CENTRAL GOVERNMENT v. COMMISSIONER OF PAYMENTS — 1991 DIGILAW 540 (DEL)

B. N. KIRPAL ( 1 ) THE short question which arises for consideration in this case is the interpretation of Section 10 (3) of the Sick Textile Undertakings (Nafionalisation) Act, 1974 (hereinafter referred to as the said Act ). ( 2 ) BRIEFLY stated the fact? are that the Central Government had promulgated the Sick Textile Undertaking (Taking Over of Management) Act, 1972. Under the said Act, the management of some sick mills was taken over without divesting all the owners of their ownership. The management of respondent No. 2 was sought to be taken over with effect from 31st October 1972. ( 3 ) DUE to some legal proceedings which had been initiated. the actual management of respondent No. 2 was not handed over the erestwhile owners to the Central Government or to the Custodian. Secondly, with effect from 1st April 1974, the Sick Industrial Undertaking (Nationalisation) Act 1974 was promulgated. The sick mills including respondent No. 2 whose management was not taken over under the Act of 1972, were sought to be nationalised. There is no grievance in the present petition with regard to (he act of nationalisation. ( 4 ) SECTION 10 of the said Act provides for accounts to be renderedd by the owners of Sick Textile Undertaking who did not in fact hand over the management of the Sick Textile Undertakings. Sub-section (1) of Secion 10 requires the owners of such Sick Textile Undertakings to render an account to the Central Government of the income and expenses relaing to the period commencing on the date of the notified order under the Industrial Development and Regulation Act 1951 or on the date of commencement of the Act of 1972 and ending on the date on which the management of Sick Textite Undertakings was actually taken over by the Central Government or custodian. If no account is rendered, or it Central Government has reason to believe that the account rendered try the owners is incorrect or false then a reference 13 made under Sub-section (3) of Section 10 to the Commissioner of Payments appointed under the said Act Section 10 is as follows :- "10. Accounts to be rendered by the owners of sick textile undertakings. Accounts to be rendered by the owners of sick textile undertakings. (1) Where in pursuance of any decree, order or is junction of a court or otherwise, the Central Gov- ernment or the Custodian was prevented from taking over the management of any sick textile undertaking, the owner of such sick textile undertaking shall - (a) in the case of an undertaking the management of which was subsequently taken over by the Central Government at any time before the date on which the Ordinance was promulgated, within sixty days from such date; or (b) in the case of any other sick textile undertaking, the management of which could not be taken over by the Central government before the date on which the Ordinance was promulgated, within sixty days from such date, render accounts in relation to the period commencing on the date of the notified order under the Industries (Development and Regulation) Act, 1951, or, as the case may be, on the date of commencement of the Sick Textile Undertakings (Taking Over of Management) Act 1972, and ending on the date on which the management of the sick textile undertaking was taken ever by the Central Government or the Custodian, as the case may be, with regard to the- (i) assets and stores of the sick textile undertaking acquired or sold during the said period : (ii) textile sold or despatched during the said period : and (iii) income derived by the owner from the sick textile undertaking during the said period. (2) If on examination of the accounts, referred to in sub-section (i), any income is found to have been derived by the owner from the sick textile undertaking during the period referred to in that sub-section, such income shall be recoverable by the Central Government from the amount payable under section 8 to the owner of such sick textile undertaking and the debt due to the Central Government on this account shall rank as an unsecured debt (3) If no account is rendered by the owner of a sick textile undertaking within the period referred to in sub-section (1) or if the Central Government has any reason to believe that the account rendered by such owner is incorrect or false in material particulars, the Central Government may refer the matter to the Commissioner and thereupon the Commissioner shall determine the income derived by the owner from the sick textile undertaking during the period referred to in sub-section (i) and take steps to recover the said income from flue amount payable to the owner of the sick textile undertaking under section S, as if the debt due to the Central Government on this account were an unsecured debt. (4) No mortgage, charge, lien or other incumberance in relation to a sick textile undertaking or any asset thereof shall be binding on the Central Government or the National Textile Corporation, it such mortgage, charge, lien or other incumberance was created, at any time during the period in which the Central Government or the Custodian was prevented, by any decree, order or injunction of a court or otherwise, from taking over the management of the said sick textile undertaking. " ( 5 ) IN the present case reference was made by the Central Government to the Commissioner of Payments under Section 10 (3) of the Act. The referenc was with regard to the rendition of account of income which is alleged to have been earned by the erstwhile owners of respondent No. 2 prior to the time when the management was handed over to the custodian. Mr. Chawla also states that in the reference which was made the Central Government also claimed priority with respect to the accounts found to be die and payable to the Central Government. Mr. Chawla also states that in the reference which was made the Central Government also claimed priority with respect to the accounts found to be die and payable to the Central Government. ( 6 ) BY the impugned order dated 27th July 1981 the Commissioner of Payments disposed of the reference which had been made to it by the Central Government. In the said order we do not find any determination of income which had been earnedby the erstwhile owners and which was required to be paid to the Central Government. The Commissioner of Payments, however, came to the conclusion that the amount which is due to the Cen- tral Govrnment enjoyed the same priority as a claim under Category V of the Second Schedule of the Act. ( 7 ) THE grievance of the petitioner in this writ petition Is that the Commissioner has not decided the reference in accordance with Section 10 (3) of the Act. According to the learned counsel the question of priority does not arise under Section 10 (3) and, therefore, the Commissioner exceeded his jurisdiction in issuing such direction to it. ( 8 ) BEFORE dealing with the aforesaid contention it is important to note that Commissioner of Payments is appointed under Section 17 of the Act. Sub-section (3) Section 19 inter alia provides that liabilities in relation to Sick Textile Undertakings in respect of any period prior to the appointed date which have not been discharged by the custodian, shall be the liabilities of the owner of that Sick Textile Undertakings. Claims are to be filed against the owner of a Sick Textile Undertaking under Section 20 of the Act. The priority of claim is determined according to the principles laid down by Section 21. The priorities are in respect of the claims arising out of matters specified in the Second Schedule. Broadly speaking the said section provides that category I will have precedence over ail other categories, category II will have precedence over category III and so on. The claims are to be investigated and examined by the Commissioner who decides the priority of a claim. ( 9 ) READING of Section 10 and of the other provisions of the Act makes it clear that Section 10 is not concerned with a claim which people have against the erstwhile owners of the textile mills. The claims are to be investigated and examined by the Commissioner who decides the priority of a claim. ( 9 ) READING of Section 10 and of the other provisions of the Act makes it clear that Section 10 is not concerned with a claim which people have against the erstwhile owners of the textile mills. Section 10 is specifically concerned with the claim of the Government to the rendition of account by the erstwhile owners in respect of the period during which the management was with those owners, though the management should have passed on to the Central Government or the custodian. In other words the account which has to be rendered under Section 10 was, in a sense, an account which was required to be rendered by an agent to the principal. ( 10 ) WE are informed that respondent No. 2 had not rendered any account at all, though it was required to do so according to the provisions of Section 10. When a reference is made under Sub-section (3), the Commissioner has to decide as to what is the amount of income which has been generated after the appointed date. The claim referred to under Section 10 is only the claim in respect of which no account or a false account has been rendered by the owner and it refers to the account or a claim referred to in Sub-sections (1) and (2) of Section 10. The Commissioner of Payments is required to ask the erstwhile owners to render a full and true account and thereafter he has to determine as to what is the amount of income which is to be regarded as a debt due to the Government. In the present case the Commissioner of Payments has not carried out any such determination. The Commissioner of Payments has gone into the question of interpretation of Sections 20 and 21 of the Act, though he was not called upon to d. o so. The Commissioner was not deciding a claim with regard to the determination of the priority under Section 21. He had to carry out a determination according to the provisions of Section 10 (3) of the Act. This he failed do. The Commissioner was not deciding a claim with regard to the determination of the priority under Section 21. He had to carry out a determination according to the provisions of Section 10 (3) of the Act. This he failed do. ( 11 ) AFTER determination under Section 10 (3) the amount due to the Central Government will be regarded as an unsecured debt and will be dealt with in accordance with the provisions of the Act. ( 12 ) FOR the aforesaid reasons, this writ petition is allowed. A writ of certiorari is issued quashing the order dated 27th July 1991 and a writ of mandamus is issued directing the Commissioner of Payments to decide Reference No. 5 of 1981 between the Central Government and respondent No. 2 de novo, after notice to the parties, and in the light of the observations made in this writ petition.