B. K. MEHTA, J. ( 1 ) THESE three company applications arise out of the proceedings of taking over the Manek Chowk and Ahmedabad Manufacturing Company Ltd. (in winding up) (hereinafter referred to as the Company ). By two company applications namely Company Application No. 28 of 1981 and 82 of 1982 the Union of India and by Company Application No. 101 of 1981 the shareholders and the creditors of the Company the petitioners herein (hereinafter referred to as the Sponsors of the Scheme) have taken out summonses for directions. The Union of India has sought the direction that a permission under sec. 18 FA (1) of the Industries (Development and Regulation) Act 1951 (hereinafter referred to as the Act) to take over the textile unit of the Company be granted for the purposes of handing over the said unit to the Gujarat State and for appointment of the Gujarat State Textile Corporation as authorised persons. The Sponsors of the Scheme have by Company Petition No. 36 of 1980 sought the sanction of the Court under sec. 391 (2) of the Companies Act 1956 (hereinafter referred to as the Companies Act) to the scheme they have proposed before the Court and which has been approved and adopted by the prescribed statutory majority of the various interests of the Company. The Sponsors of the Scheme have therefore by Company Application No. 101 of 1982 sought the directions that pending consideration of the scheme the hearing of the Company Application No. 28 of 1981 moved by the Union of India under sec. 18 FA (1) of the Act be stayed or in the alternative the Court may decide as to which out of the two rival proposals of taking over one by the Union of India and another by the sponsors of the Scheme is beneficial to the interests of the Company. A few facts be noticed in order to appreciate the background of these proceedings. ( 2 ) THE Company was incorporated in 1892 and Messrs Hiralal Tricumlal and Sons a partnership firm were the managing agents of the Company till 31/12/1965. One Shri Dinubhai Hiralal was appointed as the Managing Director of the Company with effect from 1/01/1966 for a period of five years. The textile unit of the Company was closed down with effect from 31/03/1968. One Shri Dinubhai Hiralal was appointed as the Managing Director of the Company with effect from 1/01/1966 for a period of five years. The textile unit of the Company was closed down with effect from 31/03/1968. Some of the creditors of the Company filed the winding up petitions in this Court in July 1968 in which this Court appointed provisional liquidator. M/s. Indequip Limited one of the major creditors of the Company had sponsored and moved a scheme of compromise between the Company and the creditors and members which was sanctioned by this Court by its order of 10/12/1969 The provisional liquidator therefore handed over the possession of the textile unit of the Company to the Board of Directors on 5/05/1970 and the unit was recommenced in October 1970. It should be noted that in August 1967 the Union Bank of India had sanctioned to the Company a loan in the sum of Rs. 13 lakhs against guarantee from the Government of Gujarat. One of the conditions of the said guarantee was that the Company would appoint on its Board of Directors two nominees of the Government of Gujarat. The textile unit was run and managed under the aforesaid scheme till October 1976 but again due to the financial difficulties came to a standstill and since this Court found that it was not possible to work the scheme directed by its order of 12/12/1977 to wind up the Company and the Official Liquidator was appointed as the liquidator in charge of the Company. The Official Liquidator in spite of his best efforts could not attract any person for taking over the textile unit of the Company either on lease or by way of outright sale so that it could be recommenced. There was no response in spite of repeated public notices inserted by the Official Liquidator from the persons in the textile industry or from the State Government or the Central Government or even from the National Textile Corporation with the result that the textile unit remained closed. The Government of Gujarat had appointed an expert committee in about March 1977 to report about the technical viability of the unit under the chairmanship of one Shri I. C. Shah a leading expert of repute in the textile industry. The Government of Gujarat had appointed an expert committee in about March 1977 to report about the technical viability of the unit under the chairmanship of one Shri I. C. Shah a leading expert of repute in the textile industry. The said committee submitted its report about the viability of the said unit and in the opinion of the said committee on consideration of all the relevant aspects set out in detail in the said report the said unit was neither technically nor economically viable. The National Textile Corporation also did not evince any interest in the taking over of this unit. An half hearted attempt was made by the Cooperative Society of Workers namely Manekchowk Katan Vanat Kamdar Udyogik Sahakali Mandli Limited which has moved this Court for taking over the textile unit on lease by a phase programme. This Court has by its order dated 2-7-79 permitted the said Society on certain terms and conditions to take over the textile unit by phases in pursuance of which the processing house of the textile unit was taken over by the said society. Unfortunately however the arrangement could not materialise fully with the result that the society found itself unable to take over other sections of the textile unit and could not also work the processing section which was taken over by them. This Court therefore by its order of 28/07/1980 refused to grant any further extension of time for taking over and terminated the said arrangement. It is in these circumstances that the sponsors of the Scheme moved this Court by Company Application No. 5 of 1980 on 21/01/1980 for directions under sec. 391 of the Companies Act for convening the meetings of the different interests of the Company to adopt with or without modification the proposed scheme for restarting the textile unit. This Court has by its order dated 18-4-80 directed the convening of meetings of the various interests on different dates as specified therein for the purposes of consideration and adopting the said scheme with or without modification. Various meetings of the shareholders creditors secured unsecured and statutory and workers were convened to consider the said scheme. The proposed scheme has been approved by the prescribed majority of the secured as well as unsecured creditors shareholders and workmen. The Union Bank of India which is a major secured creditor of the Company also supported the scheme. Various meetings of the shareholders creditors secured unsecured and statutory and workers were convened to consider the said scheme. The proposed scheme has been approved by the prescribed majority of the secured as well as unsecured creditors shareholders and workmen. The Union Bank of India which is a major secured creditor of the Company also supported the scheme. The statutory creditors did not approve of the Scheme and they were therefore kept outside the scheme by the sponsors of the scheme proposed to negotiate with them directly. The Sponsors of the Scheme therefore moved this Court on 11/07/1980 by filing the Company Petition No. 36 of 1980 under sec. 391 (2) of the Companies Act for sanctioning the said scheme of compromise. This Court has directed the issuance of notice to the Central Government under sec. 394-A of the Companies Act which was accordingly served on the Central Government on 4/08/1980 This Court had directed the sponsors of the Scheme to deposit a sum of Rs. 50 0 in all with the Official Liquidator so as to enable them complete the work of cleaning and greasing the textile unit so that in case of the sanction being granted by this Court to the scheme of arrangement no unnecessary time may be wested in recommencing the textile unit. It is at this stage that the Central Government made an application under sec. 15-A of the Act for obtaining permission to investigate into the possibility of running or starting the textile unit of the Company. This Court by its order of 20/08/1980 granted the permission as prayed for. In pursuance of the said permission the Central Government appointed a committee to investigate into at possibility of recommencing the textile unit. The said committee at its first meeting on the 26th and 27th of September 1980 had held on the spot inspection of the textile unit so as to ascertain the condition of the machinery and the general lay out etc. The second meeting was held on 3rd and 4/11/1980 when the representatives of the mill management the Bankers and representative of recognised labour unions were heard by the Committee. After holding the third meeting of 18/11/1980 the report was finalised by the committee in its meeting on 12/12/1980 and submitted the said report to the Government of India. The second meeting was held on 3rd and 4/11/1980 when the representatives of the mill management the Bankers and representative of recognised labour unions were heard by the Committee. After holding the third meeting of 18/11/1980 the report was finalised by the committee in its meeting on 12/12/1980 and submitted the said report to the Government of India. After the report was submitted the Union Government moved the Company Application No. 28 of 1980 for permission to take over the textile unit. It appears that some of the creditors and shareholders had moved the Delhi High Court challenging the decision of the Central Government by their Civil Writ Petition No. 468 of 1981 to take over the textile unit of the Company and also for such orders and directions as to prevent them directly or through its agents from taking over the management of the said unit in pursuance of the said decision. Petitioners Nos. 2 and 3 of Company Petition No. 36 of 1980 were amongst the petitioners who had challenged the said decision before the Delhi High Court as stated above. The petition was admitted by the Delhi High Court and an interim relief was granted directing the Central Government to maintain the status quo. The said petition came up for hearing before the Delhi High Court on 10/11/1981 when the counsel for the Government of India stated that the Government was willing to give a hearing to the petitioners without conceding that the petitioners were entitled to be heard before the proposed action was taken under sec. 18 (FA) of the Act. On that statement the Delhi High Court by its order on 10/11/1981 disposed of the petition with the direction that till the petitioners were heard by the Central Government no farther action in pursuance of the impugned decision should be taken and the matter be disposed of at the earliest date in view of the urgency of the question Accordingly a notice of hearing was issued on 26/11/1981 and the hearing was given to the petitioners of the said writ petition. The Joint Secretary who had given the hearing by his order of 24/03/1982 negatived the objections of the said objectors and recommended that the Government should press its application before this Court for permission to take over the industrial unit of the Company. The Joint Secretary who had given the hearing by his order of 24/03/1982 negatived the objections of the said objectors and recommended that the Government should press its application before this Court for permission to take over the industrial unit of the Company. Accordingly the Company Application No. 82 of 1982 has been moved by the Union of India. It is in the light of this backdrop that T have to decide whether the permission as prayed for by the Government of India should be granted under sec. 18-FA of the Act or the proposal of the Sponsors of the Scheme for sanctioning the Scheme to restart the textile undertaking of the Company be granted. ( 3 ) AT the time of hearing of this group of applications it was urged on behalf of the sponsors of the scheme that the directions as prayed for by the Union of India in Company Applications Nos. 28/81 and 82/82 if granted by this Court would not only cause prejudice to the different interests of the Company but would cause a great harm to each of them. It as pointed out by the learned Counsel for the Sponsors of the scheme that the first casualty of the Government taking over the textile unit of the Company would be the interest of the workers inasmuch as there is no obligation on the authorised person who will be placed in the control and management of the said textile unit to employ all the former employees of the said undertaking whose services became discharged by reason of the winding up of the Company and it would be a discretion of the authorised person as to whom out of such workers should be employed. It was also pointed out by the learned Counsel that the creditors also would suffer if the Government takes over the unit since every debt arising out of any loan obtained by the authorised person for the management and control of such undertaking would enjoy priority over all other debts whether secured or unsecured which might have been incurred before the management is so taken over. Even as regards the preferential debts the debts incurred by the authorised person for the management and control of such undertaking shall be entitled to rank equally with them. Even as regards the preferential debts the debts incurred by the authorised person for the management and control of such undertaking shall be entitled to rank equally with them. The learned Counsel further pointed out that the shareholders will also suffer inasmuch as their right to manage and control the industrial undertaking would be virtually lost till the Government retains the control and management of such industrial undertaking. In any case the learned Counsel for the Sponsors of the Scheme also contended that the Court has no jurisdiction to grant the directions as prayed for inasmuch as the condition precedent prescribed in sec. 18 are not satisfied since no material has been brought on the record inspite of the grievance made by the sponsors of the scheme in the reply affidavit to oppose the directions prayed for by the Union of India for taking over that the Central Government has formed necessary opinion in respect of the textile unit in question. In submission of the learned Counsel for the sponsors of the scheme the Scheme proposed by them and approved by the statutory majority in more favourable and in the interest of the workers creditors and the shareholders of the Company. ( 4 ) TWO questions therefore arise for my consideration namely (i) whether the Court has jurisdiction to grant the directions as prayed for by the Union of India and (ii) if yes which is the better alternative out of the two proposals for taking over one by the Union of India and another by the sponsors of the scheme for taking over under the scheme having regard to the over all interest of the workers creditors and the shareholders. Re: Question No. 1: ( 5 ) I do not think that the learned Counsel for the sponsors of the scheme was justified in contending that the Court has no jurisdiction to grant the directions under sec. 18-FA (1) of the Act. The said sub- sec. reads as under:"18-FA Power of Central Government to authorise with the permission of the High Court persons to take over management or control of industrial undertakings _ (1) If the Central Government is of opinion that there are possibilities of running or restarting an industrial undertaking in relating to which an investigation has been made under see. reads as under:"18-FA Power of Central Government to authorise with the permission of the High Court persons to take over management or control of industrial undertakings _ (1) If the Central Government is of opinion that there are possibilities of running or restarting an industrial undertaking in relating to which an investigation has been made under see. 15-A and that such industrial undertaking should be run or restarted as the case may be for maintaining or increasing the production supply or distribution of articles or class of articles relatable to the scheduled industry needed by the general public that Government may make an application to the High Court praying for permission to appoint any person or body of persons to take over the management of the industrial undertaking or to exercise in respect of the whole or any part of the industrial undertaking such functions of control as may be specified in the application. ( 6 ) TWO conditions are to be satisfied before the Court can grant permission to the Central Government to appoint any person or body of persons to take over the management of an industrial undertaking in relation to which an investigation has been made under sec. 15 of the Act. Firstly it must be established that the Central Government has formed an Opinion about the possibility of running or restarting the industrial undertaking and secondly such undertaking should be run or restarted for maintaining or increasing the production supply or distribution of articles or class of articles needed by the general public and relatable to the Scheduled industry. If these two conditions are satisfied the Court is bound to grant the permission if an application is made by the Central Government under sub-sec. (1 ). I have therefore to decide whether the Central Government has formed the necessary opinion on consideration of the relevant aspects prescribed in the said section. It is common ground that the affairs of the Company were investigated under sec. 15-A of the Act for purposes of finding out the possibility of running or restarting the industrial undertaking and the Investigation Committee appointed by the Central Government had submitted report after detailed investigation of the relevant aspects The Investigation Committee has in part IVth of the said report sum marised its finding and made the necessary recommendations. 15-A of the Act for purposes of finding out the possibility of running or restarting the industrial undertaking and the Investigation Committee appointed by the Central Government had submitted report after detailed investigation of the relevant aspects The Investigation Committee has in part IVth of the said report sum marised its finding and made the necessary recommendations. The material part so far as relevant for purposes of these applications reads as under;" Conclusion And Recommendations: on the basis of a personal visit to the Mill discussions with the representatives of the Management labour and bank and written statements from various organisations the Committee has prepared the detailed report on the viability of restarting the Ahmedabad and Manekchowk Mfg. Co Ltd. The detailed report has been given earlier. The overall conclusions and recommendations of the committee regarding restarting of the Mills are given below:1 The condition of the existing machinery in the mill is on the whole very unsatisfactory. In particular most if not all machinery in the spinning department is absolute and much of it is in a scrap condition. Most of the machinery in the weaving department is in a reasonable condition whereas the machinery in processing is in a good condition on the whole. 2 The financial picture of the Company is gloomy. The accumulated loss uptodate is approximately Rs. One crore and the networth of the Company is negative Past liabilities amount to approximately Rs. 1. 7 crores. 3 In the present condition the working of the Mill cannot be considered viable under any circumstances. Unless substantial investments on renovation and modernisation of the machinery is carried out and unless adequate provision for working capital is made the Mill cannot be restarted. 4 Having considered the various alternatives the Committee has concluded that it would be advisable to restart the Mill in three phases : (a) In the first phase only the processing department should be restarted since minimum of investment is necessary here. Processing is recommended to be carried out on a jobwork basis. (b) In the second phase it is proposed that the Weaving Department should be started with purchased yarn and the cloth so produced would be processed in the Mills own process house. If surplus capacity is available In the process house this can be utilised in the form of jobwork. (b) In the second phase it is proposed that the Weaving Department should be started with purchased yarn and the cloth so produced would be processed in the Mills own process house. If surplus capacity is available In the process house this can be utilised in the form of jobwork. (c) In the third and final phase spinning department should be started after proper modernisation and the Mill would produce its own yarn and cloth and will finish it for marketing. 5. The Committee estimates that the expenditure on modernisation will amount to a total or Rs. 2. 58 crores which would be phased in the following manner : x x x ( 7 ) CONSIDERING the optimum manufacturing programme that the Company can undertaking after going thorough the phased modernisation as proposed here there will be an accumulated loss of Rs 155. 14 lacs in the five years after restart of the Mills after providing interest and depreciation. Since depreciation is not a cash outflow the actual cash loss comes to Rs. 86. 62 lacs by subtracting the amount of depreciation from the accumulated losses of Rs. 155. 14 lacs quoted above. This cash loss is almost equivalent to the interest on working capital. Therefore if the Company can be provided with the working capital free of interest it can be saved from cash loss. This situation is possible only if this company can be merged with a healthier and profit earning company. ( 8 ) THE Committee also recommends that remunerative use of the existing assets of the company viz. surplus land should be made to provide additional revenue to the gill Company free of interest. The Mill has nearly 15000 sq. mtrs of surplus land which is utilised for construction of a commercial complex can fetch an estimated additional revenue of Rs. 20 lakhs to Rs. 25 lakhs per year. ( 9 ) ONE such scheme proposing a merger is pending before the Gujarat High Court (Vide Annexure X) which offers facilities for working capital and commercial utilisation of available surplus land. ( 10 ) THE second alternative would be for the State or the Central Government to take over this unit. For undertaking the take over the Government must recognise and be prepared for continuing cash losses for a period of at least five years amounting to approximately Rs. 90 lacs. ( 10 ) THE second alternative would be for the State or the Central Government to take over this unit. For undertaking the take over the Government must recognise and be prepared for continuing cash losses for a period of at least five years amounting to approximately Rs. 90 lacs. ( 11 ) IN Company Application No. 28/81 one Shri M. Damodaran who happened to be Deputy Secretary in the Government of India Ministry of Commerce Department of Textiles at New Delhi filed an affidavit in support of the Summons taken out in the said application for permission under sec. 18-FA (1) of the Act. It has been inter alia stated in the said affidavit that the Government of India had after obtaining permission under sec. 15-A of the Act from this Court. appointed an Investigation Committee under the chairmanship of Dr. P. C. Mehta to investigate into the possibility of running or restarting the textile unit of the Company. As regards the opinion of the Government on consideration of the said report the deponent has stated in paragraphs 3 to 5 of the said affidavit as under: ( 12 ) THE aforesaid Investigation Committee submitted its report to the Government of India on 21 1980. The Government has considered the report of the Committee and its observations suggestions and recommendations and it has formed the opinion that there are possibilities of restarting the aforesaid Industrial Undertaking and that the said undertaking should be restarted for maintaining and increasing the productions supply and distribution of textile articles which are needed by general public. ( 13 ) THE Government of India has decided to move this Honble Court for a permission to appoint Gujarat State Textile Corporation Ltd. to lake over the management of the Industrial undertaking. ( 14 ) I say that the facts stated in paragraphs 1 to 4 are true according to Illy information derive from records. ( 13 ) THE Government of India has decided to move this Honble Court for a permission to appoint Gujarat State Textile Corporation Ltd. to lake over the management of the Industrial undertaking. ( 14 ) I say that the facts stated in paragraphs 1 to 4 are true according to Illy information derive from records. ( 15 ) IT appears that after Company Application No. 28/81 was moved by the Union of India the aforesaid decision of the Government of India was challenged in the Delhi High Court by Shri Rajendra Ratilal Shah (who is one of the sponsors of the scheme and petitioner No. 2 in Company Application No. 101/82) and others by their Civil Writ Petition No. 468 of 1981 and sought appropriate writs orders and directions to quash and set aside the same inter alia on the ground that the petitioners were not heard by the Central Government before the decision was taken. The Delhi High Court admitted the petition and directed the Central Government to maintain statusquo. However on the Counsel for the Government of India staling to the Delhi High Court that the Government of India was willing to give hearing to the petitioners without conceding that they had a right to be heard the petition was disposed of by a short order dated 10 1981 of the Division Bench of the said High Court that in view of the statement made by the learned Counsel for the Government of India nothing survived in the petition for further adjudication and therefore directed the Central Government to give a hearing to the petitioners before passing any orders under see. 18-FA of the Act and till the hearing is afforded which was expedited having regard to the urgency of the matter no further action should be taken by the Government in the matter of taking over. The notice of hearing was issued on the petitioners of the said Civil Writ Petition for the hearing to be made on 19/12/1981 by the Joint Secretary of the Government of India in Ministry of Commerce. In response to the said notice only one petitioner namely Gokaldas Parikh appeared for personal hearing alongwith his Counsel. The notice of hearing was issued on the petitioners of the said Civil Writ Petition for the hearing to be made on 19/12/1981 by the Joint Secretary of the Government of India in Ministry of Commerce. In response to the said notice only one petitioner namely Gokaldas Parikh appeared for personal hearing alongwith his Counsel. On behalf of the petitioners appearing before the Joint Secretary in the course of hearing all the contentions which are urged before me were raised by the learned Counsel on behalf of the Sponsors of the Scheme. None of the contentions impressed the Joint Secretary who by his reasoned order rejected the same and held that the Government should press its application before the Gujarat High Court for permission to take over the industrial undertaking. the factum of hearing as well as the final order made by the Joint Secretary have been disposed to in the additional affidavit filed in Company Application No. 82/82 by Shri M. Damodaran Deputy Secretary to the Government of India The order of the Joint Secretary rejecting the contentions of the petitioners of the Civil Writ Petition has also been annexed to the said affidavit. I do not think therefore that the sponsors of the scheme are justified in contending before me sought to be done by their learned Counsel that the first condition about the form ation of the opinion by the Central Government has not been established. As a matter of fact the challenge was virtually to this very decision of the Government of India in the Delhi High Court in the Civil Writ Petition No. 468181 and one of the grounds of challenge was that the said decision of the Government of India was vitiated since no opportunity of hearing was given to the persons effected namely the petitioners of the said petition. The petitioners of the said petition did not object to the Division Bench disposing of the writ petition since the Central Government showed its willingness to give them hearing. If therefore the sponsors of the scheme out of whom Shri Rajendra Ratilal Shah who was one of the petitioners in the said civil writ petition had a grievance that in fact no opinion had been formed by the Government they would not have allowed the petition to be disposed of Oil the short ground as was done by the Delhi High Court. In any case if they had not urged before the Delhi High Court that in fact no opinion was formed by the Central Government I am afraid it would not be possible for them to agitate that question in this Court now. In any view of the matter since the statement on oath of Shri M. Damodaran in his affidavit in Company Application No. 28/81 that the Central Government has considered the report of the Investigation Committee and has formed the opinion that there are possibilities of restarting the textile unit of the Company and that it should be restarted for maintaining and increasing the production etc. of the textile articles needed for general public has not been controverted by or on behalf of the sponsors of the scheme in their reply affidavit in terms I do not think that I would be justified in holding that the Central Government has not formed the opinion as required under sec. 18fa (1) of the Act. The only averment made in the reply affidavit of Shri Rameshchandra Gopaldas Parikh who is one of the Directors of M/s Indequip Chemdyes Ltd. and one of the sponsors of the Scheme in this behalf is to be found in paragraph 5 and which reads as under: ( 16 ) I further say and submit that in order to enable this Honourable Court to examine the question whether the Central Government has formed the opinion reasonably rationally and such a decision is not based on extraneous considerations the Central Government ought to be called upon to place before this Honble Court the report of the Investigation Committee appointed by the Central Government under the permission of this Honourable Court I say that it is well settled that mere assertion that the Central Government has formed the required opinion is not conclusive and this Honourable Court has jurisdiction to examine whether such an opinion in fact has been formed and if such an opinion is purported to have been formed whether the Government has acted arbitrarily or unreasonably or malafide or in total disregard of the provisions of law. I therefore say and submit that this Honourable Court ought to call upon the Central Government to produce the report of the Investigation Committee and examine the averments made by the Central Government in its affidavit that it has formed its opinion as required by sec. I therefore say and submit that this Honourable Court ought to call upon the Central Government to produce the report of the Investigation Committee and examine the averments made by the Central Government in its affidavit that it has formed its opinion as required by sec. 18-FA of the IDR Act. I say that the decision of the Central Government is arbitrary unreasonable and based on extraneous considerations. " ( 17 ) IT is no doubt true that I had directed the learned Counsel for the Central Government to produce the necessary file to satisfy this Court as to whether in fact the opinion had been formed by the Government of India or not and who formed the opinion. The learned counsel for the Government of India had also assured in the course of hearing of these applications on 13th and 14th of May 1982 to file necessary affidavit or to produce the file within a week in support of the aforesaid averment about the formation of the opinion in reply affidavit of Shri M. Damodaran. Inspite of this assurance no further affidavit has been filed nor necessary record produced as assured by the learned Counsel for the Central Government till today that is 3/06/1982 Mr. R. H. Mehta for Mr. K. S. Nanavati wanted to take out some summons for directions which have become necessary in light of the non-fulfilment of its assurance to the Court to file necessary affidavit and/or to produce record in support of the statement of Shri M. Damodaran in his reply affidavit. I do not think that any further direction is necessary in view of the matter which I am now inclined to take that on the material which is existing I do not think that the learned Counsel for the sponsors of the scheme is justified in urging that the first requirement prescribed under sec. 18 about the formation of the opinion by the Government of India is not complied with. The reasons for my view are obvious. Firstly one of the sponsors of the scheme viz. : Shri Rajendra Ratilal Shah who was one of the petitioners in the civil writ petition before the Delhi High Court had virtually challenged this decision of the Central Government to move this Court to take over the textile unit of the Company. In effect and substance. Firstly one of the sponsors of the scheme viz. : Shri Rajendra Ratilal Shah who was one of the petitioners in the civil writ petition before the Delhi High Court had virtually challenged this decision of the Central Government to move this Court to take over the textile unit of the Company. In effect and substance. the challenge in the said petition was to the opinion of the Central Government to take over the management and control of the textile unit of the Company. Secondly the said petition was allowed to be disposed of without any demeurer by the petitioners of the said petition which included one of the sponsors of the scheme before me on the ground that nothing survives for further adjudication in view of the willingness expressed by the Central Government to give hearing to the petitioners of the said petition. Thirdly the sponsors of the scheme in their reply affidavit have not joined issue to the statement made on oath by Shri M. Damodaran in his reply affidavit that the Government of India has formed the necessary opinion as required under sec. 18-FA of the Act for moving the High Court for permission. The sponsors of the scheme have challenged the opinion of the Government as vitiated inter alia on the ground of arbitrariness based on extraneous considerations and therefore bad in law and void. Fourthly in the reply affidavit filed on behalf of the sponsors of the scheme before me it has not been urged in terms that no such opinion has been formed by the Central Government and that necessary files of the Central Government should be called for satisfaction of the Court. In that view of the matter therefore I am of the opinion that the first condition prescribed in sec. 18-FA is satisfied. ( 18 ) THE second condition that restarting of the industrial undertaking was necessary for maintaining and increasing the production supply and distribution of the textile articles needed for the general public is also satisfied since in paragraph 3 of the affidavit of Shri M. Damodaran a statement on oath has been made to that affect. 18-FA is satisfied. ( 18 ) THE second condition that restarting of the industrial undertaking was necessary for maintaining and increasing the production supply and distribution of the textile articles needed for the general public is also satisfied since in paragraph 3 of the affidavit of Shri M. Damodaran a statement on oath has been made to that affect. As a matter of fact this is the second aspect of the same question on which the Central Government has to form the opinion and if I am satisfied which I am that the Central Government has formed such an opinion I do not think that the first contention of the learned Counsel for the sponsors of the scheme that the Court has no jurisdiction can be sustained. I am therefore of the opinion that the Court has jurisdiction to entertain and decide these two applications moved by the Union of India. Re: Question No. 2: ( 19 ) THE learned Counsel for the sponsors of the scheme was at great pains to emphasise that the scheme proposed by the sponsors is a better alternative than the proposal of the Government of India to take over the control and management of the textile unit of the Company. The learned Counsel for the Central Government urged that the Court has no discretion to consider the alternative scheme proposed by the sponsors if the Court is satisfied that the Central Government has formed the opinion as required under sec. 18-FA of the Act so as to enable the Central Government to make an application to take over any industrial undertaking in respect of which an investigation has been made under sec. 15-A of the Act. I am of the opinion that the contention of the learned Counsel for the Central Government is wellfounded. Sub-sec. (2) of sec. 18-FA provides that where an application is made under sub-sec. (1) the High Court shall make an order empowering the Central Government to authorise any person or body of persons to take over the management of the industrial undertaking or to exercise functions of control in relation to the whole or any part of the industrial undertaking for a period not exceeding five years. In my opinion the expression shall as used in sec. 18-FA sub-sec. In my opinion the expression shall as used in sec. 18-FA sub-sec. (2) is mandatory and the Court is bound to pass an order directing handing over the management and control of such an industrial undertaking to the authorised person or body of persons in the manner as provided in sec. 18-FA once it has been brought to the notice of the Court that the Central Government has formed the opinion as required under sec. 18-FA and an application is made in that behalf. The only discretion which is vested in the Court under sub-sec. (2) is that when the extension is sought by the Central Government to continue the management and control of an undertaking taken over under the main enactment of sub-sec (2) for a period exceeding five years that the Court may make an order directing permitting the authorised person to continue to manage such undertaking or to exercise functions of control in relation to such undertaking. The over all limits on the power of the Court is that the continuance shall not in any case be permitted to exceed 12 Dears. The combined reading of the main enactment of sub-sec. (2) and its first proviso make it clear that when an application is made under sub-sec. (1) by the Central Government after it formed the opinion about the possibilities of the running or restarting an industrial undertaking in the interest of maintaining or increasing the production supply and distribution of articles needed by the general public the Court is under obligation and bound to grant the permission to the Central Government to take over the management and control of such an industrial undertaking and it is only when the extension is sought beyond completion of initial period of five years that the Court has discretion to grant such extension subject however to a maximum period of 12 years. If therefore the Court is under an obligation to grant permission to the Central Government to take over I do not think that it would be open to consider as to which of the alternatives out of the two namely one by the Central Government another by the sponsors of the scheme to take over the management of the textile unit of the Company is more advantageous to the different interests of the Company. ( 20 ) MY attention has been drawn to the decision of the learned Single Judge of the Bombay High Court in UNION OF INDIA V. VIJAY MFG. CO. (1977) 47 COMPANY CASES 348 where in almost similar circumstances the learned Single Judge of the Bombay High Court held that the expression shall in sec. 18-FA (2) of the Act is mandatory and the Court is bound to pass an order directing the handing over of the industrial undertaking to the authorised person once it has been brought to the notice of the High Court that the opinion has been formed by the Central Government and an application is made in that behalf that the Court was not in such circumstances bound to consider the alternative scheme for reorganization or arrangement of the said Company moved by some interested patties. Assuming that the power of the Court under sub-sec. (2) of sec. 18-FA is discretionary and the word shall is to be interpreted as may even then I do not think that the sponsors of the scheme have been able to make out a case that their proposal to restart the textile unit of the Company is more advantageous to the different interests namely the workers shareholders and the creditors of the Company The reasons for my view are obvious The first hurdle in the way of the sponsore of the scheme is that the Scheme has not been approved by the statutory creditors. Apart from this infirmity the very basis of the scheme as proposed by the sponsors is in my opinion very nebulous vague and imprecise The basis of the scheme is provided in part IVth of the Scheme. It reads as under:" IV. Basis of the Scheme: 1. The Scheme is proposed on the basis that the total liabilities of the Company as on 30/04/1979 do not exceed Rs. 170 lacs and permission is given to the sponsor to put the vacant land as well as the buildings so far lying idle to commercial use including the sale or lease of the said land and the building either in one lot or in parts or deal with the same in any other manner and/or carry on construction activities thereon either alone or in collaboration with others. 2. 2. 50% of the amount realised by putting the land buildings to commercial use shall be utilised for modernisation of the plant and machinery and the remaining 500 of the realisations shall be utilised for discharging the liabilities of the Bank. . ( 21 ) TO put it tersely the entire scheme has been rested on the assumption that the sponsors would be able to put the vacant land as well as the buildings of the Company so far lying idle to commercial use including the sale or lease of the said land and the building either in lot or in parts. If this is the basis of the scheme I am afraid there would be many hurdles and impediments which are difficult to comprehend fully at this stage which the sponsors of the scheme shall have to over come in order to commercially exploit the vacant land as well as the idle buildings. If there is a vacant land the constraints prescribed by the Urban Land (Ceiling and Regulation) Act 1976 shall have to be overcome and unless the Government permits to exempt the vacant land from the provisions of the Ceiling Act it would not be possible for them to commercially exploit the same. Assuming that the provisions of the Ceiling Act do not apply to the land of the Company even then in the present state of the estate market it would be difficult for the sponsors of the scheme to commercially exploit the land and buildings without making substantial investment of capital. The present modus operandi in the estate market is too well known to be emphasised and I do not think that the sponsors of the scheme would be able to earn the full benefit for the land and buildings of the Company unless they are prepared to indulge in the sharp practices of transferring the properties for consideration in excess of the apparent consideration stated in the instrument of transfer which would expose them to the acquisition proceedings under the Incometax Act also. Apart from these hurdles of the real estate market initial investment of the capital for putting the vacant land as well as buildings of the company to commercial use would pose a very serious problems before the sponsors of the scheme and unless some developers are associated with the development project it would not be possible for the sponsors of the scheme to achieve their object of commercially exploiting the vacant land and idle buildings of the company. The incidence of capital gain tax is also a factor which cannot be ignored while considering the viability of the scheme. Even assuming that these sponsors of the scheme would be able to overcome this hurdle in a legal and just manner even then assuming that the market price of the land in the area where the textile unit of the Company is situated is Rs. 1000 per metre the amount which can possibly be raised by the sponsors would not be more than Rs. 2 to 3 crores having regard to the open vacant land which is available with the Company. The investigation Committee appointed by the Government of India has opined that the initial capital investment for modernisation of the plant would be in sum of Rs. 2. 50 crores. Besides the capital investment the Company would also require working funds which have been estimated by the Committee at Rs. 90 lacs per annum. I do not think therefore that the basis of the scheme is at all workable. It should be noted that the Investigation Committee has considered that the commercial use of the surplus land which is admeasuring about 15000 sq. metres can fetch an additional estimated revenue of Rs. 20 to 25 lacs per year. This can be possible only if the Government takes over this industrial undertaking since the State Government can permit the authorised person to put the surplus land to commercial use on the terms and conditions which it may think proper to impose under the Ceiling Act. In that view of the matter therefore 1 do not think that the alternative scheme proposed by the sponsors can be said to be more advantageous in nature than the proposal of the Government of India. ( 22 ) THE result is that the Company Application No. 101 of 1982 made by the sponsors of the scheme should be dismissed and Company Application Nos. ( 22 ) THE result is that the Company Application No. 101 of 1982 made by the sponsors of the scheme should be dismissed and Company Application Nos. 28/81 and 82/82 made by the Union of India should be allowed. 1 therefore make Judges summons in Company Application No. 28/81 absolute in terms of prayer (a) of the said summons and grant permission to the Union of India to take over the textile unit of Manekchowk and Ahmedabad Mfg. Co Ltd. entirely with the lands buildings and machineries for a period not exceeding five years and direct the Official Liquidator to hand over the management of this undertaking to the Gujarat Textile Corporation Limited as authorised person in the manner provided for in sec. 18-FA of the Industrial Development and Regulation Act 1951 The Official Liquidator before handing over the possession of the undertaking shall make a complete inventory of all the assets and liabilities of this industrial undertaking and deliver a copy thereof to the authorised person. I further direct that the Official Liquidator before handing over such possession to such authorised person must receive all charges costs and expenses except in regard to any proceedings that he might have taken as Official Liquidator incurred by him as official Liquidator until date he hands over the possession. There should be no order as to costs in these applications. In view of the order made in these applications there should be no order in Company Petition No. 36 of 1980 including no order as to costs. ( 23 ) AFTER the dictation of this order was completed Mr. H. M. Mehta learned Counsel for the Central Government sought my permission to file an additional affidavit of one Shri V. K. Chowdhary Deputy Secretary to the Government of India Ministry of Commerce (Depart. ment of Textiles) as directed by this Court. I told him to put the affidavit though the dictation of the order was completed. The additional affidavit of Shri V. K. Chowdhary does not make any difference on the overall view which I have taken of the matter but it on the contrary supports the say of the Government that the Central Government has formed the necessary opinion in the matter. Order accordingly. .