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2005 DIGILAW 1 (CAL)

Hall and Anderson Ltd. v. UNION OF INDIA

2005-01-06

AMITAVA LALA

body2005
Judgement ORDER :- This writ petition was filed mainly for two reasons. Firstly, for a declaration that the management of the land and building situate at premises No. 31, Chowringhee Road, Calcutta, and more fully mentioned in the schedule annexed hereto and marked "A" and the said property business of the petitioner No. 1 other business referred thereto save and except the said textile mills business and/or textile undertaking are not covered and have not vested in the Central Government by and under the Textile Undertakings (Taking Over of Management) Ordinance, 1983. Mandamus and other prayers in connection thereto are also categorically made therein. Secondly, a prayer is made for declaration of such ordinance as ultra vires and void. Second prayer is no longer subsistent in view of the declaration of the Supreme Court that the ordinance is intra vires. Therefore, no discussion is required on the second prayer. 2. By an order dated 26th Oct., 1983 an interim order was passed by the High Court in terms of prayer (h) of the writ petition as regards business of the petitioner company at Calcutta. Such interim order of injunction related to non interference with the operation of the bank account and/or other records in respect of the property business of the petitioner No. 1 as well as from taking over register of the members, minute books of Board Meetings, register of Directors register of investments, register of debenture and debenture holders and register of members common seal and all other common records of the petitioner No. 1 pertaining to the textile undertakings of the petitioner No. 1 as well as the said property business. 3. The petitioner No. 1 i.e. M/s. Hall and Anderson Ltd. was incorporated under the provisions of the Indian Companies Act, 1913 on 8th November, 1946. The object of the company prescribes various business as follows: (a) to carry out the business of drapers; (b) to carry out the business of general warehousemen; (c) to carry out business of silk and other manufacturing etc. The object of the company prescribes various business as follows: (a) to carry out the business of drapers; (b) to carry out the business of general warehousemen; (c) to carry out business of silk and other manufacturing etc. including import of wholesale and retail; (d) to carry out business of wholesale and retail of leather goods; (e) to carry out household furniture; (f) to carry out iron mongery; (g) to carry out turney and other household fittings and utensils; (h) to carry out ornaments, stationery and fancy goods; (i) to carry out drugs, chemicals and other articles being commodities of personal and household use and consumption; (j) to carry out business of undertakers, coach and carriage builders, saddlers etc. (k) to carry out business of electrical engineers; (l) to carry out business of contractors, estate and house agents, builders; (m) to carry out business of auctioneers; (n) to carry out hardware business; (o) to carry out jewellery business including business in the nature of gold and silver smith; (p) to carry out business of book selling and dealing with musical instruments; (q) to carry out refreshments, contractors, restaurant keepers, hotel bearing, lodging house keeping etc. (r) to carry out business of licensed victuallers , wine or spirit merchants, tobacconists dealers of mineral, aerated and other liquors; (s) to carry out business with farmers, dairymen, market gardeners nurserymen and florists; (t) to carry out property business as a whole in every possible manner as indicated in the budgets; (u) to carry out business of owners of trucks, trams, lorries motor cars, ship owners, lightermen and aircrafts; 4. Out of various businesses particulars of some businesses are given hereinabove. The petitioner No. 1, company is an absolute owner of the land and building known as Hall and Anderson Building situates at 31, Chowringhee Road (Jawaharlal Nehru Road), Calcutta. As per the Annexure "A" to the writ petition the cite area is approximately 5 bighas, 11 cottahs, 5 chittaks and 14 square feet. It can doubtlessly be said that the property situates at the heart of the sophisticated commercial place in the city of Calcutta (Kolkata). The property is butted and bounded on the north by Park Street, on the east by Russel Street, on the south partly by 1B, Russel Street and partly by 32, Chowringhee Road and on the west partly by 32, Chowringhee Road and partly by Chowringhee Road. 5. The property is butted and bounded on the north by Park Street, on the east by Russel Street, on the south partly by 1B, Russel Street and partly by 32, Chowringhee Road and on the west partly by 32, Chowringhee Road and partly by Chowringhee Road. 5. The nomenclature of the company continued to be the same before 21st July, 1959. By a Deed of Conveyance dated 12th June, 1950 the company purchased textile mill at Bombay (Mumbai) from M/s. Shree Madhusudan Mills Limited. After acquiring the said mill the petitioner No. 1, company started its additional business of manufacturing and selling cotton textile. The nomenclature of the company was changed to M/s. Shree Madhusudan Mills Ltd. with effect from 21st July, 1959 in the place and instead of M/s. Hall and Anderson Limited. However, the business of the petitioner No. 1 company other than the textile business was never stopped. According to the petitioner, the registered office of the said company situates in a very small area of 345 square meters approximately in the said Hall and Anderson Building at 31, Chowringhee Road, Calcutta. Description of the property business and others is available from the body of the petition as well as the annexures. It clearly speaks that many important offices, banks and corporate houses are the tenants and/or occupiers of the said building. That apart, the textile mill at Bombay (Mumbai) was run on the basis of the financial advances granted by the Central Bank of India having its office at Bombay upon mortgaging the title deed/s of the textile mill alone therein. Such financial advance was wholly and exclusively utilized for the textile mills. No part of any advance granted by the bank was ever utilized for the property business of the petitioner No. 1 or for maintenance or payment of outgoings in relation to the said property. However, the company as renamed as M/s. Hall and Anderson Limited from M/s. Shree Madhusudan Mills Limited on the basis of the certificate issued by the Registrar of Companies changing the name. Cause title was amended accordingly. Since the bank already instituted the proceedings previously before the Bombay High Court which was subsequently transferred to the Debt Recovery Tribunal therein, such bank was also added as party respondent herein. Cause title was amended accordingly. Since the bank already instituted the proceedings previously before the Bombay High Court which was subsequently transferred to the Debt Recovery Tribunal therein, such bank was also added as party respondent herein. No objection has been made by the Union of India at any point of time in respect of the change of nomenclature of the company or for addition of Central Bank as party respondent or for passing any order to protect the interest of the property or properties in the course of proceedings. No step was taken by any of the respondents for vacating the interim order already passed within last 20 years. At least nothing is reflected from the record. 6. Belatedly on 8th May, 2003 a notarised application was filed on the part of the National Textile Corporation (South Maharashtra) Limited, Mumbai by the pen of their Company Secretary without any affidavit of competency (at least not available in the record) for condonation of delay and recalling the orders dated 8th August, 2002 and 8th January, 2003. Such orders were passed only on the basis of the certificate issued by the company for amending the cause title etc. and for giving interim protection of the property by appointing a Special Officer for the purpose of collection of rents, issues, profits etc. due to vaccum created by relinquishment of office by the erstwhile Receiver appointed by the appropriate Court in the proceeding of the Bank . Such Special Officer was subsequently converted to Receiver as per the order of the appropriate Debt Recovery Tribunal in the proceeding of the Bank. However, at the time of final hearing of the writ petition, Mr. P.K. Das, Learned Senior Counsel appearing for it contended that such applicant does not want to proceed with the interlocutory application at this stage but interested to take part in the hearing of the main writ petition. He argued at length in the merit of the main writ petition on all points. Therefore, the interlocutory application is treated as infructuous at this stage. 7. Now, let me scan the arguments advanced by Mr. Ranjan Deb, Learned Senior Counsel, appeared on behalf of the writ petitioners, Mr. P.K. Das, Learned Senior Counsel appeared for the above applicant and Mr. Therefore, the interlocutory application is treated as infructuous at this stage. 7. Now, let me scan the arguments advanced by Mr. Ranjan Deb, Learned Senior Counsel, appeared on behalf of the writ petitioners, Mr. P.K. Das, Learned Senior Counsel appeared for the above applicant and Mr. Indranath Mukherjee, Learned Counsel, appeared for the respondent No. 3 bank in respect of the merit of the writ petition only on the first point which was specified hereinbefore. 8. According to Mr. Deb, The Textile Undertakings (Taking Over of Management) Ordinance, 1983 came into force on and from 18th Oct. 1983 which was challenged. During the pendency of the writ petition such ordinance became an Act. Such Act was known as The Textile Undertakings (Taking Over of Management) Act, 1983. Subsequently, nationalisation Act of such undertakings came into force having been known as The Textile Undertakings (Nationalization) Act, with effect from 1st April, 1994. Mr. Das raised an objection in respect of making submission as regards the Nationalisation Act 1995 saying that the same is not the part and parcel of the writ petition. Mr. Deb contended that by the earlier Act, management of 13 textile undertakings, including petitioner No. 1, Shree Madhusudan Mills, Pandurang, Budhkar Marg, Mumbai pending nationalisation vested in the Central Government. Latter Act is obvious outcome of the nationalisation. Hence such Act is neither alien nor the subject matter is outside the scope and ambit of the proceeding. According to me, locus standi or right to represent the case by the contesting respondent springs out from Section 2(j) of the 1995 Act. Therefore, the instruction of Mr. Das to make such objection is not more than committing hara-kiri. However, such objection is ignored by this Court at this stage. 9. Mr. Deb further contended that the scope and ambit of both the Acts is taking over the undertaking and/or its management but not the company. The company may have multifarious activities but that does not necessarily mean that by virtue of taking over the management of the undertaking the company would be taken over. The statute never said so. Each and every place of the Act is categorical in respect of taking over the management of the undertaking and undertaking alone but nothing beyond the same. There is no dispute that the company was owning the undertaking at the relevant period of time. The statute never said so. Each and every place of the Act is categorical in respect of taking over the management of the undertaking and undertaking alone but nothing beyond the same. There is no dispute that the company was owning the undertaking at the relevant period of time. But it is difficult to accept that taking over the management of an undertaking means taking over the company having its registered office at Calcutta far away from Bombay in spite of carrying out multifarious activities. Although the compensation may not be the criteria for the purpose of determination of acquisition of 15 acres of land with building in Bombay (Mumbai) covering the undertaking but adequacy of valuation at Rs. 2,70,85,000/- can give an impression in drawing inference. Even by a conservative outlook compensatory value of the undertaking at Bombay cannot be said to be adequate and it is far to say that it includes, even thereafter, the Calcutta (Kolkatta) property situate at the heart of the city. Incidentally, it is noted hereunder that even such compensatory amount has not yet been disbursed by the Union of India. Bank claimed approximately 21 crore from such undertaking at Bombay. 10. I find from the objects and reasons of the earlier Act that the management of the undertaking was taken over in the public interest. In the preamble I find that the textile undertaking of the company specified in the first schedule was taken over. In the definition clause under Section 2(d) I find "textile undertakings" or "the textile undertaking" means an undertaking specified in the second column of the first schedule. Such second column prescribes of the undertaking i.e. Shree Madhusudan Mills, Pandurang, Budhkar Marg, Bombay. In Section 3 of the Act it says that the management of the textile undertaking shall vest in the Central Government. Such second column prescribes of the undertaking i.e. Shree Madhusudan Mills, Pandurang, Budhkar Marg, Bombay. In Section 3 of the Act it says that the management of the textile undertaking shall vest in the Central Government. Sub-section (2) says that the textile undertakings shall be deemed to include all assets, rights leaseholds, powers, authorities and privileges of the textile company in relation to the said textile undertaking and all property movable and immovable including land, building, workshop project, stores, instruments, machinery, equiptment, automobiles and other vehicles and goods under production or in transit , cash balances, reserve fund investments and all other rights and interests in or arisen out of such property as were immediately before the appointed day, in the ownership, possession, power of control of the textile company whether within or outside India and all books of accounts, registers and all other documents of whatever nature relating thereto. Sub-section (3) also says about the business and affairs of the textile undertaking. Sub-section (4) says involvement of persons of the textile company in relation to the textile undertaking. In each and every sub paragraph the description is made either of the textile undertaking or any part thereof or textile company in relation to the textile undertaking . Sub -section (4) also says about custodian of textile undertaking . Compensation as fixed under Section 5 of the Act also speaks about payment for such vesting under Section 3 of the management of textile undertaking of the company. Sub-section (2) therein also says textile undertaking remains vested under the Act. This Act has an overriding effect upon others on the basis of Section 7 therein. So far as Section 8 is concerned it has been clarified that the Companies Act, 1956 will not be operative for such textile company in relation to such undertaking. Therefore, it is crystal clear from the Act that the same is made for the textile undertaking and taking over of mangement thereof. It cannot extend the jurisdiction beyond the scope of textile activities of an undertaking under the company. On the other hand , it can safely be construed that a company having multifarious activities cannot be held up aboslutely for the purpose of failure of one segment and taking over by the management of such segment. It cannot extend the jurisdiction beyond the scope of textile activities of an undertaking under the company. On the other hand , it can safely be construed that a company having multifarious activities cannot be held up aboslutely for the purpose of failure of one segment and taking over by the management of such segment. The Act is so categorical in respect of the textile undertaking there is no necessity for the Court to interpret the same by saying that taking over the management of the undertaking means taking over the company as a whole irrespective of various businesses even unconnected with the textile undertaking. If such interpretation is made it will lead to absolute absurdity and third party interest will be affected. 11. Mr. Das contended that the subject-matter of the writ petition is hit by principles of res integra. He relied upon two Supreme Court judgments to establish his case. Firstly, he relied upon AIR 1986 SC 1234 (National Textile Corporation Ltd. v. Sitaram Mills Ltd. etc.). Paragraph 39 of such judgment is quoted hereunder : "We find it difficult to sustain the conclusion or reasoning of the High Court. The High Court failed to appreciate that it was dealing with an Act of Parliament providing for taking over in public interest of management of the textile mills specified in the Second Column of the First Schedule, pending nationalization of such textile undertakings and for matters connected therewith and incidental thereto. The legislation was clearly in furtherance of the Directive Principles of State Policy in Art. 39(b) and (c) of the Constitution. In interpreting such a piece of legislation the Courts cannot adopt a doctrinaire or pendentic approach. It is a well-known rule of construction that in dealing with such a beneficent piece of legislation, the Courts ought to adopt a construction which would subserve and carry out the purpose and object of the Act rather than defeat it. The High Court completely ignored the fact that all the assets of the Company were held in relation to the textile business. The company acquired all its real estate in the 19th century when it was formed for carrying on textile business and admittedly no new assets had been acquired by it thereafter. The High Court completely ignored the fact that all the assets of the Company were held in relation to the textile business. The company acquired all its real estate in the 19th century when it was formed for carrying on textile business and admittedly no new assets had been acquired by it thereafter. This is borne out by the fact that the disposal of surplus lands was with the sole and avowed intention of ploughing back the money to improve the financial liquidity of the company and to reduce the liabilities relating to the textile business. In the absence of the surplus lands no loans could have been raised for the purpose of running the textile undertaking and as such they were and are an integral part of the textile undertaking. We regret to find that the High Court in coming to the conclusion that it did, has also overlooked the reports of the several high powered committees constituted by the Central Government from time to time which stressed that the potential viability of the textile undertaking depended to a large extent on the proper utilization of the lands belonging to the textile undertaking, and also the fact that the Company had in the past been misutilising its real estate. In particular, the Investigation Com-mittees report highlighted that the disposal of the surplus lands had been misused by the Company and that it was to the detriment of the Companys textile undertaking implying thereby that the proper utilization of the assets would make the textile undertaking viable. The viability study of the IDBI clearly brings out that the textile undertaking could only be made viable by the disposal of the surplus lands. Further, the report of the Task Force submitted to the Economic Affairs Committee of the Union Cabinet classified the Companys textile undertaking under Group II i.e. mills which will be viable with the sale of surplus lands. The legislature in enacting the law for the taking over of the management of the textile undertakings therefore clearly had the intention of taking over the surplus lands of the Company. In our opinion, the High Court ought to have interpreted sub-s. (2) of S. 3 of the Act in the context of sub-sec. (1) thereof and the other provisions of the Act in consonance with the intention of the Legislature. In our opinion, the High Court ought to have interpreted sub-s. (2) of S. 3 of the Act in the context of sub-sec. (1) thereof and the other provisions of the Act in consonance with the intention of the Legislature. It was the intention of the Legislature to take over all the assets belonging to the Company held in relation to the textile undertaking. The Note attached to the report of the Task Force includes the total lands belonging to the petitioners Company for the purpose of determining the value of the assets of the Company and does not exclude the Real Estate Division. Even for determining the total compensation to be paid on nationalization, the Task Force takes into account the total surplus lands of the Company and does not exclude any land belonging to the so-called Real Estate Division. The viability study of the IDBI also heavily relied on the surplus lands held by the petitioners Company" (Emphasis supplied) 12. According to me, two parts are very clear from the said judgment. One is legal part when the other is factual part. So far as the legal part is concerned it can doubtlessly be said that in adopting a piece of legislation Court should not adopt a doctrinaire or pedantic approach. But interpretation of law should be fact oriented. Each and every case has its own factual basis. In the referred case adjacent land of the textile undertaking was tried to be converted as real estate business. Court found that such land is integral part of the undertaking.Can the same factual analysis be applicable in respect of a premises situate at Calcutta far away from Bombay i.e. the place of the textile undertaking ? Law does not prescribe that the company will be taken over but the undertaking. But when no dispute is now available in respect of taking over of the undertaking at Bombay irrespective of the claim of the Central Bank of India with regard thereto how can this Court come to a conclusion that the Hall and Anderson building at Calcutta dealing with different businesses will be treated as part and parcel of the textile undertaking alone ! There is no doubt that the company was and still is existing with multifarious activities from the very beginning till this date. There is no doubt that the company was and still is existing with multifarious activities from the very beginning till this date. Excepting change of nomenclature at an interim period there is no change in the object of the company. Neither the property situates adjacent to the undertaking at Bombay nor there is any element of factual doubt that it carries no other business than the textile business. Here the balance sheets are different. Loan amount in connection with the bank exclusively lies with the textile business. Therefore, how the building which is lying at the heart of the city of Calcutta fetching high price can be treated to be part and parcel of the textile undertaking at Bombay. It is true to say that as per the ratio of AIR 1988 SC 1353 (Anil Kumar Neotia v. Union of India) compensation amount can be lump sum. But lump sum has got some sort of theoretical basis. It cannot be said that any value even nominal will be equated with the words lump sum. The value of the undertaking was fixed at 2,70,85,000/- as per the Act, 1995. 15 acres of land, building and the materials were acquired leaving aside the Calcutta property which is approximately about 4 acres. Therefore, even estimation of lump sum compensation cannot throw any light about acquisition of Calcutta property. 13. At a point of time pro-nationalisation policy was introduced by the Government. As a result whereof, the Government used to take over various undertakings for the betterment of the same for the public purpose. Lump sum compensation was directed to pay under such acquisition. Sometime it became throw away price. But by the passage of time, Government thought it fit that the pro-nationalisation may not give much benefit to the people at large. It had introduced de-nationalisation policy. Present scenario has been totally changed in view of the introduction of globalisation in furtherance. The Government itself adopted market policy in the place and instead of socialistic policy. Now it is believer of transaction in such way. Therefore, question of valuation cannot be ignored in respect of the coming to conclusion. It has to be yardstick to form an opinion whether valuation made for the undertaking covers the entire properties of Bombay or properties of Bombay plus Calcutta property. 14. Now it is believer of transaction in such way. Therefore, question of valuation cannot be ignored in respect of the coming to conclusion. It has to be yardstick to form an opinion whether valuation made for the undertaking covers the entire properties of Bombay or properties of Bombay plus Calcutta property. 14. By citing another judgment reported in AIR 1988 SC 782 (M/s. Doypack Systems Pvt. Ltd. v. Union of India with other matters) Mr. Das wanted to say that the ratio of such judgment clearly prescribes that expression "forming part of" or "pertaining to" means that only such assets which have a direct nexus with the textile mills as would fall under the first limb of Section 4(1) of the relevant Act therein i.e. The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986. It was further held that the shares in question would still vest in the Central Government under the second limb of Section 4(1) of the Act since the shares were bought out of the income of the textile mills and were held by the company in relation to such mills. The shares would also fall in the second limb of Section 3(1) being right and title of the company in relation to the textile mills. 15. According to me, such judgment cannot help the proposition of Mr. Das in the present case. There the Act was introduced to take over the textile company which obviously includes textile undertaking/s but here the Act was introduced to take over textile undertaking/s of a company which may or may not include textile business alone. Even in the ratio of AIR 1988 SC 782 (supra) it is clear and categorical that only when such assets have to have direct nexus with the textile mills can be said to be forming part of or pertaining to. It implies anything or everything of a company cannot be treated as asset of a textile unit of the same. The Act, 1986 is not pari materia with the 1983 Act or 1995 Act. These Acts are clear and categorical in respect of taking over the management of textile undertaking of a company and nothing more or nothing less. Therefore, factually such reference is distinguishable in nature. The Act, 1986 is not pari materia with the 1983 Act or 1995 Act. These Acts are clear and categorical in respect of taking over the management of textile undertaking of a company and nothing more or nothing less. Therefore, factually such reference is distinguishable in nature. When there is any iota of evidence that the company is carrying out business other than the textile undertaking, same cannot be allowed to be acquired either by the 1983 Act or by the 1995 Act. Legislature never intended to do so. Nothing is established to show that the Calcutta property is part and parcel of textile undertaking alone. Belatedly M/s. National Textile Corporation (South Maharashtra) Limited, Mumbai without making itself as party respondent tried to establish such view. The whole purpose of such party appears to be extension of the area of acquisition possible to meet the claim of the bank etc. instead of betterment of the textile undertaking which is the purpose of Act. This cannot be allowed to be encouraged particularly when no compensation has said to be withdrawn and available materials are in favour of the petitioners. I have repeatedly called upon the contesting applicant to produce the records before this Court to establish that the textile undertaking possesses Calcutta land and building held by the M/s. Hall and Anderson Limited or by M/s. Shree Madhusudan Mills Limited but no document has been produced by such party to establish the grievance. The Bank has played an independent role. 16. Under such circumstances, I have no other alternative but to hold that the Hall and Anderson Building situate at 31, Chowringhee Road, Calcutta excepting the 345 square feet as utilized for the purpose of carrying out business by the company for textile undertaking as indicated in the plan annexed to the writ petition is free from acquisition, if any, under the aforesaid Acts. 17. The writ petition is accordingly disposed of with such declaration. Rule is made absolute. Interim order/s is/are merged with final order. Pending application/s as above made by the contesting parties are treated to be disposed of without any further order. Special Officer appointed by the Court at an interim stage for the purpose of collecting rents, issues and profits from the building is hereby discharged upon recovery of remuneration of 2000 G.Ms. Interim order/s is/are merged with final order. Pending application/s as above made by the contesting parties are treated to be disposed of without any further order. Special Officer appointed by the Court at an interim stage for the purpose of collecting rents, issues and profits from the building is hereby discharged upon recovery of remuneration of 2000 G.Ms. from the fund lying with him as full and final settlement and subject to his continuance as Receiver as per the order of the concerned Debt Recovery Tribunal and direction for filing Accounts, if any, therein. Rents, issues and profits so collected by the Special Officer be transferred to the account of the Receiver. No order is passed as to costs. 18. Prayer for stay is made, considered and refused. 19. Let an urgent xeroxed certified copy of this judgment, if applied for, be given to the learned Advocates for the parties within two weeks from the date of putting the requisites. Order accordingly.