Skip to content


Janki Sugar Mills Co. Ltd. Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil;Constitution;Labour and Industrial
CourtAllahabad High Court
Decided On
Case NumberCivil Misc. Writ No. 885 of 1974
Judge
Reported inAIR1976All99
ActsIndustries (Development and Regulation) Act, 1951 - Sections 15 and 18AA; Industries (Development and Regulation) (Amendment) Act, 1971; Constitution of India - Article 226
AppellantJanki Sugar Mills Co. Ltd.
RespondentUnion of India (Uoi) and ors.
Appellant AdvocateS.K. Suri, ;S.C. Kharey and ;S.S. Bhatnagar, Advs.
Respondent AdvocateB.D. Agrawal, Standing Counsel
DispositionPetition dismissed
Excerpt:
labour and industrial - appointment of authorised controller - sections 15 and 18-aa of industrial (development and regulation ) act, 1951and article 226 of constitution of india - writ petition against government notification under section 18-aa - section 18-aa empowers central government to take over industrial undertaking without investigation and appoint authorised controller - compliance with provision of section 15 before appointing authorised controller not necessary - provision directed to empower central government to take speedy action against the defaulting undertakings - principle of natural justice applies to administrative proceedings - parliament empowered to exclude principle in the interest of administrative efficiency - held, writ petition failed. - cantonments.....orderk.c. agarwal, j.1. on 15-1-1973, the government of india published a notified order, in exercise of the powers by section 18-aa of industries (development and regulation) act, 1951, hereinafter referred to as the act, authorising the uttar pradesh state sugar corporation limited, to take over the management of the shree sugar mills and company, doiwala district dehradun (u. p.) (hereinafter referred to as the petitioner firm) for a period of one year from the date of its publication in the official gazette. before this period of one year could expire on 27-12-1973 in exercise of the powers conferred by sub-section (2) of section 18-aa read with sub-section (2) of section 18-a of the act, the central government made an amendment in the aforesaid notified order dated 15-1-1973.....
Judgment:
ORDER

K.C. Agarwal, J.

1. On 15-1-1973, the Government of India published a notified order, in exercise of the powers by Section 18-AA of Industries (Development and Regulation) Act, 1951, hereinafter referred to as the Act, authorising the Uttar Pradesh State Sugar Corporation Limited, to take over the management of the Shree Sugar Mills and Company, Doiwala district Dehradun (U. P.) (hereinafter referred to as the petitioner firm) for a period of one year from the date of its publication in the Official Gazette. Before this period of one year could expire on 27-12-1973 in exercise of the powers conferred by Sub-section (2) of Section 18-AA read with Sub-section (2) of Section 18-A of the Act, the Central Government made an amendment in the aforesaid notified order dated 15-1-1973 directing that for the words 'one year' the words 'five years' would be substituted. As a result of this amendment the order of appointment of the auhorised controller became five years in place of one year. The petitioner firm, therefore, filed the present writ petition on 12-2-1974 challenging the aforesaid notified orders dated 15-1-1973 and 27-12-1973 appointing the authorised controller over its factory.

2. The petitioner firm alleged that it was a partnership concern consisting of nine partners. For the purpose of manufacture of sugar the petitioner firm started a vacuum pan sugar factory at Doiwala several years back. In the year 1970 the factory started crushing sugarcane with effect from 16-12-70. Between 16-12-1970 and 14-3-1971 huge quantity of sugarcane was crushed by it, but as it could not pay its price, the Cane Commissioner, U. P. issued two recovery certificates on 25-2-1971. As the amount was not paid by the petitioner firm, the Collector, Dehradun on 15-3-1971 in exercise of the powers under Section 279 (1) (g)/286-A of the U. P. Zamindari Abolition and Land Reforms Act, attached the property of the petitioner firm and appointed one Sri O. P. Saxena, Additional District Magistrate as Receiver for the realisation of the. dues for a period till further orders. The order of appointment of the Receiver was challenged by means of another writ petition No. 1983 of 1971 in this court. The petitioner claimed that although the Receiver had been appointed by the Collector for the realisation of Rs. 19,60,762.16 paisa but despite the fact that he paid a sum of Rs. 27,82,000 within six weeks of his appointment, his appointment wascancelled. During the pendency of the aforesaid writ petition challenging the appointment of the Receiver, the Government of India took over the management of the petitioner concern under Section 18-AA of the Act and appointed the Uttar Pradesh Sugar Corporation, Lucknow as its authorised controller. The petitioner firm has asserted that this appointment is wholly illegal and without jurisdiction, therefore, the initial appointment order dated 15-1-1973 and thereafter its extension dated 27-12-1973 are liable to be quashed.

3. The writ petition has been contested by the Union of India as well as the U. P. State Sugar Corporation and the allegations have been denied. In an affidavit filed on behalf of the Central Government it has been stated that the total amount of cane price dues towards the petitioner firm was Rs. 61,28,668.11 out of which an amount of Rs. 29,28,455.25 paisa was paid upto 30-4-1971 leaving a balance of Rs, 32,00,212,86. At the time when the petitioner's factory was closed on 24-5-1971 the total cane dues were Rupees 73,34,106.08 out of which a sum of Rupees 47,28,455.25 was paid leaving a balance of Rs. 26,05,651.6. Taking the amount of commission and interest as on 21-5-1971 the total amount payable was Rupees 28,20,226.11. In addition Rs. 5,38,678.31 paisa was due as purchase tax for the years 1968-69, 1969-70 and 1970-71. It has further been stated in the counter-affidavit that due to complete neglect of even ordinary repairs and maintenance work for a long tune, the performance of the factory was not at all satisfactory. The partners of the firm showed utter indifference in its management and did not take any interest in improving its financial position or its working efficiency. Contrary to this five out of nine partners diverted their funds As a result their share of investment came down from Rs. 10.50 in 1966 to Rs. 6.48 lakhs in 1971. Justifying the appointment of the authorised controller the Union pleaded that in order to avert loss of production of an essential commodity, the Government of India had to appoint an authorised controller. Dealing with the question of an opportunity before issuing the impugned order the Union of India asserted that there being no provision in the Act, it was not called upon to give such an opportunity to the petitioner firm.

4. In the rejoinder affidavit the petitioner firm has refuted the allegations made in the counter-affidavit and reiterated those which were made in the initial affidavit.

5. In the background of these facts and allegations, Sri S. C. Khare, appearing for the petitioner raised the followingpoints assailing the appointment of the authorised controller:--

(1) that the petitioner having not been afforded an opportunity to meet the ground on which the appointment of the authorised controller was made, the said order infringed the principles of natural justice, hence was void.

(2) that the withdrawal of contribution made by the partners did not amount to diversion of funds within the meaning of Section 18-AA of the Act hence the ground of appointment of the authorised controller being non-existent, the appointment was contrary to law,

(3) that the Receiver being the person in charge of the factory on the date of appointment of authorised controller, the provisions of Section 18-AA were not attracted. Inasmuch as an appointment of an authorised controller under Section 18-AA can be made only when the factory is in the charge of the management.

(4) that the factory was in the sound financial position, hence the appointment of authorised controller was not warranted.

6. The first question that falls for determination is whether before passing an order of 'take over' under Section 18-AA it was incumbent on the Government of India to give reasonable opportunity to the petitioner firm for making suitable representation against the proposed take over. In order to understand the point urged I must first read the relevant portion of Section 18-AA of the Act. The same is as under :--

'18-AA. Power to take over industrial undertakings without investigation under certain circumstances-- (1) Without prejudice to any other provision of this Act, if, from the documentary or other evidence in its possession, the Central Government is satisfied, in relation to an industrial undertaking, that-

(a) the persons in charge of such industrial undertaking have, by reckless investments or creation of incumbrances on the assets of the industrial undertaking, or by diversion of funds, brought about a situation which is likely to affect the production of articles manufactured or produced in the industrial undertaking, and that immediate action is necessary to prevent such a situation; or

(b) It has been closed for a period of not less than three months (whether by reason of the voluntary winding up of the company owning the industrial undertaking or for any other reason) and such closure is prejudicial to the concerned scheduled industry and that the financial condition of the company owning the industrial undertaking and the condition of the plant and machinery of such under-taking are such that it is possible to restart the undertaking and such restarting is necessary in the interest of the general public, it may, by a notified order, authorise any person or body of persons (hereafter referred to as the 'authorised person') to take over the management of the whole or any part of the industrial undertaking or to exercise in respect of the whole or any part of the undertaking such functions of the control as may be specified in the order.'

7. This Section 18-AA was brought in the Statute Book by means of the Indian Parliament Act No. 72 of 1971. The Act itself had come into force on the 8th May 1952. The Act was passed to provide for the development and regulation of certain industries. Section 15 of the Act invests power on the Central Government to cause investigation to be made into scheduled industries or industrial undertakings. If after making investigation referred to in Section 15 any action is desired to be taken by the Central Government, Section 16 provides the machinery for the same. As it was thought that these provisions were insufficient to vest control of industries in the Central Government, the Parliament made an amendment in the said Act providing for Section 18-A in Chapter III-A. This section invested the Central Government with power to assume management or control of an industrial undertaking in cases (a) where an industrial undertaking to which directions have been issued in pursuance of Section 16 has failed to comply with such directions or (b) where an industrial undertaking in respect of which an investigation has been made under Section 15 is being managed in a manner highly detrimental to the public interest. Under this section the Central Government, therefore, could take over the management covered by Sections 15 and 16. In order to confer wider control and to enable the Central Government to take immediate action the Ordinance No. 20/71 was promulgated in 1972 conferring power on the Central Government to take over industrial undertaking without investigation under certain circumstances. These circumstances are those where immediate actions are necessary to prevent fall or stoppage of production. This section was enacted to clothe the Central Government to take over the management without requiring it to investigate into causes leading to the situations mentioned in Clauses (a) and (b) of Section 18-AA comparison of the two provisions viz. Section 18-A with Section 18-AA would show that the latter provision is more drastic than the earlier. Taking the scheme behind Section 18-A it will have to be conceded that it is incumbent on theGovernment to give at some stage a reasonable opportunity to the undertaking concerned for making representation against the proposed take over. In fact Rule 5 framed under Section 30 of the Act also provides for opportunity of hearing. Such an intention can be found from the language employed in Section 18-A itself. It is, however, not possible to interpret Section 18-AA in the same manner. Starting from the marginal note it would be seen that the same reads 'power to take over industrial undertaking without investigation under certain circumstances. The use of the word 'without' denotes an intention that the legislature does not intend any enquiry to be made before appointment of the authorised controller to be made. As observed by the Supreme Court in India Aluminium Co. v. K. S. E. Board, AIR 1975 SC 1967. It is true that the marginal note cannot afford any legitimate aid to construction of a section, but it can certainly be relied upon as indicating the drift of the section'. To use the words of Collins M. R. in Bushwell v. Hammond, (1904) 2 KB 563 'to show that the section was dealing with.' It is apparent from the marginal note that an action under this provision can be taken without an investigation being made against the undertaking concerned. Counsel for the petitioner is not right in contending that the marginal note does not provide any clue or help in solving the problem.

8. Statements of Objects and Reasons given in the Bill further throws light on this aspect. It is mentioned in its paragraph 3 that :

'with a view to ensuring speedy action by Government, it has been provided in the Bill that if the Government has evidence to the effect, that the assets of the company owning the industrial undertaking are being frittered away or the undertaking has been closed for a period not less than three months and such closer is prejudicial to the concerned scheduled industry and the condition of the plant and machinery installed in the undertaking is such that it is possible to restart the undertaking and such restarting is in the public interest, Government may take over its management without an investigation.'

9. The objects would also indicate that the intention was to clothe the Government with power which could entitle it to take speedy action against the defaulting undertakings. It has now been ruled by the Supreme Court that the objects of the Bill can be looked into for a limited purpose.

10. Apart from this, the language employed in this section also leads to the same conclusion that this does not intendany enquiry to be made before proposed taking over of a factory under it. This authorises the Central Government to pass an order appointing authorised controller on the basis of documentary and other evidence in its possession. It does not require the evidence available to the Central Government against a factory to be shown to it for a confronted enquiry.

11. Since the legislature intended to avoid confronted enquiry it deliberately mentioned the same by providing that an action under this section can be taken by the Government on satisfaction derived from evidence in its possession. Further, Clauses (a) and (b) of Section 18-AA provide for immediate action in order to avert a situation which might affect the production of articles manufactured or produced in the industrial undertaking. Laying down that an obligation is cast on the Central Government to give a show cause notice before proposed take-over any obstruct taking of the prompt action and would defeat the object for which this section is enacted (sic). The use of the words 'that immediate action is necessary to prevent such a situation' in Section 18-AA(1)(a) show that the power under section has been given for being exercised instantly or without any delay on occasions affecting production or manufacture. This shows that in a case covered by the aforesaid clause appointment of an authorised controller can be immediately made without spending time in any enquiry or investigation. Similarly, under Clause (b) of Sub-section (1) of Section 18-AA if a factory has been closed for a period of three months or more than that period and if such closure is prejudicial to the concerned schedule industry and that the financial condition of the company and the condition of the plant and machinery are such that it is possible to restart the undertaking and such re-starting is necessary in public interest, then again the factory can be taken over without any prior proceedings making enquiries about the same. These are two special or grave situations.

12. Section 18-AA of the Act would thus be seen proceeds with precision and elaborate detail to prescribe the steps required to be taken before taking over an undertaking.

13. The purpose of giving to the Central Government the power to take over a factory in grave emergency contemplated by Clauses (a) and (b) of Section 18-AA would be frustrated if the compliance of the procedure prescribed by Section 15 is required. For the purpose of holding that such a procedure should have been followed in the instant case, the provision of Section 18-AA will have to be redrafted, I, therefore, do notfind merit in the first contention of the learned counsel for the petitioner that an action under Section 18-AA could not be taken in respect of the petitioners' factory without complying with the proceedings of Section 15 of the Act. The learned counsel for the petitioner also suggested that the words 'without investigation' used in Section 18-AA denote something like police investigation prescribed under the Criminal P. C. I am unable to accept this contention as I do not find any basis for the same. The word 'investigation' has not been in Section 18-AA in the sense in which the learned counsel for the petitioner wanted it to foe read. It has been used in a different sense.

14. It may be useful here to refer to the speech of the Minister of Industrial Development made in the Raiya Sabha moving The Industrial (Development and Regulation) Amendment Bill, 1971. This speech gives a certain reason for the proposed amendment. The question whether a speech, made by a Minister in Parliament, can be looked into by a court for the purpose of finding the object of the proposed amendment, came for consideration before the Supreme Court in Civil Appeal Nos. 2130 and 2131 of 1970 decided on 28-8-1975 = (Reported in AIR 1976 SC 10). The Sole Trustee Loka Shikshana Trust v. Commr. of Income-tax, Mysore, Hon. Beg J. has observed as under:--

'If the reason given by him only elucidates what is also deducible from the words used in the amended provision, we do not see why we should refuse to take it into consideration as an aid to & correct interpretation. It harmonises with and clarifies the real intent of the words used.....'

15. Krishna Iyer, J. of the Supreme Court, speaking for the court in Civil Appeal No. 2129 of 1970 Indian Chambers of Commerce v. C. I. T. West Bengal decided on 17-9-1975 = (Reported in AIR 1976 SC 348) expressed his agreement with the view taken by Hon. Beg J. in the aforesaid case. After referring to the speech made by the Minister with regard to the object of the section with which he was dealing with he observed that the interpretation of the provision must naturally fall in line with the advancement of the object. These authorities of the Supreme Court, therefore, make it clear that a speech made by a Minister can be referred to, although for a limited purpose indicated above. I have already indicated earlier that Section 18-AA of the Act enables the Government to take over the management in special circumstances without prior notice. The said interpretation is based on the language employed in Section 18-AA of the Act. In his speech the Minister also stated that:

'About the second provision that has been brought in, it has been found that sometimes these inquiries are time consuming. In this period some of the owners of these companies go into reckless investments and creation of encumbrances to create further difficulties when these companies are taken over. In order to plug such a loophole, the amendment is to the effect that in such cases, if there is a documentary or other evidence with the Government, the Government shall be able to take-over such a company even without an investigation.' This Ordinance had to be promulgated at a stage when there were large number of industries which were closing down one after another. We were on the threshold of war. Pakistan was at that time threatening with a war. We could not afford to see our industries closing down one after another.'

16. The next question argued by the learned counsel for the petitioner in the alternative was that even if it is held that investigation as required by Section 15 was not necessary in a case covered by Section 18-AA of the Act, he urged that the principle of natural justice still applies and that as the petitioner had not been afforded any opportunity of showing cause against taking over of the factory by the Central Government, the said order is void. He urged that the rules of natural justice govern and apply to administrative proceedings, therefore, even if the Government was exercising the administrative power while making an order under Section 18-AA of the Act, it should have given an opportunity of hearing to the petitioner.

17. It is now a settled proposition of law that even administrative orders must be preceded by notice and hearing if the proceeding will have adverse civil consequences upon a man. Out of the two rules of natural justice that a man should not be a Judge of his case and that no one should be condemned unheard, the requirement of service of notice before a proposed action flows from the latter. Although at one time it was said that the principles of natural justice were sadly lacking in precision, but Lord Reid in the memorable decision in Ridge v. Baldwin, (1964) AC 40 scotched the heresy observing that merely because the principles of natural justice are vague that did not mean that they were meaningless. Lord Reid pointed out that natural justice requires that the procedure before any tribunal which is acting judicially should be fair in all circumstances, but said that he would be sorry to see the fundamental general principle degenerated into a series of hard and fast rules. Since then the Supreme Court has held in a number ofcases that a decision contrary to principles of natural justice of audi alteram partem would be void. It is, therefore, not necessary to make a comprehensive discussion of those authorities which have been cited by petitioner's counsel on this point. Suffice to mention that the applicability of the principles of natural justice to administrative proceedings is not beyond pale of any controversy. This further vanishes the difference between administrative and quasi-judicial proceedings.

18. It is, however, indisputable that Parliament may expressly dispense with the need for the notice of hearing although it is prima facie required. In the interest of administrative efficiency and expedition applicability of principles of natural justice can be excluded by making a provision, by implication to that effect. In his book on Judicial Review of Administrative Act S. A. De Smith, IIIrd Edition, p. 167 has stated the law that in administrative law a prima facie right to prior notice, an opportunity to be heard may be held to be excluded by implication if any of the factors mentioned by him is present. Among the factors which is stated by him the one relevant for our purpose is where an obligation to give notice an opportunity to be heard would obstruct the taking of prompt action, especially action of a preventive or remedial nature.' He says at page 168 of the said Book as under :

'The urgency may warrant disregard of the audi alteram partem rule in other situations is generally conceded.....'

19. The Supreme Court in A. K. Kraipak v. Union of India, AIR 1970 SC 150 and in the subsequent decision of Union of India v. J. N. Sinha, AIR 1971 SC 40, laid down that the rules of natural justice are neither embodied rules nor can they be elevated to the position of fundamental rules. These rules can operate only in areas not covered by any law validly made. They do not supplant but supplement it. If a statutory provision can be read consistently with the principles of natural justice, the court should do so but if a statutory provision either specifically or by necessary implication excludes the application of any rules of natural justice, then the court cannot ignore the mandate of the legislature or the statutory authority and read into the concerned provision the principles of natural justice.

20. These pronouncements of the Supreme Court leave no room for doubt that where there is a provision to the contrary specifically or by necessary implication in any Statute overruling the application of principles of natural justice, the same would prevail.

21. I have already analysed Section 18-AA. The analysis of the same would show that there are sufficient indications that the principles of natural justice are not to apply. Section 18-AA require action with promptitude. It is, therefore, impossible to imply a term that the rules of natural justice had to be observed. In Gaiman v. National Association for Mental Health, 1971 Ch D 317 at p. 336 Megarry, J. holding that the principles of natural justice did not apply to that case, observed as under:--

'The power under Article 7 (b) is one which must be exercised thus, and the exercise of this power is one in which the question that may arise is not only whether it is to be exercised, but when. Where, as in the present case, their duty may impel the council to exercise the power with great speed, whereas natural justice would require delay. I think that this indicates that the council is intended to toe able to exercise its powers unfettered by natural justice.'

22. As Section 18-AA is also meant to meet urgent cases where an action is required to be taken with speed the observations of Megarry, J. would apply with full force to the facts of the present case. I, therefore, find that the principles of natural justice are inapplicable to the instant case.

23. There is another aspect of the matter which deserves to be noticed in the present case. The same being that the initial order of appointment of the authorised controller was made by the Central Government on 15-1-1973. The life of this order was one year from the date of its publication in the official gazette. Before its period of one year could expire another notified order dated 27-12-1973 was made by the Central Government in exercise of power conferred by Sub-section (2) of Section 18-AA, By the said order the words 'one year' for the words 'five years' were substituted. As a result of the aforesaid amendment made the period of appointment of authorised controller became five years. The petitioner did not challenge the order dated 15-1-1973. He kept quiet for over a year and filed the present writ petition in this court challenging both the orders dated 15-1-1973 and 27-12-1973 in February 1975. The question that arises for consideration is whether the principles of waiver could be applied against the petitioner for holding that as the petitioner did not challenge the first order dated 15-1-1973 within reasonable time, his right to challenge the same as well as the subsequent order dated 27-12-1973 should be held to have been extinguished on account of laches. It is to be noted in this connection that the appointment of the authorised controller was made under Section 18-AA for the reason that by diversion of funds the petitioner firm brought about a situation, which was likely to affect the production of sugar manufactured in the said undertaking and that immediate action was necessary to prevent such a situation. After the aforesaid order was passed the factory was taken over by the authorised controller and the management of the same was started toy him. As like conditions existed the Central Government passed another order on 27-12-1973. Since by the very nature the conditions continued to exist the Central Government was not required to satisfy itself with regard to the conditions for the exercise of the power under Section 18-AA again. The position, therefore, is that the second order is in fact based on the first order end as the first order was not challenged by the petitioner firm by means of a writ petition within reasonable time, he cannot now be permitted to challenge the same by contending that as the first order dated 15-1-1973 had been continued by the second order dated 27-12-1973 the petition filed by him challenging both the orders in February 1973 could be held to be within time. As stated above the second order is continuation of the first and the cause of action, if any, accrued to the petitioner when the first order was passed.

24. In K. P. Khetan v. Union of India, AIR 1957 SC 676 the Supreme Court was required to consider the appointment of authorised controller under Section 18-A. In the said case the authorised controller was appointed by the order dated 8-11-1955. His appointment was thereafter continued by the amending order dated 7-11-1956. The question raised in the aforesaid case was that the order dated 7-11-1956 amending the order dated 8-11-1955, having not been passed without making a fresh investigation under Section 15 of the Act, was invalid. Rejecting the contention the Supreme Court held that fresh investigation was not required to be made because the management had not since 8-11-1955 vested in the owner and by the very nature the conditions continued to exist till the management went into the hands of the owner again. This decision of the Supreme Court supports the contention that the second order being in continuation of the first, the petitioner should have challenged the validity of the first order within time. As the petitioner did not do so, the writ petition is liable to be rejected on this ground alone.

25. The next contention raised by counsel for the petitioner was that the withdrawal of contribution made by the partners did not amount to diversion offunds within the meaning of Section 18-AA of the Act. The submission made is without substance. Section 18-AA lays down that in case funds are diverted and the same has affected the manufacture of the product in which the factory is engaged, the same would be a ground for appointment of an authorised controller. It has not been denied by the petitioners that they had diverted their share investment to the extent of 6.48 lacs out of 10.50 lacs. As this huge amount had been diverted by them from the factory, the same was likely to affect its working. The word 'diverged' used in Section 18-AA does not have any technical meaning. It conveys the idea that if a partner or an owner of the factory has taken out some contribution or funds from the factory, the requirement of the aforesaid section would apply. I, therefore, do not find any merit in this submission of the learned counsel for the petitioner.

26. The next contention urged by Sri S. C. Khare, counsel for the petitioner was that the Receiver appointed by the Collector and not the petitioner firm or the partners being the 'persons incharge' managing the industrial undertaking on the 15th January 1973, the undertaking could not be taken over and authorised controller be appointed for its management. For exercising power by the Central Government under Section 18-AA of the Act, the essential requirements are that a situation, which is likely to affect the production of articles manufactured or produced in the industrial undertaking requiring immediate action to prevent such a situation must have been created on account of the reckless investment or creation of incumbrances, or by diversion of funds by a person who was in charge of such an undetraking. Such a person must actually be running the factory on the date of the issuance of the notified order under Section 18-AA is not the requirement for justifying action under this provision. In the instant case it would be found that the ground, on which the appointment of the authorised controller, was directed by the Central Government related to a period when the management of the undertaking was in the hands of the partners of the petitioner. The words 'person in charge' do not mean that the person responsible for mismanagement must be actually managing the undertaking on the date of the impugned order Sri B. D. Agarwal, counsel appearing for the respondent argued in reply to the above contention that the Receiver appointed by the Collector was the agent of the petitioner firm. Therefore, possession of the Receiver for all intents and purposes was that of the partners of the firm themselves. But as in my view the condition as to the management of the industrial undertaking which created a situation justifying interference alone is necessary. I need not express my opinion on this aspect of the case.

27. The submission that since the Receiver had been appointed, therefore, the appointment of an authorised controller could not be legally made is also without merit. It is worthy of note that the purpose of appointment of the Receiver toy the Collector under Section 279 (1) (g)/ 286-A of the U. P. Zamindari Abolition and Land Reforms Act was to realise the dues and to pay off the same, whereas the appointment of the authorised controller is aimed at to achieve a different object. Various provisions of the Act entitle the Central Government to invest money in the factory and to prevent the situation which may affect the production of sugar manufactured in the said industrial undertaking. The large sum of money could not, however, be guaranteed unless the control of the factory was retained by the authorities for some years. The scope of the appointment of the Receiver was limited as it was outside his functions to invest funds into the undertaking so as to continue to function.

28. The last point urged for the petitioner was that the facts of the present case did not warrant appointment of the authorised controller by the controller as the grounds on which such an order could be passed did not exist. Counsel invited the attention of the court to some of the paragraphs of the petition as well as that of the supplementary and other affidavits for the purpose showing that the total liability of the petitioner firm on the date of the appointment of the Receiver was Rs. 19,60,762.16 paisa and the same had been realised, therefore the allegation that the situation of the factory was such that the same was likely to affect production of the Industrial undertaking is without any basis or foundation. Counsel for the petitioner also urged that the undertaking was in an affluent position hence the order passed under Section 18-AA was unjustified.

29. Before dealing with the above submission I wish to dispose of another aspect of the above point urged by Sri S. C. Khare. The same being that the expression 'is satisfied' used in Section 18-AA of the Act is not the result of subjective satisfaction. It has to be based on relevant facts and is objective to that extent. He urged that Section 18-AA postulates certain requirements which, if they are not there, the Government will not be able to take any action under the section. He referred to the decision in Barium Chemicals Ltd. v. Company Law Board, AIR 1967 SC 295. At p 324 of the report a reference was made to the expression'reason to believe' or 'in the opinion of. Relying upon this case he submitted that these expressions do not always lead to the construction that the process of entertaining 'reason to believe' or 'the process' do not even permit limited scrutiny of the court that a conclusion of the Government concerned was not based on relevant facts. This was a case in which the Supreme Court was considering the provision under Section 237(b) of the Companies Act. The court said that an order passed in exercise of power under a statute could not be challenged on the ground of proprietary or sufficiency of evidence, it is liable to be quashed on the ground of mala fide, dishonestly or corrupt purposes.

30. Sri D. D. Agarwal, appearing for the U. P. State Sugar Corporation, urged that the power of a court to interfere in matters like the present is a limited one. The court can certainly interfere, if it comes to the conclusion that there was no material before the concerned Government to come to the conclusion on which the order is based. But it cannot sit as an appellate authority over the decision of the Government and substitute its opinion. The submission made by him is fully supported by the decision of the Supreme Court in M. A. Rasheed v. State of Kerala, AIR 1974 SC 2249, Ray, C. J. speaking for the court observed :

'Where powers are conferred on public authorities to exercise the same when 'they are satisfied' or when 'it appears to them', or when 'in their opinion' a certain state of affairs exists; or when powers enable public authorities to take 'such action as they think fit' in relation to a subject-matter, the Courts will not readily defer to the conclusiveness of an executive authority's opinion as to the existence of a matter of law or fact upon which the validity of the exercise of the power is predicated'

31. In the instant case the enquiry which should be made is whether the opinion of the Central Government was based on the relevant material or on any material extraneous to the scope and purpose of the relevant provisions of the statute. In the counter-affidavit denying the allegation of the petitioner firm that the Central Government passed the order without any basis and any material or evidence on the record, it stated that from the written report submitted by the State Government it was fully satisfied about the condition precedent to such exercise of power. From the said report the Central Government came to the conclusion that in order to avert loss of production of sugar, an essential commodity, already in short supply, causing hardship to cane-growers, the Labour and the public, takingover of the undertaking under Section 18-AA was absolutely necessary. Dealing further it has stated that the partners of the management had shown utter indifference in its management and had not taken any interest in improving the financial position or its working efficiency. On the other hand, five out of nine partners diverted funds of the Mills. Their share investment declined from Rs. 10.50 lakhs on 21st October, 1966 to Rs. 6.48 lakhs on 15th March, 1971, with the result a situation was brought about which was likely to affect the production of sugar.

32. After perusal of these affidavits it appears to me that the assertion of the petitioner firm that the Central Government had no material to satisfy itself about the ground on which the impugned order was based, is devoid of substance. The State Government had submitted a report about the working condition of the factory. This report was considered by the Central Government. The report of the State Government was a relevant material being covered by the expression 'documentary or other evidence' used in Sub-section (1) of Section 18-AA. This report was thus the relevant and not extraneous material on which the satisfaction of the Central Government could be based. Hence the order authorising the U. P. State Sugar Corporation to take over management of the industrial undertaking passed by the Central Government, being in accordance with law, is valid.

33. The submission made by the petitioner that if the diversion of funds took place in 1971, action should have also been taken immediately thereafter. And as this was not done in 1971 the authorised controller could not be appointed in January 1973 is also without substance. Section 18-AA does not provide any time limit. If and when it is felt that the production is likely to be affected, an authorised controller can be appointed to prevent such a situation. It is true that funds were diverted by the partners earlier to the year 1973 but as its impact came to be realised in subsequent years and more seriously in the year 1972-73 the power under Section 18-AA was utilised in early 1973 It is worthy of note that no mala fide has been alleged against the Central Government, an attempt has only been made to challenge it on the ground of proprietary or sufficiency, but this is beyond the purview of the jurisdiction of the High Court. This point therefore also falls to the ground.

34. In the result, the writ petition fails and is dismissed with costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //