1998 (7) TMI 559 - HC - Companies Law

Powers of Central Government to authorise with permission of High Court to takeover management or control of industrial undertaking

Summary

Issues Involved:
1. Petition for writ of mandamus to direct the Central Government to decide on a representation.
2. Viability and potential takeover of Calico Polyester Fibre Division.
3. Jurisdiction and applicability of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) versus the Industries (Development and Regulation) Act, 1951.

Issue-wise Detailed Analysis:

1. Petition for writ of mandamus to direct the Central Government to decide on a representation:

The petitioner, a union representing workmen at the Calico Polyester Fibre Division, sought a writ of mandamus to compel the Central Government (respondent No. 1) to decide on a representation made on October 9, 1997. The representation requested the Central Government to take necessary steps under sections 15A and 18FA of the Industries (Development and Regulation) Act, 1951, to ensure the continuation of the viable and profit-making Calico Polyester Fibre Division amidst the winding-up proceedings of its parent company.

2. Viability and potential takeover of Calico Polyester Fibre Division:

The petitioner argued that the Calico Polyester Fibre Division, a unit of the financially distressed Ahmedabad Manufacturing and Calico Printing Company Ltd. (the principal company), was always viable and profit-making. The petitioner claimed that respondent No. 2 was initially interested in taking over this unit. However, respondent No. 2 later stated in an affidavit that they were not interested in the takeover due to economic non-viability under current competitive conditions. The court noted that the Central Government should explore the possibility of other agencies being interested in the takeover if respondent No. 2 was not interested.

3. Jurisdiction and applicability of SICA versus the Industries (Development and Regulation) Act, 1951:

The core legal issue was whether the Central Government could act under the Industries (Development and Regulation) Act, 1951, given that the BIFR had already taken action under SICA. Respondent No. 1 contended that once BIFR had taken action under SICA, neither the Central Government nor any other agency could act under the Industries (Development and Regulation) Act, 1951. The court clarified that SICA and the Industries (Development and Regulation) Act, 1951, are distinct enactments with different objectives. SICA aims to revive sick industrial companies as a whole, while the Industries (Development and Regulation) Act, 1951, aims to protect individual industrial undertakings in the larger economic interest. The court held that once BIFR submits a report to the High Court recommending winding up, its role under SICA ends, and the Central Government can then act under the Industries (Development and Regulation) Act, 1951.

The court directed the Central Government to reconsider the petitioner's representation in light of the judgment's observations, particularly noting that the Central Government's stance of inaction due to SICA proceedings was incorrect. The court emphasized the need for the Central Government to explore all possibilities to ensure the survival of the Calico Polyester Fibre Division.

Conclusion:

The court allowed the petition, directing the Central Government to reconsider the representation made by the petitioner on October 9, 1997, and to take a decision accordingly. The rule was made absolute, and no order as to costs was issued.