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National Sugar Mills Ltd. Vs. the State of West Bengal - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKolkata High Court
Decided On
Case NumberMatter No. 129 of 1965
Judge
Reported inAIR1967Cal609
ActsIndustries (Development and Regulation) Act, 1951 - Section 20
AppellantNational Sugar Mills Ltd.
RespondentThe State of West Bengal
DispositionPetition dismissed
Excerpt:
- .....for which the company was promoted, was to start sugar mills and distilleries in the state of west bengal or elsewhere in india. the paid up capital of the company was rs. 33 lakhs. in march 1956 the company obtained the necessary licence from the central government for setting up a sugar factory at ahmedpur in the district of birbhum in the state of west bengal. the plant and machinery had been installed by january, 1960 and production had started in november, 1960. under an indenture of mortgage dated the 26th of september, 1957 the company had borrowed a sum of rs. 21 lakhs from the respondent state of west bengal. under the said mortgage the entire assets of the company including all its plants, machinery, land, buildings and factory were charged and mortgaged in favour of the.....
Judgment:
ORDER

A.N. Sen, J.

1. This is an application under Article 226 of the Constitution.

2. The facts relevant for the purpose of this application may be set out. National Sugar Mills Ltd. hereinafter referred to as the company, was incorporated on the 3rd of August 1955 as a public limited company. The head office of the company was at No. 15, Chittaranjan Avenue. The principal object for which the company was promoted, was to start sugar mills and Distilleries in the State of West Bengal or elsewhere in India. The paid up capital of the company was Rs. 33 lakhs. In March 1956 the company obtained the necessary licence from the Central Government for setting up a sugar factory at Ahmedpur in the District of Birbhum in the State of West Bengal. The plant and machinery had been installed by January, 1960 and production had started in November, 1960. Under an indenture of mortgage dated the 26th of September, 1957 the company had borrowed a sum of Rs. 21 lakhs from the respondent State of West Bengal. Under the said mortgage the entire assets of the company including all its plants, machinery, land, buildings and factory were charged and mortgaged in favour of the respondent. The said indenture of mortgage, inter alia, provides at follows:

'1. The Governor and/or the Government after default has been made in payment of the principal money or interest thereon for three months after notice requiring payment has been given, shall be entitled without any further consent of the company and without any prejudice to any other remedy available in law to sell the said Sugar Mill and the other asse is forming the subject matter of the security or any part thereof either by public auction or by private contract either in one lot or in several lots at different times to any person or persons for realisation of the moneys due and to enter into any contract therefor or vary any contract for sale or to resell the said property without being answerable or responsible for any loss or diminution in price of sale proceeds occasioned thereby and with power also to execute assurance and to give effectual receipts for the purchase money and to do all other acts and things for effecting such sale which any person or persons exercising such power of sale does or do and such power of sale shall be deemed to be power to sell and concur in selling the mortgaged property without intervention of the Court within the meaning of Section 69 of the Transfer of Property Act. 1882.

2. All other provisions and trusts ancillary to the power of sale which are contained in Section 69 of the Transfer of Property Act, 1882 shall apply.

3. Upon any such sale aforesaid the receipt of the Governor or the Government for the purchase money shall effectually discharge the purchaser or purchasers therefrom and from being concerned to see to the application thereof or being answerable for the loss or misapplication thereof.

4. The Governor or the Government shall have the right to appoint any of its officer or officers or any other person or persons to be the Receiver or Receivers of the mortgaged property and all the provisions powers and trusts under Section 69A of the Transfer of Property Act, 1882 shall apply to the Receiver or Receivers an appointed.

5. The Governor or the Government shall not be answerable or accountable for any in-voluntary loss which may happen in or about the exercise or execution of any of the powers or trusts which may be vested in the Governor or the Government by virtue of these presents or by legislative enactment.

6. The Governor or the Government shall have the right and be entitled to take over the management of the whole concern and business of the company in the said Sugar Mill and factory as well as the right to sell and realise all the properties and the company shall in such event forthwith on demand by the Governor or the Government hand over charge and management of the whole of the business and the undertaking of its said concern to the Government.

7. Any transfer of any of the properties and assets made by the Governor or the Government in exercise of any of the powers of the sale and realisation in the foregoing provisions shall vest in the transferee all rights in or to the property or assets transferred as if the sale had been made by the Company itself and if and when the Governor or the Government shall take over the management of the business and concerns of the company the Governor or the Government shall be deemed to be the owner of the assets of the said concern of the Company for purpose of suits by or against the Company and may sue and be used in the name of the Company.

8. Upon the Governor or the Government taking over possession of the mortgaged property or any part thereof or if a Receiver or Receivers thereof shall have been appointed as aforesaid it shall be lawful for, but not obligatory upon the Governor or the Government or the Receiver or Receivers as the case may be to carry on the business in and with the mortgaged property or any of them and to manage or conduct the same as he it or they shall in its, his or their absolute discretion think fit and proper and for the purpose of the said business to employ or re-employ such agents, managers, engineers, technical men, solicitors, accountants, servants and workmen upon such terms and conditions as to remuneration or otherwise as he it or they may think fit and proper and to renew, repair, replace such of the plant, machinery and effects of the Company as shall be worn out or lost or otherwise become unserviceable or inefficient or unfit for use and generally to do or cause to be done all such acts, deeds and things and to enter into such arrangements or contracts respecting the mortgaged property or the working of the same or any part thereof as he, it or they should do if he, it or they was or were absolutely entitled thereto and without being responsible in any way for any loss or damage which may be occasioned thereby provided that all the powers provisions and trusts referred to above shall be independent of and over and above all powers, rights and privileges which the Governor or the Government is by any law for the time being entitled to exercise and enforce.'

The company had also borrowed various other sums and had incurred various other liabilities to the State of West Bengal. The sugar mill of the company could not work properly and satisfactorily. The Company seeks to lay the blame for the unsatisfactory working of the mills on the Government of West Bengal. In view of the unsatisfactory working of the mills at Ahmedpore, the company sought to formulate a scheme to shift the mills to Madras and had been taking steps with that end in view. The respondent State of West Bengal was opposed to the scheme of shifting the mills to Madras. By its letter dated the 27th of August, 1964 the respondent State of West Bengal demanded from the company the dues payable by the company mentioning that in default necessary action will be taken by the Government to enforce the securities created in favour of the respondent. On the 16th of February, 1965 the Government of West Bengal by its order bearing No. Ind-598 directed and authorised the District Magistrate of Birbhum to take over possession of all the assets move-able and immoveable of the sugar factory of the company at Ahmedpore. The said order of the Government reads as follows:

'You are hereby directed and authorised to take over possession of all the assets moveable and immoveable of the sugar factory of National Sugar Mills Limited situated at Ahmedpore in the District of Birbhum in enforcement of the securities created by the mortgage, further charge and other charges executed by National Sugar Mills Limited in favour of the Governor of the State of West Bengal.'

On the 17th of February, 1965 the District Magistrate of Birbhum wrote the following letter to the company:

'This is to give you notice that possession of the sugar factory of the National Sugar Mills Limited having been taken on 16th February, 1966 in pursuance of the authority vested in me and the direction given by the Governor of West Bengal as embodied in Government order No. Ind-698 dated 16-2-65 an inventory of the property will commence today 17-2-65 in the presence of two local witnesses your presence la requested at the time inventory is being prepared.'

This application was moved on behalf of the company sometime in 1966 under Article 226 of the Constitution and the Rule Nisi has been issued by this Court. This application has been subsequently specially assigned to me. In this writ petition the company prays for the following orders:

(I) Issue of a writ of and/or in the nature of Mandamus or other appropriate writ commanding the respondent to withdraw the said letter dated February 17, 1965 and the said order No. Ind-598 dated February 16, 1965 and to deliver possession of the petitioners Sugar Mills at Ahmedpore to your petitioner.

(I) (a). That a writ or writs of or in the nature of Mandamus do Issue under the seal of this Court commanding the respondent, to forbear from passing any order under your (sic) invoking the provisions of the West Bengal Factories and Mines (Control of Dismantling) Act, 1948 for the purpose of restraining the dismantling and/or shifting of the plant or machinery of the petitioner's Mills located at Ahmedpore. Birbhum from the State of West Bengal and if necessary, a declaration be made to the effect that the said (sic) has no application to the petitioners in trustee.

(II) Issue of any other appropriate writ order or direction in this behalf.' During the pendency of the writ petition the company has been directed and ordered to be wound up by this Court and the company is now in liquidation. This application has been proceeded with by the Official Liquidator who has been appointed Liquidator of the Company.

3. The main contention of the petitioner has been that the order of the Government of West Bengal bearing No. Ind-598 dated 16-2-65 and the taking over of possession of the mills pursuant to the said order are Illegal, as the same are in contravention of Section 20 of the Industries (Development and Regulation) Act, 1951. Section 20 of the said Act on which the case of the petitioners is primarily based, reads as follows:

'After the commencement of this Act, it shall not be competent for any State Government or a local authority to take over the management or control of any Industrial undertaking under any law for the time being in force which authorises any such Government or local authority so to do.'

It is argued on behalf of the petitioner that in view of the said provision, the State of West Bengal is debarred from taking over of the possession of the mills, and the taking over of the possession of the mills by the State of West Bengal is illegal. It is further argued that even if the State Government had taken over the possession in enforcement of the security and the right created under the mortgage, such taking over of possession must be construed to be authorised under the law of contract and by virtue of the provisions contained in Section 20 of the Industries (Development and Regulation) Act, such authority under the law of contract has been curtailed and it is not open to the State Government to exercise any such right or authority conferred by the indenture of mortgage.

4. I am unable to accept this contention of the petitioner. In my view Section 20 of the Industries (Development and Regulation) Act, 1961 relied on by the petitioner, has no application whatsoever to the facts of the instant case. Section 20 of the Industries (Development and Regulation) Act, 1951 contemplates, in my view, cases of taking over management or control of any industrial undertaking by the State Government pursuant to any law which authorises the State Government to take over such management or control; in other words. If any particular provision of any statute authorises the State Government to take over management or control of any industrial undertaking and the State Government chooses to exercise such powers in pursuance of any such provisions, Section 20 is attracted and the provisions of the said section apply Section 20 of the Industries (Development and Regulation) Act has no application to any case of taking over possession on the basis of any arrangement or agreement between the parties. There is no provision in the Contract Act itself which authorises the State Government to take over possession or management or control of any industrial undertaking. It cannot, in my view, be contended that the State Government has in the instant case taken possession pursuant to any provision of any law in force. The State Government has chosen to assert its right under the mortgage and to exercise the powers conferred under the deed of mortgage; and in exercise of such powers State Government has taken over physical possession of its securities, namely, the assets of the company including the mills. The assertion of any right by the State Government on the basis of any agreement between the parties does not, in my opinion, come within the purview of Section 20 of the Industries (Development and Regulation) Act. In my view, Section 20 of the Industries (Development and Regulation) Act, 1961 does not deal with any contractual rights or obligations of the parties and it does not preclude the State Government from asserting any right on the basis of any contract between the parties.

5. It is further to be noted that the language used in Section 20 is, 'taking over the management or control of any industrial undertaking, under any law which authorises so to do.' The said section therefore applies only when 'management' or 'control' of any industrial undertaking is taken over by State Government or local authority and further when such management or control is taken over pursuant to 'any law for the time being in force which authorises any such Government or local authority so to do.' The said section therefore, cannot have any application to a case where the mortgagee takes possession of the mortgaged properties on the basis of covenants ir the mortgage-deed between the parties.

6. It has further been contended on be-half of the petitioner that the State Government has acted mala fide in seeking to exercise its alleged right under the mortgage in taking over physical possession of the mills of the company, as the State Govt. was opposed to the company's scheme of transferring the plants and machinery and other equipments to Madras On the basis of the allegations made in the petition I am unable to come to the conclusion that the State Government has acted mala fide in the instant case in taking over possession of the mills. Even if the State Government had acted mala fide in the exercise of its contractual rights, in taking over possession, such mala fide or improper exercise of the contractual right could not have afforded any relief to the petitioner in this writ petition.

7. The genuineness of the letter dated the 16th of February 1965 has also been sought to be challenged on behalf of the petitioner in course of the argument. It is sought to be argued that it could not have been possible for the District Magistrate at Birbhum to act on the 16th of February on the basis of a letter written from Calcutta on the same date. It is to be noted that there is no averment in the petition challenging the genuineness of this letter. There is no allegation in the petition that the letter of the 16th February, 1965 is a fabricated document and has been brought into existence at any later stage. In the absence of any such allegation in the petition and in the absence of any such case being made in the petition, I do not think that the Court will be justified in taking any note of this argument. There may be plausible convincing explanations. It is not for the Court to speculate. I am of the opinion that the petitioner cannot be heard to make any such case of fabrication without making any such case in the petition.

8. As in my judgment the main contention of the petitioner has no merit, the first prayer of the petitioner necessarily fails, and in view thereof I do not consider it necessary to deal with the other prayer which is absolutely premature at this stage.

9. This petition is, therefore, rejected and the rule is discharged. There will be no order as to costs. The Official Liquidator will retain his costs out of the assets in his hands.


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