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Gujarat State Textile Corporation Ltd., Vs. New Jehangir Vakil Mills Company Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtGujarat High Court
Decided On
Case NumberCompany Application Nos. 61, 90, 150, 167 of 1982
Judge
Reported in[1985]58CompCas768(Guj); (1983)1GLR205
ActsCompanies Act, 1956 - Sections 391; Industries (Development And Regulation) Act, 1951 - Sections 15, 15A, 15A(1), 15A(2), 16, 18, 18AA, 18FA, 18FA(1), 18FA(2), 18FC and 18FD(2)
AppellantGujarat State Textile Corporation Ltd., ;manubhai Chimanlal Shah and ;indulal and Co., Ahemedabad an
RespondentNew Jehangir Vakil Mills Company Ltd.
Appellant Advocate K.N. Raval, Adv.; H.M. Mehta, Adv. for Union of India,;
Respondent Advocate K.S. Nanavati, Adv.
Cases ReferredUnion of India v. Vijay Mfg. Co.
Excerpt:
- - if, after such investigation, the central government is satisfied that action under s. these provisions show that where an industrial undertaking is not being wound up, the central government has wide powers to order its take over if the requirements of the relevant provisions are satisfied. there was a scheme pending before the court which was stated to be a better alternative to the proposal for taking behalf of the management of the industrial undertaking. it was urged on behalf of the central government that the court has no discretion to consider the alternative scheme of the court is satisfied that the central government had formed the necessary opinion as required by s......to provide for the development and regulation of certain industries. section 15 empowers the central government to cause investigation to be made in respect of any scheduled industry or industrial undertaking. if, after such investigation, the central government is satisfied that action under s. 16 is desirable, it may issue directions to the concerned industrial undertaking for all or any of the purposes set out in clauses (a) to (d) of sub-s. (1) thereof. if the industrial undertaking fails to comply with such directions of if an undertaking in respect where of an investigation is made under s. 15 is, in the opinion of the central government, managed in a manner highly detrimental to the scheduled industry or to public interest, s. 18a enables the central government to authorise.....
Judgment:

A.M. Ahmadi, J.

1. The learned senior standing counsel for the Central Government raised a preliminary objection against the consideration of the proposed scheme on the ground that once the court grants permission under s. 18FA of the Industries (Development and Regulation) Act, 1951, for take - over of the management or control of sick unit, it is precluded from entertaining an application under s. 391 of the Companies Act, 1956, relating to that unit. In order to understand the submissions made at the Bar, it is necessary to examine a few provisions of the Act.

2. The preamble of the Act shows that it was enacted to provide for the development and regulation of certain industries. Section 15 empowers the Central Government to cause investigation to be made in respect of any scheduled industry or industrial undertaking. If, after such investigation, the Central Government is satisfied that action under s. 16 is desirable, it may issue directions to the concerned industrial undertaking for all or any of the purposes set out in clauses (a) to (d) of sub-s. (1) thereof. If the industrial undertaking fails to comply with such directions of if an undertaking in respect where of an investigation is made under s. 15 is, in the opinion of the Central Government, managed in a manner highly detrimental to the scheduled industry or to public interest, s. 18A enables the Central Government to authorise any person or body of persons to take over the management of the undertaking. Section 18AA confers powers on the Central Government to take over an industrial undertaking without investigation under the certain circumstances. These provisions reality to industrial undertakings which are not being wound up. However, where a company, owning an industrial undertaking is being wound up by or under the supervision of the High Court, and the business of such company is not being continued, s. 15A(1) empowers the Central Government to make an application to the High Court for permission to make or cause to be made an investigation into the possibility of running or restarting the industrial undertaking. Sub-s. (2) provides that where such application is made, the High Court shall grant the permission sought. Section 18FA(1) next provides that if the Central Government is of opinion that such possibility exists and that the concerned industrial undertaking should be run or restarted, it may make an application to the High Court for permission to appoint any person or body of persons to take over the management of such undertaking. According to sub-s. (2) of that section, when such an application is made, the High Court shall make an order empowering the Central Government to authorise any person or body of persons to take over the management of the concerned industrial undertaking for a period not exceeding five years in the first instance. Section 18FC confers power on the Central Government to call for a report on the affairs and working of a managed company. Sub-s. (2) of s. 18FD empowers the Central Government to prepare a scheme for the reconstruction of the company owning the industrial undertaking.

3. It will appear from the scheme of the provisions referred to above that the Central Government may cause investigation to be made in the respect of a scheduled industry or any industrial undertaking if conditions set out is s. 15 exist. After investigation, it may issue directions under s. 16 and if such directions are not compiled with by the concerned undertaking of if the undertaking is managed in a highly detrimental manner, s. 18A empowers the Central Government to take over the industrial undertaking. Section 18AA permits take over in certain cases without investigation. These provisions show that where an industrial undertaking is not being wound up, the Central Government has wide powers to order its take over if the requirements of the relevant provisions are satisfied. The power is circumscribed if the industrial undertaking is being wound up, under the supervision of the High Court, in that, the Central Government must seek the permission of the High Court for causing an investigation to be made (s. 15A) or for taking over the management of the concerned undertaking (s. 18FA). Once an application is made under s. 15A or s. 18FA, as the case may be, the law provides that the 'High Court shall' grant the permission sought. Sub-s. (2) of S. 15A provides that where an application is made by the Central Government under sub-s. (1), 'High Court shall', notwithstanding anything contained in the Companies Act, 1956, or in any other law for the time being in force, grant the permission prayed for. So also sub-s. (2) of s. 18FA lays down that where an application is made under sub-s. (1), 'the High Court shall' make an order empowering the Central Government to authorise the authorised person to take over the management of the industrial undertaking. The words 'the High Court shall' used in both the sub-s. (1) of s. 15A or subs. (1) of s. 18FA of the Act. If the granting of the permission under s. 18FA is imperative, where is the scope for entertaining a scheme of compromise of arrangement under s. 391 of the Companies Act in a case where the permission sought has already been granted under s. 18FA of the Act Even if a scheme is pending to the date permission under s. 18FA is sought, such a scheme will have to make way because it in law incumbent on the High Court to permit the take-over of the management of the industrial undertaking; much less would it be open to the court to entertain a scheme after permission under s. 18FA is granted. My learned brother, B. K. Mehta J., in Manekchowk and Ahemedabad Mfg. Co. Ltd., In re : Union of India v. Manekchowk and Ahemedabad Mfg. Co. Ltd. (Company Application No. 28 of 1982 in company Petition No. 36 of 1980 decided on June 14, 1982 - [1985] 58 Comp Cas 729 (Guj), had to consider a more or less similar contention. In that case, the Central Government had made an application under s. 18FA of the Act. There was a scheme pending before the court which was stated to be a better alternative to the proposal for taking behalf of the management of the industrial undertaking. It was urged on behalf of the Central Government that the court has no discretion to consider the alternative scheme of the court is satisfied that the Central Government had formed the necessary opinion as required by s. 18FA of the Act. The said contention was upheld by my learned brother because, in his opinion, the expression 'shall' used in sub-s. (2) of s. 18FA is mandatory and the court is bound to pass an order as prayed for. He, therefore, observed at p. 743 : 'If, therefore, the court is under an obligation to grant permission to the Central Government to take over, I do not think that it would be open to consider as to which of the alternatives out of the two, namely, one by the Central Government and another by the sponsors of the scheme ..... is more advantageous to the different interests of the High Court in Union of India v. Vijay Mfg. Co. (P) Ltd. [1977] 47 Comp Cas 348. I am, therefore of the opinion that in a case where permission under s. 18FA of the Act is granted, the court cannot entertain and examine a scheme brought under s. 391 of the Companies Act. The preliminary objection must, therefore, be upheld.


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