TMI Blog1994 (2) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the appellants and, as such, dismiss the appeal. - CIVIL APPEAL NO. 441 OF 1992 - - - Dated:- 9-2-1994 - KULDIP SINGH AND S.P. BHARUCHA, JJ. G. Ramaswamy, Harish N. Salve, Dr. Shankar Ghose, S.R. Agrawal, Ms. Bina Gupta, O.P. Khaitan, A.T. Patra and Sanat Jain for the Appellant. Soli J. Sorabjee, Arun Jaitley, D.B. Sehgal, Uday Lalit, Ms. S. Banerjee, Vishwajit Singh and R.B. Misra for the Respondent. JUDGMENT Kuldip Singh, J. The validity of the Uttar Pradesh State Cement Corporation Limited (Acquisition of Shares) Ordinance, 1991(the Ordinances was challenged before the Allahabad High Court by way of a writ petition under article 226 of the Constitution of India. The High Court by its judgment dated January 24, 1992, upheld the validity of the Ordinance and dismissed the writ petition. This appeal by way of special leave is directed against the judgment of the High Court. The Uttar Pradesh State Cement Corporation Limited (the corporation was a Government company wherein all the shares were owned by the State Government. The corporation was operating three cement factories situated at Churk, Dalla and Chunar. Since the corporatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. According to the memorandum, the total amount payable by the appellant for 51 per cent, of the shares at Rs. 75 per share was a little above 26 crores. Out of the said amount the appellant paid one crore at the time of signing the memorandum. It was agreed to pay further two crores within three months of the signing of the memorandum which was paid. Another rupees two crores were to be paid within six months of the signing of the memorandum and the balance amount of about rupees 20 crores were payable within twenty-four months. Various other financial arrangements were agreed between the parties but it is not necessary for us to go into the same. On October 11, 199l the Governor promulgated the Ordinance. The Ordinance clearly stated that its purpose was to acquire the shares of the corporation in public interest. The preamble to the Ordinance stated that the agreement between the State Government and the Sahara Industries could not be given effect to on account of the interim order dated October 16, 1990, passed by the High Court and, as such, only 49 per cent of share, were transferred by the State Government to the Dalmia Industries and, as such, the purpose of the transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... run on proper lines till the disposal of these writ petitions. It is with that view that the following clarifications of the aforesaid interim order are made : (1)The Registrar of Companies, Kanpur, shall verify whether transfer of 49 per cent, of shares of U. P. Cement Corporation has been effected in favour of Dalmia Industries or their nominees, as the case may be, as on today i.e., May 24, 1991. On such verification, if he is satisfied that such a transfer has taken place, he shall issue a certificate to that effect both to the Government of U.P., U.P. Cement Corporation and Sri S. B. Gupta, Senior Advocate, appearing for the petitioners. (2)If the certificate is issued by the Registrar of Companies affirming transfer of shares as contemplated by clause (1) above, the present board of directors will be allowed to manage the affairs of the corporation pending disposal of these writ petitions and subject to such further orders or directions as may be issued by this court in these matters. (3)That the employee and officers of the Corporation shall co operate with the present management for a better running of the corporation. They shall act subject to the control and dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llaneous applications filed in the above said two writ petitions, a Division Bench of the Allahabad High Court passed the following order on August 21, 1991 : "...On October 16, 1990, a learned single judge passed an order directing the State Government not to hand over the corporation to any person. The idea was to maintain status quo obtaining as on that day pending disposal of CMWP No. 26223 of 1990 wherein the said order was passed. In spite of the same, the Government chose to transfer 49 per cent, of the shareholding to Dalmia as against 51 per cent, agreed to be transferred under the MOU and the GO based thereon. Though only 49 per cent, of the shareholding was transferred to the Dalmias, they were allowed to nominate five directors by a resolution of the corporation dated March 7, 1991. This resolution of the corporation was stayed by the Lucknow Bench on March 15, 1991, though the said order was vacated later on April 10, 1991. The above circumstances lead to the inference says counsel, that the Dalmias took the risk of obtaining the transfer of shares knowingly and all the transactions in their favour are at their own risk, since they have been arrived at during the pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of the Ordinance was with the appellants or with the State Government, the main arguments were advanced by learned counsel on the said question. Learned counsel for the appellants, however, for his own convenience, styled his contentions as under: 1.Admittedly cement is an industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 ("the Act"). Entry 52, List I, Entry 24, List II, Seventh Schedule to the Constitution of India read with section 2 of the Act takes away the legislative competence of the State Legislature to enact the subject-matter of the Ordinance and, as such, the Governor was not competent to promulgate the Ordinance. 2.The Ordinance in pith and substance is intended to take over the management and control of the corporation. That being so, it is hit by the provisions of section 20 of the Act. 3.The Ordinance being a colourable piece of legislation could not be a legislation under entry 42, List III, Seventh Schedule, Constitution of India. 4.Assuming it is a legislation under entry 42, List III, Seventh Schedule, Constitution of India, it cannot be sustained because it is not in public interest. 5.The Ordinance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rolling or managing the corporation. Paras 2 and 20 of the memorandum dated February 14, 1991, are as under : "2. Dalmia will take over the management of the corporation. 20. This M.O.U. is subject to the decision of the court whenever cases pending against them." It is thus obvious that the memorandum on the basis of which the appellants claim to have acquired the control and management of the corporation, itself stated that the terms of the memorandum were subject to the decision of the High Court in the pending cases. Similarly, paras 1 and 15 of the financial agreement dated February 22, 1991, were as under : "1. The parties hereto agree to collaborate in the conduct of the affairs and business of the corporation in the manner and to the extent as contained hereinafter. 15. While the U. P. Government has decided to sell 51 per cent, shares of the corporation as mentioned above to Dalmia and others, due to pending stay of the Allahabad High Court, only 49 per cent, shares will be transferred at present. Balance 2 per cent, shares will be transferred only after the stay is vacated though all the other formalities would be completed as per clause 6 above, now itself." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. On the plain language of its provisions, the Ordinance related to the acquisition of property (shares of the corporation). The Ordinance, therefore, falls under entry 42, List III, which reads "acquisition and requisitioning of property". The field of acquisition under entry 42, List III is not occupied by the Act which deals with the control, management, regulation and development of the declared industries. The power conferred upon the Union under the Act can as well be effectively exercised after the acquisition of the shares of the companies. This court in Ishwari Khetan Sugar Mills v. State of U. P. [1980] 3 SCR 331, had an occasion to deal with a similar situation relating to the sugar industry. Sugar was a scheduled industry under section 2 of the Act. An Ordinance called the U. P. Sugar Undertakings (Acquisition) Ordinance, 1971, was promulgated by which the sugar undertakings were transferred to and vested in the Uttar Pradesh State Sugar Corporation Limited. The validity of the Ordinance was challenged on similar grounds. A Constitution Bench of this court held that the power to legislate in respect of acquisition of property is an independent and separate power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the acquiring authority, section 20 is not attracted at all. Section 20 does not preclude or forbid a State Legislature exercising legislative power under an entry other than entry 24 of List II, and if in exercise of that legislative power, to wit, acquisition of an industrial undertaking in a declared industry the consequential transfer of management or control over the industry or undertaking follows as an incident of acquisition, such taking over of management or control pursuant to an exercise of legislative power is not within the inhibition of section 20. Therefore, the contention that the impugned legislation violates section 20 has no merits." We have held that the Ordinance was promulgated under entry 42, List III and not under entry 24, List II. We do not agree with learned counsel that the Ordinance is a colourable piece of legislation and in pith and substance it falls under entry 24, List II. We, therefore, reject the contentions of learned counsel in this respect. We do not agree with learned counsel for the appellants that the promulgation of the Ordinance was not in public interest. The High Court has elaborately dealt with this aspect. After the transfer of 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court. It is also contended that the Ordinance virtually effaced the orders of the court passed from time to time. We do not agree. It is clear from the bare reading of the orders of the court that they were interim in nature and passed during the pendency of the writ petitions. None of the aforesaid orders finally determined the rights of the parties before the court. The orders were neither final judgments nor preliminary judgments. They could not even be called as interlocutory judgments. Even otherwise, the Ordinance does not in any manner go contrary to the various interim orders passed by the High Court. In none of the orders is there a direction contrary to the purpose for which the Ordinance was promulgated. The acquisition of shares under the Ordinance did not, in any manner, have the effect of nullifying any of the orders of the court. We are, therefore, of the view that, in the facts of the present case, the argument that the promulgation of the Ordinance had encroached upon the power of the judicial review of the court is wholly misconceived. We, therefore, see no force in any of the contentions raised by learned counsel for the appellants and, as such, dismiss t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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