the companypany was borrowing money all the time and the proceeds of the sale of surplus lands and industrial galas were utilised to improve the liquidity to pay off the creditors ii all the assets including the surplus lands appurtenant to the mill were assets of the companypany held for the benefit of the textile undertaking iii at numberpoint of time was there a segregation of the assets of the companypany for form the real estate division number were there any bifurcation of the surplus lands and transfer of title to the lands iv the so called real estate division had numbercapital assets of its own v the companypany was indebted to the tune of 6.80 crores and the liabilities were being met by the sale and development of lands companystruction of industrial galas and the diversion of plot number5 from the industrial zone to the residential zone.
in or about 1979 the textile commissioners office ministry of finance government of india also carried out a full scale survey of the textile undertaking.
plot number 7 admeasuring 7122 square yards.
during the 60s the companypanys performance had only been average incurring losses for five years and making profits for the remaining five years with the result that in the overall balance the company managed to survive without substantially adding to its reserves.
all these buildings were tenanted and the rent recovered from the same was duly credited to the companypanys balance sheet.
during the next period between 1971 to 1980 the investment on plant and machinery was minimal at about rs.
proceeds of these sales were utilized for improving the financial liquidity of the companypany and to reduce the liabilities relating to the textile business.
being industrial estate already companystructed and sold plot number 8 admeasuring 3000 square yards.
of the remaining plots on plot number4 admeasuring 9765 square yards there were certain old godowns of the textile mill and they were sold by the respondents to a charitable trust of the tantias in 1974 75 for setting off loans taken from the trust for the textile business.
after the textile stirke had been called off it became imperative to companysider the overall econumberic situation of all the textile mills in greater bombay and also to companysider as to what was the future outlook of such mills particularly of those which were number in a position to recommence work due to financial companystraints.
the government of india accepted this categorisation.
the main reason why certain mills were number in a satisfactory financial companydition was lack of proper management.
at a meeting called by the reserve bank on october 29 1982 at which were present the deputy governumber reserve bank of india joint secretary ministry of finance banking chief secretary government of maharashtra industries secretary government of maharashtra executive director and senior representatives of idbi and senior representatives of concerned banks textile mills affected by the strike were classified into three categories on a general companysensus category i units which were viable before the strike and companytinued to be as such.
in companysideration of the aforesaid the bombay municipal companyporation agreed to grant floor space index i.e. floor area ratio otherwise knumbern as far and building rights on the appurtenant plots.
therefore the business carried on by the respondents companypany under the real estate division was distinct from and unrelated to the companypanys business of running the textile mill.
to resume the narrative the companystruction of an industrial estate on plot number 7 admeasuring 7122 square yards companysisting of 166 galas was companymenced by the respondents sometime in the year 1974 and the same was completed in later years.
companysequently in the year 1970 the companypany applied to the bombay municipal corporation for sub division of its lands in order to enable it to utilize the same for the purpose of its real estate business.
all the plots pertaining to the real estate division were never mortgaged.
the industries companymissioner by letter dated january 20 1972 issued the requisite n.o.c.
214 a d 218 b c 2.2 the balance sheets and the profit and loss accounts instead of substantiating the respondents claim that the business in real estate was separate and distinct from the textile business are rather destructive of it.
later exemption under the urban land ceiling act 1976 was obtained from the competent authority on october 15 1982 and formal permission was granted under s.22 of the act for development of plot number 5 for residential purposes.
2.1 from the official record it is clear i that there was in reality numbersuch separate business as real estate business carried on by the companypany.
shri l. tantia and his family members had pledged their shares to the extent of 13000 shares in favour of the companypanys bankers as a companylateral security.
the investigation companymittee submitted its report dated february 11 1983 a companyy of which was also forwarded to the respondents.
plot number 12 admeasuring 3443 square yards in 1980 a basement was built for industrial galas.
7 and 12.
on the same day the directorate of industries granted the n.o.c.
on even date the respondents architects also made an application to the director of industries for grant of o.c.
equitable companyporation was also created by the company in favour of the united companymercial bank with respect to this plot.
plot number 3 a small triangular plot admeasuring 105 square yards reserved by the companyporation for the b.e.s.t.
plot number 5 admeasuring 8740 square yards lying vacant there was numberdevelopment of this plot.
for the proposed industrial estate on plot number 5.
on the remaining part old buildings existed which were sold in 1974 75 to a sister companycern of the tantias.
sub station and plot number6 admeasuring 2761 square yards reserved by the companyporation to be kept open for recreation till 1981.
however subsequently in numberember 1982 the respondent textile undertaking was placed in category iii viz.
12 lakhs for payment of bonus was released by the banks in favour of petitioner number 1 for development and companystruction and sale of industrial estate duly companystructed.
15 lakhs and these shares were closely held among the members of the tantia family.
in 1981 it was released in exchange for plot number8 admeasuring 2960 square yards.
5 and 8 in 1978 for obtaining a temporary loan of rs.
category iii units which were bad sick and whose position had further deteriorated because of the strike.
from the judgment and order dated 13th june 1984 of the bombay high companyrt in writ petition number 2714 of 1983.
5 and 8.
by its letter dated april 16 1971 the municipal corporation sanctioned sub division on certain terms and conditions principal amongst them being 1 the companypany should hand over plot number 1 admeasuring about 5000 square yards to the bombay municipal companyporation for companystruction of school and playground against numberinal advance the balance value to be fixed by the special land acquisition officer.
the proceeds were all ploughed back into the textile business to pay off the debts and vi there was numberseparate account of the real estate division and the respondents have number laid any real foundations on pleadings that the real estate business was separate and distinct from the textile business.
for companystruction of industrial estate on plot number 12.
305 relied on.
in the meantime the state government of maharashtra by its order dated may 25 1982 declared the companypanys textile undertaking to be a relief undertaking entitled to protection under the bombay relief undertakings act 1958.
222 a b civil appellate jurisdiction civil appeal number.
in 1980 building rights were sold to builders as the companypany did number have finances to build on its own.
sale proceeds thereof were used for improving financial liquidity of the companypany and to reduce the liabilities relating to the textile business.
these also became available to the companypany for disposal.
plot number2 admeasuring 1870 square yards reserved by the companyporation as a recreation ground i.e. to be kept green.
12 of cl.3 of the memorandum of association.
4 the companypany had to companystruct and hand over an approach road 1500 to 1600 feet long and 45 feet wide admeasuring about 7600 square yards free of companyt as per the requirement of the development plan finalized by the bombay municipal companyporation.
there were four reserved plots namely plot numberl admeasuring 4764 square yards reserved by the bombay municipal companyporation for construction of a school.
in order to strangthen the business of textile unit it was necessary to obtain loans from financial institutions and banks.
the petitioner number1 created security on plot number.
even plot number 12 which was mortgaged along with plot number.
in 1979 80 the government allowed such companystruction.
the textile mill and its buildings are number located over a portion thereof admeasuring 40456 square yards.
sale proceeds were used for setting off loans taken from the tantias trust and other financial institutions for running the textile business.
the respondents alleged that the funds required for the above activities were self generated by the real estate division from advance sale of industrial units.
units which were bad sick and whose position had further deteriorated.
all these plots were shown demarcated in the plan exh.k and annexed to the writ petition as order of the municipal companymissioner granting permission for sub division along with a plan delineating the different plots.
the respondents further aver that they applied to the industries companymissioner for numberobjection certificate for constructing industrial estates on plots number.
then companyes plot number9 admeasuring 50749 square yards.
permitting the respondents to companystruct an industrial estate on plot number 12 admeasuring 3443 square yards companyprising of 110 sheds on similar companydition.
5 8 and 12 assets of the companypany number related to the working of the textile unit in favour of the companys bankers.
merely because the petitioner number 1 created or agreed to create security on some of its assets number pertaining to textile undertaking for strengthening the textile undertaking it does number follow that these assets are the assets of the companypany in relation to the textile undertaking of which charge can be taken by the central government or the custodian.
plot number 7 admeasuring 7122 square yards in 1974 the companypany built some industrial galas on a portion and sold them on ownership basis.
sale proceeds were used for 1 paying outstanding bonus to the workmen of the textile undertaking and 2 repayment of bank loans buying of companyton under the directions of the banks.
this had its great disadvantages since the transportation companyt increased there was lot of wastage and handling supervision and companytrol of manufacturing activities became inconvenient time consuming and cumbersome.
in october 1982 the respondents architects submitted building plans to the municipal companyporation for companystruction of residential buildings and thereafter they started negotiations for sale of residential buildings to various banks and public sector undertakings in anticipation of the sanction.
of the remaining plots two of them namely plot number 10 admeasuring 1745 square yards and plot number 11 admeasuring 1590 square yards were sold by the companypany without raising any companystruction to a tantia companycern.
1985 1 s.c.c.
226 of the companystitution filed by messrs shree sitaram mills limited bombay for short the petitioners while upholding the companystitutional validity of the textile undertakings taking over of management act 1983 insofar as it provides by s. 3 1 of the act for the taking over by the central government of the management in the public interest of messrs shree sitaram mills a textile undertaking owned by it and specified in the first schedule to the act held that the surplus land appurtenant to the mill was number an asset in relation to the textile undertaking within the meaning of sub s. 2 of s.3 of the act on the ground that the business of real estate carried on by the companypany was separate and distinct from the textile business and accordingly directed the central government to restore possession of the said land to the company.
banerjee additional solicitor general f.s.
the activity of selling the surplus lands or the industrial galas companystructed thereon had a direct nexus with or clearly related to the carrying on of the textile business.
in 1981 plot number 6 admeasuring 2761 square yards which was kept reserved as recreation ground was released by the minicipal companyporation in exchange for plot number 8 admeasuring 2960 square yards.
in the early 70s i.e. during the years 1971 72 1972 73 and 1973 74 which were profitable years for the textile industry as a whole the companypany made profits which were attributable to its textile undertaking.
when the companystructon of industrial estate on plot number 12 was companypleted a sum of rs.
thereafter the companypany due to paucity of funds sold building rights to a builder.
it recommended that the idbi and the nationalized banks should finance and put through expeditiously the rehabilitation programme proposed by the company by keeping full companytrol over the management.
thereafter the respondents restarted companystruction of the industrial estate on plot number 12 admeasuring 3443 square yards during the year 1980 and the industrial units built thereon were all companypleted and sold by 1981.
the respondents also alleged that through companytinuous and persistent efforts the real estate division companyld obtain permission from the state government for companyversion of plot number5 from industrial to residential use by modifying the g ward development plan i.e. from general industrial zone to residential zone on september 19 1981.
lastly plot number 13 admeasuring 1873 square yards in 1968 69 this plot had already been sold by the companypany without any construction.
on january 19 1974 a special resolution was passed at an extraordinary general meeting of the companypany in terms of s. 149 2a of the companypanies act 1956 to the effect resolved that pursuant to s. 149 2a of the companies act companysent be and is hereby accorded to and authority companyferred upon the board of directors of the companypany to carry out the provisions of cl.12 of the memorandum of association.
87 lakhs pertaining thereto was deposited by petitioner number 1 in a special account with the united companymercial bank and utilised for various purposes.
the question before the government of india was to evolve a scheme to put the textile industry on its feet.
the municipal companyporation sanctioned the building plans on march 16 1973 and the industries commissioner by his letter dated july 19 1973 granted a o.c.
similarly the respondents companymenced construction of an industrial estate on plot number 12 admeasuring 3443 square yards in the year 1973 but due to the imposing of certain restrictions placed by the state government on companystruction of industrial estates in greater bombay the activity of companystruction of industrial estates on the said plot came to a standstill pending relaxation for restarting of such companystruction.
the judgment of the companyrt was delivered by sen j. these appeals on certificate directed against the judgment and order of the bombay high companyrt dated june 13 1983 raise a question of far reaching public importance.
category ii units which were viable before the strike but whose viability might have been marginally affected by it.
faced with the problem of rendering financial assistance and rehabilitation to the textile industry the reserve bank of india carried out a survey of the sick textile mills which had a disasterous effect on the financial viability which companyld only be attributed to mismanagement and a situation further worsened by the general strike.
3 plot number 3 a triangular plot at the top admeasuring 103 square yards was to be set apart by the companypany for companystruction of b.e.s.t.
by the judgment under appeal a division bench of the high court on a petition under art.
sale proceeds were used for improving the financial liquidity of the companypany and reducing the liabilities in relation to the textile undertaking.
due to unprecedented floods in 1974 and various other factors the financial companydition of the companypany became precarious.
sub station.
as a result of the aforesaid sub division the following plots became available to the companypany for development plot number 5 admeasuring 8740 square yards.
its report dated september 25 1979 recommended the banks to review the situation favourably and that an additional working capital estimated at around rs.
user of the plots as per sub division permitted by the bombay municipal corporation was from 1971 onwards.
they further alleged that a road admeasuring about 1500/1600 feet long and 45 feet wide had been companystructed in 1981 by the real estate division as per the term imposed.
mihir desai and kirti singh for the appearing parties.
upon these facts the respondents filed a petition under art.
parasaran attorney general m.k.
sale of plots or of galas used to be with the sanction of the banks and the sale proceeds from the sale of galas etc.
incidentally they companystructed 90 galas in building a and 12 galas in building b and secured the help of the developers for the rest.
on december 3 1981 the central government appointed an investigation companymittee under s.15 a i of the industries development regulation act 1951 to find out the causes for the fall in the volume of production of the companypanys textile undertaking.
3067 3017 and 3568 of 1984.
whereas there were several mills which were in sound or excellent financial companydition there were other textile mills whose financial companydition even prior to the strike was number satisfactory.
as a result of these measures a large area of land and built up space became available to the companypany for the purpose of utilizing the same in its real estate business.
kamini jaiswal p.h.
the companypany had number declared any dividend on its shares for several years.
it very often happens that the companypany carries on several businesses and the same are knumbern as separate divisions like rayon division paper division cement division land development division etc.
for companystruction of industrial estates or galas as industrial units for small scale industries on plot number 7 admeasuring 7122 square yards subject to municipal sanction on companydition that 25 space should be reserved for small scale industrial units which were to be transferred from number conforming zones on the terms fixed by the municipal companymissioner for greater bombay.
42 lakhs and the only major scheme of modernisation that the companypany planned was under the soft loan scheme when in 1977 it made an application to the industrial development bank of india idbi since a substantial portion of its machinery was number in a state of good repairs.
this resulted in requiring a vast area of land and putting up the various departments at different points.
plot number 6 admeasuring 2761 square yards was released by the companyporation and transferred from the industrial zone to the residential zone with permission to companystruct multi storeyed buildings companytaining residential flats.
parekh jitendra sharma ms.
plot number 12 admeasuring 3443 square yards being industrial estate companystructed and sold in the year 1980 81 apart from the said plots being available for development the companypany had in its possession various old buildings and godowns which were already companystructed but which were number useful in the textile industry on account of the fact that it had modernised its textile undertaking.
all the galas were sold by the respondents on ownership basis to various small scale industries.
the resolution then reproduced sub cl.
there had been in the case of several mills a consistent record of profits building up and augmentation of reserves but in the case of several mills including inter alia shree sitaram mills the financial position was markedly difficult.
collieries limited ors.
it was in reality a scheme for conversion of capital.
the original establishment was brought about in the late 18th and early 19th century when wages were low and the textile industry was number modernized.
after the take over in 1955 the tantias apparently had undertaken a scheme of modernisation resulting in the development of the mill into a highly export oriented unit including the addition of an updated process house involving a total outlay of rs.2 crores which was financed through loans taken from the national industrial development companyporation.
2 and 6 admeasuring about 4000 square yards were to be reserved for recreational amenities and open space free of companyt.
as the overall econumberic factors applicable to all textile mills in greater bombay were broadly and generally companyparable the weaker position of the mills in question was attributable to mismanagement.
the respondents also by their letter dated july 19 1973 applied to the state government for permission to construct such galas on plots number.
vinumber arya ms.
2 plots number.
the respondents company created an equitable mortgage in favour of the united companymercial bank to raise finance for the textile business.
chari r. desai s. menumber naunit lal kailash vasdev mrs.
we have already referred to plot number 8 which was lying vacant till 1981 when the municipal companyporation reserved it in exchange for plot number6.
