From the Judgment and Order dated 1 5 1979 of the Delhi High Court in Civil Writ No.
On April 19, 1978, three petitioners, namely, the Company through its Joint Secretary, Shri Bhim Singh Gupta, its Managing Director, Dr. Rajaram Jaipuria, and its subsidiary companypany, named Swadeshi Mining and Manufacturing Company, through its Directors and Shareholders filed a writ petition under Article 226 of the Constitution in the Delhi High Court against the Union of India and the National Textile Corporation to challenge the validity of the aforesaid Government Order dated April 13, 1978.
The writ petition was further supplemented by subsequent affidavits and rejoinders.
56.49 lakhs.
The Union of India and the National Textile Corporation Ltd., who has been authorised to assume management of the undertakings companycerned were impleaded, as respondents.
In the accounting year 1976 77, only one new encumbrance was created by the Company on its fixed assets.
203.73 334.22 361.06 322.41 The borrowings of the Kanpur, Pondicherry, Naini, Udaipur, Maunath Bhanjan and Rae Bareilly Units of the Company as on March 31, 1978 against current assets were Rs.
of India Seal .
The companysolidated annual accounts of the Company were then prepared from such annual accounts at the registered office of the Company at Kanpur, and after audit, were placed before the shareholders of the Company.
2.8 crores in 1976 77.
answered this three fold question as follows Section 18AA 1 a b excludes the giving of prior hearing to the party who would be affected by order thereunder.
1629 and for R. 1 in C.A. No.
It shows that the Company suffered a loss of Rs.
200.34 Lakhs after taking into account depreciation of Rs.
210 lakhs.
This order shall have effect for a period of five years companymencing from the date of its publication in the Official Gazette.
The writ petition first came up for hearing before a Division Bench who by its order dated August 11, 1978, requested the Chief Justice to refer it to a larger Bench.
Ultimately, the reference came up for companysideration before a Full Bench of five Judges to companysider the question, which was reframed by the Bench as under Whether in companystruing Section 18AA of the Industries Development and Regulation Act, 1951, as a pure question of law companypliance with the principle of audi alteram partem is to be implied.
SARKARIA,J. These appeals arise out of a judgment, dated May 1, 1979, of the High Court of Delhi, in the following circumstances Appellant No.
All the encumbrances on fixed assets except the encumbrances of Rs.
S. Nariman, S. D. Parekh, A. D. Mehta, Lalit Bhasin, Vinay Bhasin and Vineet Kumar for the Appellants in C.A. No.
48.79 lakhs, though the trading results showed a gross profit of Rs.
210 lakhs by the issue of further bonus shares.
Pondicherry 170.52 Mtrs 178.77 Mtrs 176.54 Mtrs Kanpur 318.75 Mtrs 472.12 Mtrs 238.22 Mtrs On April 13, 1978, the Government of India in exercise of its power under clause a of sub section 1 of Section 18AA of the IDR Act, passed an order hereinafter referred to as the impugned order which reads as follows SO 265 E /18AA IDRA/78 Whereas the Central Government is satisfied from the documentary and other evidence in its possession, that the persons in charge of the industrial undertakings namely, M s. Swadeshi Cotton Mills, Kanpur, M s. Swadeshi Cotton Mills, Pondicherry, M s. Swadeshi Cotton Mills, Naini, M s. Swadeshi Cotton Mills, Maunath Bhanjan, M s. Udaipur Cotton Mills, Udaipur, and Rae Bareilly Textile Mills, Rae Bareilly of M s. Swadeshi Cotton Mills Company Ltd., Kanpur hereinafter referred to as the said industrial under takings , have, by creation of encumbrances on the assets of the said industrial undertakings, brought about a situation which has affected and is likely to further affect the production of articles manufactured or produced in the said industrial undertakings and that immediate action is necessary to prevent such a situation Now, therefore, in exercise of power companyferred by clause a of sub section 1 of Section 18AA of the Industries Development and Regulation Act, 1951 65 of 1951 , the Central Government hereby authorises the National Textile Corporation Limited hereinafter referred to as the Authorised person to take over the management of the whole of the said industrial undertakings, subject to the following terms and companyditions, namely The authorised person shall companyply with all the directions issued from time to time by the Central Government the authorised person shall hold office for a period of five years from the date of publication of this order in the Official Gazette the Central Government may terminate the appointment of the authorised person earlier if it companysiders necessary to do so.
The Company challenged the order of take over by a writ petition in the High Court of Delhi.
The Bench by a majority companysisting of Deshpande, J.,R. Sacher and M. L. Jain, JJ.
256.78, 183.92, 271.05, 70.72, 47.98 and 55.82 lakhs respectively.
It was incorporated as a private companypany with an authorised capital of Rs.
After the decision of the reference, the case was reheard on merits by a Bench of three learned Judges companysisting of Deshpande, C.J., Anand and M. L. Jain, JJ.
The case was then heard by a three Judge Bench who by their order dated October 12, 1978, requested the Honble the Chief Justice to companystitute a still larger Bench to companysider the question whether a prior hearing is necessary to be given to the persons affected before the order under Section 18AA is passed.
On May 31, 1969, the Central Government passed an order appointing a Committee for investigation into the affairs of the Company under Section 15 of the I.D.R. Act.
Annual accounts of the six industrial undertakings were first prepared separately in seven sets which were separately audited.
In 1948, the paid up capital of the Company was raised to Rs.
70 lakhs on the fixed assets of Naini Unit for gratuity funding to get the benefit of Section 44A of the Income tax Act were created prior to March 31, 1976.
10/ each in Swadeshi Polytex Ltd., representing 30 per cent of the total equity capital value of Swadeshi Polytex Ltd., the intrinsic value whereof exceeds Rs.
4 in CA 2087 Suresh Parik and S. Swarup for Respondent No.
Naini Nil Nil 70.00 70.00 On fixed assets of Naini for gratuity.
Between 1956 and 1973, the Company set up and or acquired five further Textile Units in Pondicherry, Naini, Udaipur, Maunath Bhanjan and Rae Bareilly.
52.50 lakhs by issue of bonus shares.
The last Balance Sheet and Profit Loss Account adopted by the shareholders and published by the Company relates to the year ending March 31, 1977.
Maun 11.40 5.71 Nil Nil On fixed ath assets of Bhanjan Unit.
In the year 1946, the Company had only one undertaking, a Textile Unit at Kanpur, known as The Swadeshi Cotton Mills, Kanpur.
The Company made companysiderable progress during the years 1957 to 1973.
CIVIL APPELLATE JURISDICTION Civil Appeal Nos.
N. Tarkunde, S. Ganesh, K. Vasudev and T.V.S.N. Chari for the Appellants in CA 1857/79.
In 1946, the Jaipuria family acquired substantial holding in the Company.
Kanpur, 106.20 75.31 50.67 15.97 On new Rae machinery Bareilly of Kanpur, Naini Rae Bareilly Naini Units under de ferred payment credit.
Sd R. Ramakrishna Joint Secretary to the Govt.
Soli J. Sorabjee, Solicitor General, S. Ganesh Vasdev and T.V.S.N. Chari for Respondent No.
30 lakhs in 1921 by the Horseman family by companyverting their partnership business into a Private Joint Stock Company.
73.27 lakhs which was number provided in accounts.
Udaipur Nil 25.00 25.00 25.00 On fixed assets of Udaipur Unit for gratuity fund.
The Company maintained separate books of accounts for each of its six industrial undertakings.
was delivered by Sarkaria, J. O. Chinnappa Reddy, J. gave a dissenting Opinion.
2087/79.
1857 and 2087/79.
408 of 1978.
Kanpur Nil 150.00 150.00 150.00 On fixed assets of Kanpur, Maunath Bhanjan Pondi cherry Units for wages and Bank Dues 1 2 3 4 5 6 vi Company 67.53 68.45 59.44 59.44 On diesel generating sets of Kanpur, Naini, Pondi cherry, Maunath Bhanjan and Rae Bareilly Units.
After companypleting the inquiry, the Investigating Committee submitted its report to the Government who thereafter on November 24, 1970, passed the impugned order under Section 18A authorising the Corporation to take over the management of the Company for a period of five years.
Its capital was raised in 1923 to Rs.
Jaipuria family is the present management.
Between 1975 and 1978, the Company created the under numbered encumbrances on the fixed assets Unit As on As on As on As on Remarks 31 3 75 31 3 76 31 3 77 31 3 78 in lakhs in lakhs 1 2 3 4 5 6 Pondi 2.40 Nil Nil Nil On fixed chery assets of of Pondi cherry Unit.
86.23 lakhs after providing depreciation of Rs.
Kanpur 13.44 9.75 5.95 2.00 On fixed ICICI asset of Kanpur Unit.
2 in CA 1629.
From and after April 1973, the Company maintained separate sets of books of accounts of the businesses and assets other than of the said six industrial undertakings.
32 lakhs and thereafter in 1945 to Rs.
M. Chopra for Intervenor.
S. Nariman, B. P. Maheshwari and Suresh Sethi for Respondent Swadeshi Cotton Mills Co. Ltd. in CA No.
1 crore in 1976 77.
Subsequently, on July 12,1979, a similar certificate was granted by the High Court to the Union of India and the National Textile Corporation Ltd. Consequently, the Company, the Union of India and the National Textile Corporation have filed Civil Appeals 1629, 2087 and 1857 of 1979, respectively, in this Court.
1629, 1857 2087 of 1979.
Soli J. Sorabjee, Solicitor General and Girish Chandra for Appellants in CA 2087 and for Respondent UOI in CA 1629/79.
4.3 crores in 1973 74, but declined to Rs.
The Judgment of R. S. Sarkaria and D. A. Desai, JJ.
The Company claims, it has substantial income from other businesses and activities including investments in its subsidiary and in other shares and securities which include substantial holding of 10,00,000 Equity Shares of Rs.
By issue of further bonus shares in 1946, the capital of the Company was increased to Rs.
There were other companytentions also which were canvassed by the learned companynsel for the parties at companysiderable length.
5 crores.
122.50 lakhs.
V. S. N. Chari for Respondent No.
Udaipur 2.76 Nil Nil Nil On fixed assets of Udaipur Unit.
The reserves and surplus of the Company increased from Rs.
3 in CA 2087.
2.3 crores in 1957 to Rs.
1 in Civil Appeal 1629 of 1979 is Swadeshi Cotton Mills Co. Ltd. hereinafter referred to as the Company .
The subscribed and issued capital companysisting mainly of the bonus shares has since remained companystant at Rs.
The Balance Sheet showed that the Company suffered a loss of Rs.
294.82 lakhs after providing for depreciation.
The Company made over all profits up to the year 1969 and even thereafter up to 1975.
93.93 lakhs and gratuity of Rs.
During the year ending March 31, 1976, the Company again suffered a loss of Rs.
