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1988 Supreme(Bom) 10
IN THE HIGH COURT OF BOMBAY
B. Lentin Mrs. Sujata Monohar, JJ.
Podar Mills Ltd..... Appellants.
Versus
J.K. Synthetics Ltd..... Respondents.
Appeal No. 118 of 1984, from Company Application No. 12 of 1984 in Company Petition No. 352 of 1983, decided on 8-1-1988.
Advocates appeared :
S.C. Dharmadhikari, instructed by Kanga and Co., for appellants.
S.H. Doctor, instructed by Malvi Ranchhoddas and Co., for respondents..
Headnote:TEXTILE UNDERTAKINGS (TAKING OVER OF MANAGEMENT) ACT, 1983
Section 8 (1) (c)-Textile company-Textile undertaking - Difference between -Textile company-Section 8 (1) (c) applies.
In view of the clear distinction made in the Act between a textile undertaking and textile company it is not possible to construe Section 8 as applying only to a textile undertaking. In fact Section 8 sub-section (1) clearly sets out that so long as the management of a Textile undertaking of a textile company remains vested in the Central Government no proceedings for the winding up of the textile company or for the appointment of liquidator or receiver in respect there of shall lie in any Court except with the consent of the Central Government. The Section itself uses both the terms, "textile undertakings" and "textile company" with a clear reference to their definition. The provisions of Section 8 (1) (c) apply to the Textile Company itself in the present case, to the appellants.
Section 8 (1) (c) - Whether prospective
The words "winding up" in Section 8 of the present Act requires to be given the widest amplitude, especially when Section 8 (1) (c) clearly sets out that a liquidator cannot be appointed by the Court in a proceeding unless the proceeding is with the consent of the Central Government. Undoubtedly the language of Section 8 (1) of the Sick Textile Undertakings (Taking Over of Management) Act, 1972 is somewhat different from the language of Section 8 (1) (c) of the present Act. It is true that under Section 8 (1) of the Sick Textile Undertaking (Taking over of Management) Act, 1972 the section refers expressly to proceedings being continued. Such words are absent in the present Section 8 (1) (c) But Section 8 (1) (c) refers both to proceedings for winding up as also for the appointment of a liquidator or receiver. Therefore, in a pending winding up proceeding where the liquidator is required to be appointed after the coming into operation of the said Act the consent of the Central Government is necessary before the proceeding for the appointment of a liquidator can be continued.
The words "shall lie" in Section 8 (1) (c) in this context do not necessarily refer only to a prospective proceeding. They mean "shall be entertained". The phrase in both Sections 8 and 10 is intended to mean "shall be entertained" and nothing more. Held, looking to the provisions of Section 8 (1) (c) the section applies equally to a pending proceeding for winding up of the company at the time when the Act came into operation.
2. On 23rd June, 1983 the respondents filed a petition for winding up the Appellant Company. On 14th September, 1983 consent terms were filed in Company Petition under which, inter alia, the Appellant Company admitted the claim of the respondents and agreed to pay the claim amount by monthly instalments. Under Clause 4 of the consent terms it was provided as follows:
“4. In the event of the Company failing to pay any three instalments or the last instalment on its due date as mentioned hereinabove the petition do stand admitted and the petitioners to give advertisement thereof in the “Free Press Journal”, Bombay Samachar and Maharashtra Government Gazette. The petition to be made returnable four weeks after the last advertisement is published.”
The first Instalment became payable on 20th September, 1983. This instalment was sent by the appellants along with their registered letter on 21st September, 1983. It was received by the respondents only on 28th September, 1983, There is also some dispute about the quantum of this instalment (which need not be gone into at this stage). The Next instalment was on 20th October, 1983 On 18th October, 1983 the Textile Undertakings (Taking Over of Management) Ordinance came into force. This Ordinance was later replaced by the Textile Undertakings (Taking Over of Management) Act of 1983. The Act was passed on 25th December, 1983 but deemed to have come into force on 18th October, 1983.
In view of the provisions of the Textile Undertakings (Taking Over of Management) Act, 1983 the Management of two undertakings of the appellants which are described at items 9 and 10 of the first schedule to the said Act, have been taken over by the custodian appointed under the said Act as per the provisions of the said Act. The appellants thereupon did not pay the 2nd and 3rd instalments which fell due under the consent terms on 20th October, 1983 and 20th November, 1983. The respondents then addressed a letter dated 21st November, 1983 to the appellants pointing out, inter alia, that the appellant had committed three defaults in payment of instalments under the consent terms. In view of the provisions of Clause 4 of the consent term, they contended that the petition stood admitted and the respondents were entitled to advertise the petition as provided in the consent terms. The appellant took out a Judge's summons on 19th January, 1984 being Company Application No. 12 of 1984 for stay of further proceedings in the Company petition.
4. The question which requires determination in this appeal is whether in view of the provisions of the Textile Undertakings (Taking Over of Management) Act, 1983 the respondents are entitled to take further steps in their Company Petition No. 352 of 1983 for winding up the appellant Company.
5. The Textile Undertakings (Taking Over of Management) Act, 1983 vests in the Central Government management of certain textile undertaking which are mentioned in the First Schedule to the said Act. In the recital to the Act it is stated that “by reason of mis-management of the affairs of these undertakings.... their financial position became wholly unsatisfactory even before the commencement in January 1982 of the textile strike in Bombay, and their financial condition has thereafter further deteriorated. Certain public financial institutions have advanced large sums of money to the companies owning these undertakings with a view to making the said undertakings viable..... Further investment of very large sums of money is necessary for reorganising and rehabilitating the said undertakings and thereby to protect the interests of the workmen employed therein and to augment the production and distribution at fair pr
