the word reckless does not govern the creation of incumbrances, it will be expedient to examine whether the impugned orders are otherwise in conformity with the other provisions of S. 16E (1) (a) of the Act. 10. 9. Assuming that the word reckless does not govern the creation of incumbrances, it will be expedient to examine whether the impugned orders are otherwise in conformity with the other provisions of S. 16E (1) (a) of the Act. 10. According to the petitioners there were no materials or evidence on the basis of which the Central Government could be satisfied that incumbrances had been created on the assets of the two tea units. The only incumbrance according to paragraph 11 of the petition is an equitable mortgage of the two tea estates by the deposit of title deeds and hypothecation of the tea gardens for the season 1973-74 created in favour of the Oriental Bank of Commerce Ltd. as security for overdrafts which the petitioner Company had with the said Bank. 11. The sufficiency of the documentary or other evidence in the possession of the Central Government on the basis of which, it came to its satisfaction that the passing of the impugned orders was imperative is not subject to judicial scrutiny. If, however, the existence of such documentary or other evidence is challenged, it is certainly open to the Court to examine if such materials exist and if the order challenged was passed for reasons in conformity with the legislation and not for considerations which are extraneous and also not germane. As Shelat, J. observed in the Supreme Court case of Barium Chemicals Ltd. & another vs. Company Law Board & another reported in AIR 1967 SC 295 . "Though an order passed in exercise of power under a statute cannot be challenged on the ground of propriety or sufficiency, it is liable to be quashed on the ground of mala fides, dishonesty or corrupt purpose. Even if it is passed in good faith and with the best of intention to further the purpose of the legislation which confers the powers since the Authority has to act in accordance with and within the limit of that legislation, its order can also be challenged if it is beyond those limits or is passed on grounds extraneous to the legislation or if there are no grounds at all for passing it or if the grounds are such that no one can reasonably arrive at the opinion or satisfaction requisite under the Legislation. In any one of these situations, it can well be said that the authority did not honestly form its opinion or that in forming it, it did not apply its mind to the relevant facts." 12. In paragraph 10 of the affidavit-in-opposition affirmed on behalf of the respondents by Mrs. Kamal Anand, Deputy Secretary to the Government of India, Ministry of Commerce, it has been stated that the Central Government after carefully considering the records, documents and reports concerning the two said units formed a bona fide opinion that the conditions necessary for the exercise of powers under S. 16E of the Tea (Amendment) Act, 1976 were actually in existence. In paragraph 11 of the said affidavit, reference has been made to a pending mortgage suit no. 48 of 1974 filed by the Oriental Bank of Commerce Limited in the court of the Subordinate Judge at Darjeeling. This suit obviously arises out of the equitable mortgage created by the first petitioner on the assets of the two units, particulars of which have been disclosed in paragraph 11 of the petition. This incumbrance was created long before the Tea (Amendment) Act, 1976 came into force and cannot form the basis of the satisfaction of the Central Government for passing the impugned alders on October 11, 1976. There must be proximate and rational connection between an administrative order and the materials on the basis of which the satisfaction was arrived at that the passing of such an order was necessary. 13. In paragraph 11 of the affidavit-in-opposition it has been stated that there are other liabilities against the fixed assets of the petitioner no. 1 for a sum of Rs. 30,51,435.76 as shown in the Balance Sheet as at 31st March, 1973. Whether these liabilities have been incurred by the creation of incumbrances, and if so, when these incumbrances were created have not been disclosed. Although in paragraph 10 the said affidavit leave was craved for to refer at the hearing of the case to the incumbrances on the assets of the tea units created prior to October 11, 1976, nothing new apart from what appears in the affidavit-in-opposition was disclosed at the hearing. 14. In paragraphs 14 and 15 of the affidavit-in-opposition it has been stated that there are several incumbrances on the assets of the Company as well as various liabilities totaling a sum of Rs. 14. In paragraphs 14 and 15 of the affidavit-in-opposition it has been stated that there are several incumbrances on the assets of the Company as well as various liabilities totaling a sum of Rs. 48,80,706.00 detailed particulars of such liabilities have also been given. It appears that these liabilities relate to Provident Fund, C.D.S., Central Excise Duty, Land Rent & Cess, Employees' salaries, gratuity etc. Particulars have also been given of the amounts due from the petitioner no. 1 on account of Income Tax, Agricultural Income Tax and Sales Tax in respect of Pashok Tea Co. Ltd. In paragraph 15 of the affidavit, details of Land Revenue and Cess payable to the State Government for both Lokesan and Pashok units have also been mentioned. 15. From what has been stated in paragraphs 14 and 15 at the affidavit-in-opposition, it is apparent that the petitioner no.1 had defaulted in the payment of wages, provident fund, dues of workers and other employees, land revenue, excise duties and other dues which the said petitioner was under an obligation to pay under the laws for the time being in force. On account of such defaults it was open to the Central Government to take appropriate action under other provisions of Chapter IIIA of the Act but such liabilities not having been incurred by the petitioner no.1 by the creation of incumbrances, it was not open to the Central Government to take action under S. 16 (1) (a) of the Act. The Central Government cannot also fall back upon any other section in Chapter IIIA of the Act for justifying the orders which have been purportedly passed under S. 16E (1) (a) of the Act. Therefore, the impugned orders having been passed for reasons extraneous and not germane to S. 16E (1) (a) of the Act, the said orders have to be quashed. 16. Even if the incumbrances had been created on the assets of the two tea units by the petitioner no.1, such action must bring about a situation which is likely to affect the production or manufacture of tea of the said units. According to paragraph 17 of the petition, the production of the tea gardens have increased considerably and the production of the two gardens for the years ending 31st December 1974, 31st December 1975 and 30th September 1976 have been disclosed. According to paragraph 17 of the petition, the production of the tea gardens have increased considerably and the production of the two gardens for the years ending 31st December 1974, 31st December 1975 and 30th September 1976 have been disclosed. This has been denied in paragraph 16 of the affidavit-in-opposition wherein it has been stated that the production of both the tea units have considerably dwindled below the district average and a comparative chart has been set out in the said paragraph. The chart is incomplete in respect of the two most relevant years, viz. 1975 and 1976 as the district average yield per hectare in the areas covered by the two gardens for the said years are not available. Even if fall in production of the tea units below the district average was germane to the action being taken under S. 16E (1) (a) of the Act, it cannot be said that the Central Government had in its possession materials regarding such purported fall for the periods proximate to the take over. But fall in the production of tea of a tea unit or undertaking below the district average yield may entitle the Central Government to take appropriate action under S. 16D (1)(b) of the Act and not under S. 16E (1) (a) as was done in the instant case. Therefore, on this ground also the petitioners are entitled to the relief as prayed for in the petition. 17. In the premises aforesaid, this application succeeds. The Rule is made absolute and the impugned orders, copies whereof are annexure 'B' to the petition, are quashed. Let appropriate writs issue accordingly. Interim orders, if any, stand vacated. There will be no order as to costs. 18. As this application is being allowed on the grounds stated above, the question of the violation of the principles of natural justice need not be entered into. 19. On the prayer made on behalf of the respondents the operation of this order be stayed for a period of four weeks from the date hereof. Rule made absolute.