Jagir Singh vs Union of India (UOI) and Others

R.S. Mongia, J.—M/s. Suraj Textile Mills Ltd., Malout Mandi, District Faridkot (hereinafter referred to as "the mills"), a public limited company, was established in the new industrial area of Malout Mandi in June, 1960, and it went into production in the year 1962. The mills had an authorised capital of rupees three hundred lakhs. It started with about 6,000 spindles and later on the capacity of the mills was raised to 12,000 spindles. According to the petitioner, the mills was set up for the economic benefit of the growers of the area of Malout, which is well known for producing quality cotton.

It has been averred in the writ petition that the mills were functioning properly till when the Pakistan aggression took place, in the year 1965. It has been stated that during the aggression, many bombs fell close to the labour colony of the mills, which created panic amongst the labour staying there and started running away from the area. It was because of this extraordinary situation that was created that the mills suffered a setback. It has also been stated that during that period there was a general recession in the textile industry. There was a great disparity of prices between the raw material, i.e., cotton and the finished products. There was substantial deterioration in the supply of electricity to the industry, which prevented the mills from reaching the point of optimum production.

The further stand of the petitioner in the writ petition is that after the 1965 aggression, the mills was picking up its production and was on the way to make up the setback which it had suffered but unfortunately certain disputes regarding purchase tax arose between the excise and taxation department of the State of Punjab and the mills, and in view of the circumstances mentioned above, the purchase tax assessed on the mills could not be paid. In the year 1969, the excise and taxation department attached the mills for the recovery of the purchase tax and according to the petitioner, in fact, the excise and taxation department sealed the mills. On account of the attachment of the office of the mills and the sealing thereof, it was not possible for anybody to lay hands on the past record of the mills.

Another fact which needs highlighting is that the Industrial Finance Corporation of India (hereinafter referred to as "the Corporation") had sanctioned a loan of Rs. 25,00,000 to the mills. Out of this amount, Rs. 6,00,000 were advanced immediately and the remaining Rs. 19,00,000 were to be given subsequently on various dates as agreed to between the parties. In consideration of the above, a mortgage deed dated April 27, 1962, was executed by the mills in favour of the Corporation. This was an English mortgage as contemplated under Clause (e) of Section 58 of the Transfer of Property Act. The entire movable and immovable property of the mills was conveyed and transferred to the Corporation, with the proviso that on the mills'' complying with the terms of the mortgage and repaying the loan, the Corporation would reconvey the property back to the mills. The mills committed some defaults with regard to the repayment of loan and a notice was issued by the Corporation to the mills to pay the entire amount within 15 days, failing which the Corporation would be entitled to enforce the terms of the mortgage. As stated above, the excise and taxation department had attached the mills and sealed its premises. The Corporation challenged in this court the sealing and attachment of the mill and a Division Bench of this court in Industrial Finance Corporation of India V. State of Punjab [1972] PLR 82 ; [1972] 30 STC 581 (P&H) , held that there was no provision either in the Punjab General Sales Tax Act, 1948, or the Punjab Land Revenue Act, 1887, which gives priority to the arrears of sales tax or the land revenue over the secured creditors of the defaulters. According to the Division Bench, the corporation was the legal owner of the mortgagee rights and no attachment of the property could be made by the excise department in derogation of the rights of the corporation. The department could recover its dues only out of the equity of redemption, which belonged to the mills. According to the petitioner, even after the attachment and sealing was quashed by this court in the above-referred case, the excise and taxation department did not deliver possession of the mills back to the management. It was because of this reason that the mills remained closed, which was beyond the control of the management.

u/s 15 of the Industries (Development and Regulation) Act, 1951, there is a power to cause investigation to be made by the Central Government into the scheduled industries or industrial undertakings regarding the circumstances leading to the various deteriorated conditions in the industrial undertaking. Section 15 of the said Act is reproduced below :

" 15. Power to cause investigation to be made into scheduled industries or industrial undertakings.--Where the Central Government is of the opinion that-

(a) in respect of any scheduled industry or industrial undertaking or undertakings-

(i) there has been or is likely to be a substantial fall in the volume of production in respect of any article or class of articles relatable to that industry or manufactured or produced in the industrial undertaking or undertakings, as the case may be, for which having regard to the economic conditions prevailing, there is no justification ; or

(ii) there has been or is likely to be a marked deterioration in the quality of any article or class of articles relatable to that industry or manufactured or produced in the industrial undertaking or undertakings, as the case may be, which could have been or can be, avoided ; or

(iii) there has been or is likely to be a rise in the price of any article or class of articles relatable to that industry or manufactured or produced in the industrial undertaking or undertakings, as the case may be, for which there is no justification ; or

(iv) it is necessary to take any such action as is provided in this Chapter for the purpose of conserving any resources of national importance which are utilised in the industry or the industrial undertaking or undertakings, as the case may be ; or

(b) any industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest the Central Government may make or cause to be made a full and complete investigation into the circumstances of the case by such person or body of persons as it may appoint for the purpose."

On December 17, 1978, the Government of India issued an order u/s 15 of the 1951 Act (copy annexure P-1) that since the Central Government was of the opinion that there had been, or is likely to be, a substantial fall in the volume of production in respect of cotton textiles manufactured in the industrial undertaking known as Messrs. Suraj Textile Mills Limited, for which having regard to the economic conditions prevailing, there was justification for investigation by a body which was constituted by that order, consisting of six members. The said order was conveyed to the members of the body, vide order dated November 19, 1970 (annexure P-2), which reads as under :

"I am directed to enclose a copy of order dated December 17, 1970, issued u/s 15 of the Industries (Development and Regulation) Act, 1951, setting up a committee to enquire into the affairs of Messrs. Suraj Textile Mills Ltd., Malout Mandi (Punjab), for your information and necessary action. The investigation should also be directed to the following specific points :

(a) Reasons for the present state of affairs.

(b) Deficiencies, if any, in the existing machinery.

(c) Immediate requirements, under separate heads of accounts, of working capital, if any.

(d) Requirement of long-term capital for modernisation/rehabilitation.

(e) Financial results of,

(i) immediate working without further investment on capital accounts ;

(ii) working after further investment capital account.

Suggestions regarding source of funds required under (c) and (d) and security available for their repayment.

A copy of the Investigation of Industrial Undertakings (Procedure) Rules, 1967, is sent herewith for guidance.

I am further to request that 15 copies of the report may kindly be submitted to this Ministry at a very early date.

Yours faithfully, (Sd.) H. K. Bansal, Deputy Secretary to the Government of India."

u/s 30 of the 1951 Act, the Central Government made rules known as the Investigation of Industrial Undertakings (Procedure) Rules, 1967. Rule 4 of these Rules laid down procedure to be followed in making an investigation u/s 30 of the 1951 Act. Rule 4(1)(a) reads as under :

"4. Procedure to be followed in making an investigation.--(1) In making an investigation, the investigator shall, as far as practicable, follow the procedure set out below, namely :--

(a) Where the investigation is ordered under all or any of the Sub-clauses (i) to (iii) of Clause (a) of Section 15 of the Act, the investigator shall, for the purpose of making a comparative study of the rate of production, collect facts and figures relating to the three years immediately preceding the year in which the investigation is so ordered of the volume of production, the quality and the price of any articles or class of articles relatable to the concerned scheduled industry or manufactured or produced in the concerned undertaking or undertakings, as the case may be."

Section 16 of the 1951 Act gives power to the Central Government to issue appropriate directions to the industrial undertaking after the completion of investigation u/s 15 of the Act. Section 18A of the 1951 Act, empowers the Central Government to assume management or control of the industrial undertaking in certain cases. Section 18A of the 1951 Act is in the following terms :

"18A. Power of Central Government to assume management or-control of an industrial undertaking in certain cases.--(1) If the Central Government is of opinion that-

(a) an industrial undertaking to which directions have been issued in pursuance of Section 16 has failed to comply with such directions ; or

(b) an industrial undertaking in respect of which an investigation has been made u/s 15 (whether or not any directions have been issued to the undertaking in pursuance of Section 16), is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest, the Central Government may, by notified order, authorise any person or body of persons to take over the management of the whole or any part of the undertaking or to exercise in respect of the whole or any part of the undertaking such functions of control as may be specified in the order.

(2) Any notified order issued under Sub-section (1) shall have effect for such period not exceeding five years as may be specified in the order :

Provided that if the Central Government is of opinion that it is expedient in public interest that any such notified order should continue to have effect after the expiry of the period of five years aforesaid, it may from time to time issue directions for such continuance for such period, not exceeding two years at a time as may be specified in the direction, so, however, that the total period of such continuance (after the expiry of the said period of five years) does not exceed twelve years ; and where any such direction is issued, a copy thereof shall be laid, as soon as may be, before both Houses of Parliament."

It is the case of the petitioner that a report in pursuance of the orders, annexures P-1 and P-2, was submitted by the committee to the Central Government on November 8, 1971. It is also the case of the petitioner that the Central Government did not take any action u/s 18A of the 1951 Act on the report which was submitted by the committee u/s 15 of the 1951 Act. The Central Government issued an Ordinance known as the Sick Textile Undertakings (Taking Over of Management) Ordinance, 1972, whereby the mills was declared a sick textile undertaking and included at serial No. 43 of the Schedule attached to the Ordinance. This Ordinance was replaced by the Act known as the Sick Textiles Undertaking (Taking Over of Management) Act, 1972 (hereinafter referred to as "the Take-over Act"). Reference to some of the provisions of the Take-over Act would be made hereinafter. The Take-over Act was followed by another Act, i.e., the Sick Textile Undertakings (Nationalisation) Act, 1974 (hereinafter called "the Nationalisation Act"). Under the said Act, the mill in question having been declared a sick textile undertaking under the Take-over Act was nationalised and a compensation of Rs. 2,37,000 was assessed to be paid to the management of the mills. It has been stated that the mills did not accept the compensation and did not receive the same. Initially, C.W.P. No. 4420 of 1974 was filed by the petitioner primarily challenging the vires of the Take-over Act. However, the same was got dismissed as withdrawn on April 23, 1974, with liberty to file a fresh petition as in the meantime on April 1, 1974, the Sick Textile Undertakings (Nationalisation) Ordinance, 1974, had come into force (which later on was replaced by the Nationalisation Act).

Jagir Singh, who is one of the shareholders of the mills, filed the present writ petition questioning the vires of the Take-over Act as well as the Nationalisation Act. It was further challenged that the mills was not a sick textile undertaking and, therefore, could not be declared as such under the Take-over Act, and, consequently, could not be nationalised under the Nationalisation Act.

The apex court in Panipat Woollen and General Mills Co. Ltd. v. Union of India, AIR 1986 SC 2082 ; [1988] 63 Comp Cas 164 and Minerva Mills Ltd. and Others Vs. Union of India (UOI) and Others, , upheld the constitutional validity of the Take-over Act as well as the Nationalisation Act. Under these circumstances, the petitioner''s counsel submitted that it was not open to him to challenge the vires of these Acts any more. He, however, submitted that the mills had been wrongly included in the above Acts as a sick textile undertaking.

Section 2(d) of the Take-over Act defines as to what is a sick textile undertaking. Section 2(d) of the Take-over Act is reproduced below :

"2. In this Act, unless the context otherwise requires,--

(d) ''sick textile undertaking'' means the textile undertaking which falls within one or more of the following categories, namely :--

(i) which is owned by a textile company which is being wound up, whether voluntarily or by or under the supervision of any court, or in respect of which a provisional liquidator has been appointed by a court,

(ii) which had remained closed for a period of not less than three months immediately before the appointed day and the closure of which is prejudicial to the textile industry, and the condition of the undertaking is such that it may, with reasonable inputs, be re-started in the interests of the general public,

(iii) which has been leased to Government or any other person or the management of which has been taken over by Government or any other person under any leave or licence granted by any receiver or liquidator by or under the orders of, or with the approval of, any court,

(iv) the management of which was authorised by the Central Government by a notified order made u/s 18A, or in pursuance of an order made by the High Court u/s 18FA, of the Industries (Development and Regulation) Act, 1951, to be taken over by a person or body of persons, but such management could not be taken over by such person or body of persons, before the appointed day,

(v) the management of which ought to be according to the report made after investigation by any person or body of persons appointed after January 1, 1970; u/s 15 or Section 15A of the Industries (Development and Regulation) Act, 1951, taken over u/s 18A of that Act, but in relation to which no notified order authorising any person or body of persons to take over the management of such undertaking was made before the appointed day,

(vi) in respect of which an investigation was caused to be made, before the appointed day, by the Central Government u/s 15 or Section 15A of the Industries (Development and Regulation) Act, 1951, and the report of such investigation was not received by the Central Government before the appointed day ;

and includes any textile undertaking which is deemed, under Sub-section (2) of Section 4, to be a sick textile undertaking."

The Nationalisation Act was enacted to provide for the acquisition and transfer of the sick textile undertakings and the right, title and interest of the owners in respect of sick textile undertakings specified in the First Schedule with a view to reorganising and rehabilitating such sick textile undertakings so as to subserve the interest of the general public by the augmentation of the production .and distribution, at fair prices, of different varieties of cloth and yarn and for matters connected therewith or incidental thereto. Section 2(1)(j) of the Nationalisation Act defines a sick textile undertaking as under :

"2(1) In this Act, unless the context otherwise requires-- . . .

(j) ''sick textile undertaking'' means textile undertaking, specified in the First Schedule, the management of which has, before the appointed day, been taken over by the Central Government under the Industries (Development and Regulation) Act, 1951, or, as the case may be, vested in the Central Government under the Sick Textile Undertakings (Taking Over of Management) Act, 1972."

It is apparent from a reading of the definition u/s 2(1)(j) that all the sick textile units which were mentioned in the First Schedule to the Take-over Act were included in the definition of sick textile undertakings under the Nationalisation Act,

The petitioner''s counsel submitted that if he is successful in establishing that the mills was not a sick textile undertaking as envisaged u/s 2(d) of the Take-over Act, the take-over itself would be bad, and, therefore, the question of including such mills as a sick textile undertaking under the Nationalisation Act would be ipso facto bad. in law. To a pointed question by the court as to whether the court can go into the legislative wisdom of including in the Schedule an undertaking as a sick textile undertaking, learned counsel for the petitioner replied, that the court can go into it and to substantiate his reply, he relied on para 9 of the judgment of the Supreme Court in Panipat Woollen Mills'' case [1988] 63 Comp Cas 164 which reads as under (at page 169) :

"The above submissions of the petitioners, in our opinion, are misconceived. There can be no doubt that in respect of each sick textile undertaking, a Take-over Act and a Nationalisation Act could be passed and, in that case, a large number of enactments would come into existence to the inconvenience of all concerned. In order to avoid such cumbersome course and for the sake of convenience, the Legislature has mentioned in the First Schedule in both the Take-over Act and the Nationalisation Act the names of all sick textile undertakings in the country. By including certain textile undertakings as sick textile undertakings in the First Schedule to the Take-over Act, the Legislature has not made any judicial or quasi-judicial determination, nor has the Legislature given any judgment, as contended on behalf of the petitioners, although such inclusion is sometimes loosely expressed as ''legislative judgment''. In Section 2(d), the Legislature has laid down the criteria for a sick undertaking. The sick textile undertakings have been specified in the First Schedule on the basis of the tests laid down in Section 2(d). In including the sick textile undertakings in the First Schedule, the Legislature has not acted arbitrarily, for, it has also laid down the criteria or tests for such inclusion. If any undertaking which has been so specified in the First Schedule does not satisfy the tests u/s 2(d) of the Take-over Act, the owner of it is entitled to challenge such inclusion or take-over in a court of law, and such challenge has to be founded on a strong ground. Thus, there is no finality or collusiveness, in the legislative determination of an undertaking as a sick textile undertaking. Such determination is neither judicial nor quasi-judicial Therefore, the question of damaging or altering, the basic structure of the Constitution, namely, separation of powers among the Legislature, the executive and the judiciary, does not at all arise. So also the question of the validity of the constitutional amendments by which the Take-over Act and the Nationalisation Act have been included in the Ninth Schedule on the ground that by such amendments the basic structure of the Constitution is damaged, as contended on behalf of the petitioners, does not arise. The contentions are misconceived and are rejected."

Learned counsel for the petitioner submitted that in view of the above judgment of the apex court, the court can go into the point whether the mills could be considered to be a sick textile undertaking on one or more of the clauses of Section 2(d) of the Take-over Act. According to learned counsel, the case would not fall under any of the clauses. According to him, Clause 2(d)(v) would not be applicable, as after the report of the committee was submitted u/s 15 of the 1951 Act, a decision had to be taken by the Central Government whether the mills was to be taken over or not as sick textile undertaking and since no decision had been taken by the Central Government u/s 18A of the 1951 Act on the basis of the report, the provisions of Section 2(d)(v) would not come into play. He further submitted that even the report of the committee u/s 15 of the 1951 Act was illegal and against the 1967 Rules, the mills was sealed, and, therefore, no record was available with the committee. Moreover, no person from the management was ever appointed by the committee, which came to investigate into the matter u/s 15 of the 1951 Act. In the counter-affidavit filed by the respondent in its short reply dated March 19, 1991, it is stated in para 3 as under :

" That the management of the Suraj Textiles Mills was taken over under the Sick Textile Undertakings (Taking Over of Management), Act, 1972, and, subsequently, it was nationalised under the provisions of the Sick Textile Undertakings (Nationalisation) Act, 1974. The First Schedule to the Act of 1974 against entry No. 99 shows the petitioner mills. There is a legislative determination that Suraj Textile Mills, Malout Mandi (Punjab), came within the definition of sick textile undertaking as provided in Section 2(1)(j) of the Act of 1974."

According to learned counsel for the respondents, that since there was a legislative determination that the mills in question was a sick textile undertaking, therefore, it came within the definition of sick textile undertaking u/s 2(1)(j) of the Nationalisation Act. On my pointed query, Mr. C.B.S. Sodhi, learned counsel appearing on behalf of the Union of India, submitted that the mills did not fall under the definition of the sick textile undertaking as envisaged by Section 2(d)(v) of the Take-over Act, but it fell under Clause (ii) of Section 2(d). So the question is narrowed down as to whether the mills could be said to be falling u/s 2(d)(ii) of the Take-over Act as a sick mills or not.

According to learned counsel for the petitioner, Section 2(d)(ii) of the Take-over Act envisages three conditions before an undertaking can be said to be a sick textile undertaking under the Take-over Act :

(a) The undertaking must have remained closed for a period of not less than three months immediately before the appointed day, i.e., October 31, 1972 ;

(b) the closure of the undertaking is prejudicial to the textile industry, and

(c) the condition of the undertaking is such that it may with reasonable inputs be restarted in the interests of the general public.

Learned counsel went on to submit that all the three conditions must co-exist simultaneously and the closure of the undertaking as envisaged under condition (a) above, is not just to be simple mathematical physical closure, but this closure must have co-relation and direct bearing on condition (c), i.e., the closure must be because of lack of inputs. According to learned counsel, supposing there is such a law and order situation that an undertaking is closed for a period of not less than three months before the appointed day or because of certain calamity in the family of the management or because of some labour problem, the mills had to be closed, the first condition if read on the face of it would be satisfied. Naturally, the second condition would stand satisfied because the closure would be prejudicial to the textile industry. The third condition, i.e., condition (c) above would also stand satisfied because with some reasonable inputs the undertaking can be restarted. Can such an industry be declared a sick industry because it had remained closed because of a law and order situation or for such any similar reasons ? Counsel further submitted that the first condition in Section 2(d)(ii) of the Take-over Act has to be read in such a manner that the closure has some nexus to the lack of inputs.

The pleadings of the petitioner on the point that the mills was not a sick mill as envisaged under the Take-over Act are paras 24, 25 and 33(3) of the writ petition, which are reproduced below :

" 24. That, while introducing the above-said Bill, the Central Government did not place before Parliament the true facts as enumerated above, as regards the petitioner''s mill which fact establishes that the mill was not sick at any material time. Moreover, the fact that from the date of the promulgation of the Ordinance of 1972 till the introduction of the Bill of 1974, the possession of the mill was not taken over by the Custodian u/s 5 of the 1972 Act.

That the Central Government did not further put before Parliament that the mill was not sick within the meaning of the Ordinance 9 of 1972, and Act No. 72 of 1972. Parliament, however, enacted the Sick Textile Undertakings (Nationalisation) Act, 1974, hereinafter to be referred to as the 1974 Act, which purports to nationalise the mill of the petitioner.

The Act consists of (i) Sections 1 to 38 divided into Chapters I to VII ; (ii) the First and Second Schedules.

Section 1(2) provides that Sections 32 (Penalties) and 33 (Offences by companies) shall come into force at once and that the remaining sections, i.e., sections 1 to 31 and 34 to 38 and the two Schedules, should be deemed to have come into force on the 1st day of April, 1974.

Sections 2(1)(j) and 2(1)(n), respectively, define ''sick textile under- takings'' and ''textile company''. They read thus :

2(1) In this Act, unless the context otherwise requires- . . .

(j) "Sick textile undertaking" means a textile undertaking, specified in the First Schedule, the management of which has, before the appointed day, been taken over by the Central Government under the Industries (Development and Regulation) Act, 1951, or as the case may be, vested in the Central Government under the Sick Textile Undertakings (Taking Over of Management) Act, 1972 ;

(n) "textile company" means a company specified in column (3) of the First Schedule as owning the textile undertaking specified in the corresponding entry in column (2) of that Schedule . . .''

The material portion of the First Schedule reads as under :

THE FIRST SCHEDULE

Sl. No. Name of the undertaking Name of the owner Amount (in rupees)

(1) (2) (3) (4)

Suraj Textile Mills, Malout Mandi, Punjab. Suraj Textile Mills Limited, Malout Mandi, Punjab. 2,37,000

On a reading of Section 2(1)(j) and 2(1)(n) and columns Nos. 2 and 3 of serial numbers 43 and 99 of the First Schedule to the Act, it is crystal clear that, for its efficacy this act depends entirely upon the Sick Textile Undertakings (Taking over of Management) Act No. 72 of 1972 (which repealed and replaced Ordinance No. 9 of 1972). Therefore, it follows that if it is held that the textile undertaking specified at Serial No. 99, column 2, of the Schedule was not sick within the meaning of the Sick Textile Undertakings (Taking over of Management) Act, 1972 (which repealed and replaced Ordinance No. 9 of 1972), then in such event the Act of 1974 must wholly fail in its object and effect and the mills of the petitioner cannot at all be held to be nationalised or as having been nationalised. 33(3) That, as stated earlier, the facts and circumstances under which the Suraj Textile Mills Ltd. was closed down were beyond the control of the mills and the closure was not due to any substantial fall in the volume of production or due to any financial stringency by which it could be said that the mills had become a sick textile undertaking and hence fell within the mischief of the Sick Textile Undertakings (Taking Over of Management) Act, 1972. Therefore, the provisions of Act No. 72 of 1972 do not get attracted and the petitioner''s mills cannot be termed to be a sick textile undertaking under any canon of law."

The reply of the respondents as to why the mills had been declared as a sick mill has already been quoted above.

Learned counsel for the Union of India cited Kothandran Spg. Mills Pvt. Ltd. Vs. Union of India and Others, to substantiate his contention that once there was a legislative determination that the mills was a sick mill and had been put in the Schedule to the Take-over Act at item No. 43 and also in the Schedule to the Nationalisation Act at item No. 99, this court should not go into the matter as to whether the mills was a sick textile mill or not In para 5 of the judgment, it has been observed as under (at page 4) :

"The First Schedule to the Act against entry 96 shows the petitioner''s mills. There is a legislative determination that petitioner No. 1 came within the definition of sick textile undertaking as provided in Section 2(1)(j) of the Act, The petitioners have not alleged any mala fides against Parliament and in our opinion rightly. It is relevant to notice at this stage that the Central Act 57 of 1974 has been put into the Ninth Schedule to the Constitution by the Thirty-ninth Amendment and, therefore, has come under the umbrella of protection provided under Article 31B of the Constitution. In the case of Minerva Mills Ltd. v. Union of India [1987] 61 Comp Cas 406 (SC) challenge was raised against the vires of this Act. The court dealt with the effect of the inclusion of the Act in the Ninth Schedule by referring to the ratio in Waman Rao and Others Vs. Union of India (UOI) and Others, , and upheld its vires. Similar was the view of the court in the case of Panipat Woollen and General Mills Co. Ltd. v. Union of India [1988] 63 Comp Cas 164 (SC)."

Suffice it to observe that the petitioner is no more challenging the vires of the Take-over Act or the Nationalisation Act and the petitioner is also not challenging the declaration of the mills as a sick textile mill on the ground of mala fides of the Legislature. He is challenging the action on the ground that the mills does not fall under any of the clauses of Section 2(d) of the Take-over Act to be declared as a sick mill. In Panipat Woollen Mills'' case [1988] 63 Comp Cas 164, the Supreme Court has observed, as noticed earlier, that in a given case, the court can go into the matter as is being raised in the present writ petition.

Learned counsel for the respondents further relied on the judgment of the Supreme Court in S.P. Mittal v. Union of India, : AIR 1983 SC 1, to contend that even if the material which was placed before Parliament was wrong before the mills was declared as a sick textile mill, this court cannot go into it. In the present case, it has not been even averred anywhere as to what was the material which was before Parliament on the basis of which it came to the conclusion that the mills was a sick mill. The only thing which has been said in the short reply is that since it has been included in the Schedule to the Take-over Act, and the Nationalisation Act, it beqomes a sick mill and this court cannot go into it. That being so, this authority has no bearing on the facts of the present case.

I find force in the contentions of learned counsel for the petitioner that simply because the mills was closed for a period not less than three months before the appointed day October 31, 1972, under the Take-over Act, the first condition of Section 2(d)(ii) would (not ?) be satisfied. The closure was not to be as a matter of fact only, but it had to be seen whether the closure had any nexus with the third condition as envisaged u/s 2(d)(ii) of the Take-over Act. Was there any material before Parliament to come to the conclusion that the mills was closed because of lack of inputs or not, has not been averred in the reply nor any material placed before this court. If the mills remained closed for the reasons which have been mentioned in the petition, then, according to me, the first condition would not be satisfied, inasmuch as such a closure had no co-relation with the lack of inputs. That being so, according to me, the inclusion of the mills as a sick mill in the Schedule to the Take-over Act and the Nationalisation Act would be against Section 2(d)(ii) of the Takeover Act.

Learned counsel for the respondents then raised a point that only one of the shareholders had come forward to file the present writ petition and the management had not come forward to challenge the take-over. He further submitted that more than 17 years have passed since the nationalisation of the mills and at this stage the court should not interfere.

So far as the first contention noted above is concerned, suffice it to say that it would not matter if the management has not come forward, but only a shareholder has come forward. A shareholder is as much interested in the affairs of the mills as the management itself can be. There is no bar to grant the relief at the instance of a shareholder.

As regards the second contention, noted above, is concerned, it may be noticed that the writ petition was filed in the year 1974, which was dismissed, as withdrawn, with liberty to file a fresh one. The present writ petition was filed on March 14, 1975. The Central Government can be compensated for running the mills for all these years, which may be determined by an appropriate agency that may be constituted by the Central Government after associating the erstwhile management of the mills. The aggrieved party can seek legal redress against such determination of compensation. The compensation may be determined within a period of four months from the receipt of this order.

For the foregoing reasons, this writ petition is allowed and it is held that the inclusion of the Suraj Textile Mills Ltd., Malout Mandi, in the First Schedule to the Sick Textile Undertakings (Taking over of Management) Act, 1972, as a sick textile mill and further inclusion of the said mills in the Schedule to the Sick Textile Undertakings (Nationalisation) Act, 1974, is against the provisions of Section 2(b)(ii) of the Take-over Act. The Central Government should hand over the management of the mills immediately to the erstwhile management which was there at the time of the taking over of the mills by the Central Government. This will be subject to the payment of compensation by the mills to the Central Government that may be determined by it for running the mills for all these years after the take-over. The payment of compensation would be made by the management within two months of the receipt of the order determining the compensation. The management would also clear all its dues regarding its liability to the Sales Tax Department, Excise and Taxation Department, Income Tax Department, Electricity Department, Department of Employees'' State Insurance and Provident Fund, as well as to the bankers of the mills, within a period of six months from the handing over of the management of the mills by the Central Government to the erstwhile management.

To safeguard the interest of the Central Government for ensuring the discharge of the liabilities by the management referred to above (which would include the compensation), the Central Government may nominate one officer on the board of the management of the mills for a period of six months. In case the liabilities are not discharged by the erstwhile management of the mills within the stipulated period as mentioned above, the management would revert back to the Central Government. There will be no order as to costs.