Companies Act Case Law Custodian of Textiles Undertaking Bombay Vs Hall Anderson Ltd Ors

Companies Act Case Law

Custodian of Textiles Undertaking Bombay Vs Hall & Anderson Ltd & Ors

 

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO……………/2011
(ARISING OUT OF SLP(C) NO. 11162 of 2008)
Custodian of Textiles Undertaking, Bombay …..Appellant

Versus

Hall & Anderson Ltd. & Ors. …..Respondents
JUDGMENT
Dr. B.S. CHAUHAN, J.

 

1. Leave granted.
2. This appeal has been preferred against the judgment and order

dated 14.12.2007 in FMA No.761/05 and CAN No.7885/07 passed by

the High Court of Calcutta affirming the judgment and order of the

Learned Single Judge dated 6.1.2005 in CR No. 10289(W)/83 by

which the Learned Single Judge has held that the appellant cannot

take the management or possession of the suit premises, No.31,

Chowringhee Road, Calcutta, in view of the provisions of the Textile
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Undertakings (Taking Over of Management) Act, 1983, (hereinafter

called the `Act 1983′).
3. Facts and circumstances giving rise to this case are that Hall &

Anderson Ltd. (hereinafter called `Hall’), incorporated under the

Indian Companies Act, 1913, came into existence on 8.11.1946 and

started primarily a departmental store business on the premises at

No.31, Chowringhee Road (hereinafter called the premises styled as

Hall & Anderson). Hall purchased the textile mill situated at Globe

Mills Passage (Lower Parel) from M/s. Madhusudan Mills Ltd. on

12.6.1950 and commenced business of manufacturing and selling of

cotton. The name of the company M/s. Hall & Anderson Ltd. was

changed to M/s Shree Madhusudan Mills Ltd., having its registered

office at the premises on 21.7.1959. Amalgamation of Profit & Loss

Account was prepared henceforth for M/s Shree Madhusudan Mills

Ltd. from 1970.
4. In 1976, the business of departmental store was stopped due to

economic loss and after winding up of the said business, the premises

was let out on rent. In 1989, because of strike by workers of textiles

mills, several mills suffered losses and it became difficult to run the

 

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business and therefore, the Government after having due deliberations

with Reserve Bank of India and other authorities first came with the

Ordinance and later on it was replaced by Act 1983.
5. The respondent No.1 herein filed Writ Petition No.10289/83

before the Calcutta High Court challenging the provisions of the Act

1983 and an injunction was granted by the High Court vide order

dated 26.10.1983 restraining the present appellant from interfering

with bank accounts relating to the property business as well as textile

undertaking business. It was during pendency of the business that

Textile Undertaking Nationalisation Act, 1995 came into existence

and the mills stood acquired. M/s Shree Madhusudan Mills Ltd. was

renamed as Hall on 11.2.1999. Learned Single Judge allowed the said

writ petition vide judgment and order dated 6.1.2005 holding that the

suit premises situated at Calcutta was by no means related to the

textile undertakings and therefore, it could not be part and parcel of

textile undertakings and not covered by the said Acts 1983 or 1995.
6. Being aggrieved, the present appellant preferred the FMA

No.761/05 which has been dismissed by the Division Bench, and in

concurrence with the learned Single Judge. Hence, the present appeal.

 

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7. Shri G.E. Vahanvati, Learned Attorney General for India has

submitted that the Division Bench, as well as the Learned Single

Judge of the High Court of Calcutta, failed to appreciate the purpose

of taking over the management of textile undertakings. Because of

mismanagement and strike of workers, the textile undertakings

became unworkable and the Government of India in public interest

and taking recourse to the provisions of Articles 39B & 39C of the

Constitution appointed a Committee to examine the issue and after

considering its report with consultation and considering the guidance

of the Reserve Bank of India, it took up a decision to take over the

management of the same units of the textile undertakings. The

present textile industry was in category III, and it was evident that the

undertaking made viable after investment of a huge amount which

could be raised by selling the extra land with the textile industries. In

the instant case, the accounts of the textile undertakings and of the

premises stood amalgamated in 1970. The courts below failed to

appreciate the law laid down by this Court in various judgments and

held that the premises was not related to textile industries by any

means and was a separate and independent entity and the business of
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letting out the premises was totally separate business having no nexus

to the textile undertakings. Thus, the appeal deserves to be allowed.
8. On the contrary, S/Shri R.F. Nariman, L. Nageswar Rao, U.U.

Lalit and Ranjit Kumar, learned senior counsel appearing for the

respondents, have opposed the appeal contending that the judgments

cited by the Learned Attorney General in the cases of National

Textile Corporation Ltd. & Ors etc. v. Sitaram Mills Ltd. & Ors.

etc., AIR 1986 SC 1234 and M/s. Doypack Systems Pvt. Ltd. v.

Union of India & Ors., AIR 1988 SC 782 have no bearing in this

case for the reason that the facts therein are quite distinguishable. In

the case of Sitaram Mills (supra) there had been the finding of fact

recorded by this Court reversing the finding of the courts below that

the real estate division of that company was not having separate and

independent business and the income of real estate division came into

existence from the funds of the company itself. Therefore, it was the

assets of that company, namely, Sitaram Mills. In the instant case as

the Calcutta High Court has held that the premises had totally separate

entity having no nexus to the textile undertakings or its activities had

not come into existence from the funds of textile undertakings, it

could not be the asset of the said company. More so, the premises had
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been mortgaged wherein the mortgagee had already sold this property

because it could not be redeemed. In fact, the mortgage became the

liability and under the Act 1995, it is the only assets which have been

taken over and not the liabilities of the nationalised company. The

appeal lacks merit and is liable to be dismissed.
9. We have considered the rival submissions made by learned

counsel for the parties and perused the records.
10. The pleadings in the writ petition before the High Court

revealed the factual matrix of the case and it is evident from the same

that the respondent initially started the business of selling various

goods and articles from the departmental store operating from the

premises under the name and style of M/s Hall & Anderson. The

Company purchased the textile mill in Bombay on 12.6.1950 and

commenced the additional business of manufacturing and selling

cotton textile. The departmental store continued its business upto

1976. Subsequent thereto, the building was developed as an income

yielding asset and as such started the business of letting out various

portions of the said building to different business organizations. The

total area of the premises is about 4 acres and on an area of 345 sq. ft.

 

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the registered office of the company is situated. The business of

textile mill remained completely separate from the premises business

of letting out. They had not been interconnected and the premises

business has no connection with running the textile undertakings. The

accounts of the property business were separately and independently

maintained. Staff engaged in the property business were also not

connected. They had no concern with the working of the textile mill,

except the Secretary of the Company, as he had to be the same person

in view of the requirement of the provisions of Companies Act, 1961.

No amount for the textile mill business had ever been borrowed from

any financial institution or utilized for its running. Profit and Loss

accounts of both the business have been prepared separately in spite

of amalgamation since 1970. The books of account had been

maintained for both the business separately. The premises had been

mortgaged with the Central Bank of India, Bombay by deposit of title

deeds with a view to secure advance granted by the Central Bank of

India to the Company for the purpose of running the textile mill, but it

stood only as a security. It has not become an integral part of the

textile industries or had any nexus or relation with the working of

textile mill. In the counter affidavit, reference has been made to the

 

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report of the Committee that disposal of immovable property of the

Company, i.e., premises would provide substantial amount for making

the undertaking viable within a few years provided, the said premises

was sold. Further reference had been made to the observations made

by the task force under the terms of reference that Company would be

viable with the sale of land.
11. After considering the pleadings as well as the submissions

made on behalf of the parties, a learned Single Judge as well as the

Division Bench recorded the following findings:

i) M/s Hall and Anderson premises at Calcutta deals with

different business and cannot be treated as part and parcel

of the textile undertaking at Bombay.

ii) The company was engaged in multifarious activities.

iii) The textile undertaking at Bombay carries no other

business other than the textile business.

iv) The bank accounts and balance-sheets of both the units

are different.

v) The lump sum compensation to the tune of

Rs.2,70,85,000/- has been fixed and paid under the Act

1995. 415 acres of land, building and the material
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acquired at Bombay leaving aside the premises at

Calcutta.

vi) The textile mill at Bombay had been purchased as an

asset of M/s Hall & Anderson as it had been purchased

totally out of the resources of M/s Hall & Anderson. The

premises at Calcutta by no means can be part and parcel

having any nexus or related to the textile undertaking at

Bombay.
12. The judgment in Sitaram Mills (supra) was distinguishable as

it had been argued in that case that the land appurtenant to the said

mill was not a part of the textile undertaking. However, this Court

came to the conclusion that as a result of modernization resulted in a

formation of mill of a much smaller size, the land had become

surplus. It was lying vacant. It was not in dispute that the surplus

land was under the ownership of the textile undertaking. It was in fact

the land on which the different division of the old mill had been

functioning. Thus, this Court held that the land was an integral part of

the textile undertaking. In the instant case, position is otherwise. The

textile mill has been under the ownership of M/s Hall & Anderson at

Calcutta.
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13. In M/s Doypack Systems Pvt. Ltd. v. Union of India &

Ors., AIR 1988 SC 782, this Court while interpreting the provisions

of Section 3 of the Swadeshi Cotton Mills (Acquisition and Transfer

of Undertaking) Act, 1986, observed that the provisions of such a

statute require broad and liberal interpretation in consonance and

conformity with the principles enshrined in Articles 39B and 39C of

the Constitution.

In the said case, the issue was whether shares purchased using

funds of the textile company could be held to be covered under the

terms of said provision. The ratio of the said case has no application in

the present case, as, admittedly, in that case the shares in question had

been purchased from the funds of the textile company. In the instant

case, the fact situation is the other way around. M/s Shree

Madhusudan Mills Ltd., Bombay, had been purchased using funds

generated from the premises at Calcutta.
14. We have gone through the provisions of the Act 1995. Section

8 thereof, provides for payment of amount to owners of textile

undertaking:
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“8. Payment of amount to owners of textile
undertakings – The owner of every textile
undertaking shall be given by the Central
Government, in cash and in the manner
specified in Chapter VI, for the transfer to, and
vesting in, it, under sub-section (1) of section 3,
of such textile undertaking and the right, title
and interest of the owner in relation to such
textile undertaking, an amount equal to the
amount specified against it in the
corresponding entry in column (4) of the First
Schedule.”
However, the column (4) of the First Schedule, so far as the

present textile industry is concerned, reads as under:

Sl. Name of the textile Name of the Amount
No. undertaking owner (in rupees)
(1) (2) (3) (4)

11. Shree Madhusudan Mills, Shree Madhusudan 2,70,85,000
Pandurang Budhkar Marg, Mills Ltd., 31,
Bombay Chowringhee
Road,Calcutta – 16
From the above, it is evident that what has been acquired is the

property at Bombay. Column 3 makes it clear that it was under the

ownership of M/s Shree Madhusudan Mills Ltd., Calcutta, and after

the property acquired at Bombay, a sum of Rs.2,70,85,000/- had been

paid as compensation. No compensation has been paid for the

premises at Calcutta.
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15. The relevant part of the judgment in Sitaram Mills (supra)

reads as under:

“The High Court completely ignored the
fact that all the assets of the company were held in
relation to the textile business. The company
required all its real estate in the nineteenth
century when it was formed for carrying on textile
business and, admittedly, no new assets had been
acquired by it thereafter………

Even for determining the total compensation
to be paid on nationalization, the Task Force takes
values into account the total surplus lands of the
company and does not exclude any land belonging
to the so-called Real Estate Division……”
Therefore, it is evident that in the said case, the land

appurtenant to the textile undertaking and belonging to it, was

converted into real estate and even on nationalisation, for the purpose

of determining the compensation, the said land had been included in

the assets. In the instant case, a contrary picture emerges as explained

hereinabove. More so, the chart quoted from the Act, does not show

that for determining the compensation, premises property at Calcutta

had also been included. As the premises in Calcutta does not form

part of or has been appurtenant to the textile industry, the judgment in

M/s Doypack Systems Pvt. Ltd. (supra) is also distinguishable.
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16. This Court in Minerva Mills Ltd. v. Union of India, AIR

1986 SC 2030, dealt with judgment of this Court in Sitaram Mills

(supra) and held as under:
“25. The learned Counsel for the petitioners
has placed reliance upon an observation of this
Court in National Textile Corpn. Ltd. v. Sitaram
Mills Ltd. The question that was involved in that
case was whether surplus land in the precinct of
the taken-over undertaking was an asset in
relation to the undertaking. It was observed: (SCC
p. 133 bottom) “The test is whether it was held for
the benefit of, and utilised for, the textile mill”.
Relying upon this observation, it is contended by
the learned Counsel for the petitioners that as the
vacant land, in the instant case, has not been
utilised for the undertaking, it is not an asset of the
undertaking. We do not think that in Sitaram Mills
case this Court really meant to lay down a
proposition that in order that a piece of land be
considered as the asset of the textile undertaking,
it must be held for the benefit of and utilised for
the undertaking in question. Can it be said that a
piece of land which is held for the benefit of but
not utilised for the textile undertaking, as in the
instant case, is not an asset of the undertaking?
The answer must be in the negative. In Sitaram
Milks case that observation was made in the
context of facts of that case, namely, that the
surplus land was held for the benefit of and also
utilised for the textile undertaking.”
(Emphasis added)

 

17. In view of the above, we do not see any cogent reason not to

concur with the view expressed by the High Court. The appeal lacks

merit and is, accordingly, dismissed. In the facts and circumstances of

the case, there will be no order as to costs.
………………………J.
(P. SATHASIVAM)
………………………..J.
(Dr. B.S. CHAUHAN)
New Delhi,
January 17, 2011

 

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