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IN THE HIGH COURT OF BOMBAY
H. Suresh, J.
State Bank of India.... Plaintiffs.
Versus
Podar Mills Ltd. others .... Defendants.
Notice of Motion No. 337 of 1987 in Suit No. 3607 of 1986, decided on 7-3-1988.
Advocates appeared :
Anil Diwan, N.G. Thakkar, S.A. Diwan, i/ by Little Co., for plaintiffs in support.
Aspy Chinoi, T.K. Cooper, i/by Mehta Girdharlal, for defendant No. 1 to show cause.
Anup Shah i/ by Bhaishankar Kanga Girdharlal, for defendants Nos. 4 5 to show cause.
see Textile Undertaking (Takingover of Management) Act, 1983 Section 8 (1)©
Section 8 (1) (c)-Civil Procedure Code, 1908, Order 40, Rule 8-Suit for mortgage-Pending-Whether court can appoint receiver.
Therefore, neither on authority nor on principle, can it be said that the Court has no powers to appoint receiver under Order 40, Rule I of the Cr. P. C. in a pending mortgage suit, if the other requirement of the law viz. that it should be just and convenient to appoint a receiver, having regard to the facts and circumstances of each case, are satisfied.
Section 8 (1) (c)-Two undertakings owned by company-On vested in Central Government-Receiver’s appointment regarding other- Then by company cannot to be wound up.
Significantly the Act on where provides for liquidation or diminution of the liabilities of the Textile Company. Similarly there are no constrains as against a creditor to file a suit or to obtain a decree or even to execute a decree as against the Textile Company and any of its assets. The Act confers no general moratorium against erring companies. It is a temporary measure, brought in, in the wake of a prolonged strike in the textile industry in Bombay in the year 1982. The object was to re-organize and rehabilite the undertakings, and thereby to protect the interests of the workmen employed therein and to augment the production and distribution at fair prices of different varieties of cloth and yarn so as to subserve the interests of the general public". This shows that the object of money, take over the management of such undertakings and finally rehabilitate the undertakings. The object is not to liquidate the Textile Companies. The fetters are as against the liquidation of the Companies. Therefore, when a receiver is appointed in respect of Jaipur undertaking, it cannot follow that there by the Company would be wound up. The management of the Bombay undertaking is taken over not for the purpose of winding up, but for the purpose of reviving and injecting life into them.
2. Now, to the first question: Section 8(1) and (2) of the Act, which are relevant are as follows:
"8 (1) So long as the management of the textile undertaking of a textile company remains vested in the Central Government under this Act, notwithstanding anything contained in the Companies Act, 1956 or in the memorandum of articles of association of such company---
(a) it shall not be lawful for the shareholders of the textile company or any other person to nominate or appoint any person to be a Director of such textile company in relation to such undertaking;
(b) no resolution affecting (whether directly or indirectly) such undertaking which is passed at any meeting of the shareholders of the textile company on or after the appointed day shall be given effect to unless approved by the Central Government;
(c) no proceeding for the winding up of the Textile Company or for the appointment of a liquidator or Receiver in respect thereof shall lie in any Court except with the consent of the Central Government.
(2) Subject to the provisions contained in sub-section (1), and to the other provisions contained in this Act and subject to such other exceptions, restrictions and limitations, if any, as the Central Government may, by notification , specify in this behalf, the Companies Act, 1956, shall continue to apply to the Textile Companies in the same manner as it applied thereto before the appointed day,"
We are mainly concerned with section 8(1)(c) of the Act.
3. It is an admitted position that the 1st defendant company owns two undertakings---one in Bombay and the other at Jaipur. As regards the undertakings in Bombay is concerned, the same vests in the Central Government as provided under the Act. But the Company owns an undertaking at Jaipur too, which is not vested in the Central Government. The plaintiff's application for appointment of a Receiver relates to this undertaking at Jaipur.
4. Undoubtedly, the Act makes a distinction between a Textile Company and a textile undertaking. There is no dispute about this dichotomy. Section 8(1) of the Act itself indicates the distinction between the two. Similarly, the plain words of the said provision do not suggest any restraint on appointment of a Receiver in respect of an undertaking which is not vested in the Central Government. It is also logical to think that the Central Government's consent is required if receiver has to be appointed in respect of an undertaking which is taken over by the Government. A reasonable interpretation of section 8(1) of the Act is that so long as the management of a Textile Company remains vested in the Central Government, the following three things shall not be done: (a) No Director shall be appointed in relation to such an undertaking by the share-holders or by any other person; (b) no effect to any resolution affecting such undertaking shall be given unless approved by the Central Government; (c) no winding up of the company shall be proceeded with excepting with the sanction of the Central Government. Therefore, there cannot be any appointment of a liquidator or a Receiver in any such proceedings.
5. Mr. Aspy Chinoi appearing for the 1st defendant submits that the Act contemplates, continuance of the company, while th
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