JUDGMENT

K. Venkataswami, J.-The appellant, formerly a shareholder and Managing Director of the Nagaland Forest Products Limited (hereinafter called the "Company"), challenged the vires of Nagaland Forest Products Ltd. (Acquisition of Shares) Ordinance, 1981 and Nagaland Forest Products Ltd. (Acquisition of Shares) Act, 1982, which replaced the Ordinance (hereinafter called the "State Act"), contending inter alia that the said legislations were ultra vires the powers of Nagaland State Legislature in view of Section 20 of the Industries (Development & Regulation) Act, 1951 (hereinafter called the "Central Act").

2. Pursuant to a contract entered into between late Shri Ram Gopal Saharia, father of the appellant and the Government of Nagaland dated 24.4.1972 to establish a plywood factory in the territory of Nagaland on the terms and conditions stipulated therein, the Company was incorporated. The authorised share capital of the Company was Rs. 50,00,000/- divided into (i) 20,000/- (6% cumulative redeemable) preference shares of Rs. 100/- each (ii) 15,000/- G class equity shares of Rs. 100/- each and (iii) 15,000/- S class equity shares of Rs. 100/- each. G and S class equity shares carried the same rights. It appears that the appellant s group, on the one hand and the Government of Nagaland on the other hand, subscribed 50% each of the equity shares. The Company after obtaining necessary certificate of commencement of business on 22.7.1972, as required under the Central Act, commenced its business thereafter. The father of the appellant was the first Managing Director of the Company. After the death of his father, the appellant became the Managing Director some time in 1975. A Cabinet ranking Minister of the Government of Nagaland was the Chairman of the Company since its inception except during Governor s Rule.

3. While so, on December 14, 1981, the Deputy Commissioner, Mon District, directed the manager, Nagaland Forest Product Limited to close down the plywood factory on 14.12.1981 till further orders. It was followed by Ordinance 1 of 1981 which enabled the State Government to take over the assets, books of accounts, registers etc. of the Company. The Ordinance came into force on 17.12.1981. As noticed earlier, the Ordinance was replaced by the Act. The appellant challenged the Ordinance initially and subsequently by amending the petition appropriately, the Act was also challenged.

4. Before the High Court, the Act was challenged on various grounds but before us the learned counsel appearing for the appellant, Mr. Sunil Gupta, confined his attack to the lack of legislative competence based on Section 20 of the Central Act. In other words, the contention was that taking over of the assets (Acquisition of Shares of the Company) amounts to taking over of management/control of the Company, which field is occupied by Parliament as contemplated by Section 20 of the Central Act.

The High Court in its considered and reasoned judgment rejected all the contentions and observed thus while rejecting the contention based on lack of legislative competence, which alone was pressed before us:-

"The Act was not enacted for taking over management or control of the company by the Nagaland State Government. In pith and substance it was enacted to acquire the S class shares of the Company. If an attempt was made to take over management or control of any industrial undertaking in a declared industry indisputably the bar of Section 20 of the IDRA would inhibit exercise of such executive power. However, if pursuant to a valid legislation for acquisition of scheduled undertaking the management stands transferred to the acquiring body it cannot be said that this would be in violation of Section 20. 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 an exercise of that legislative powers, to wit, acquisition or shares of a company owning an industrial undertak