The State had the legislative power to enact Act 4 of 2010 and the acquisition did not violate the petitioners' constitutional rights.

JUDGMENT :

N. NAGARESH, J.

1. Petitioners 1 to 4 are incorporated Companies. Petitioners 1 to 4 along with the 5th petitioner claim to hold 70.81% of equity shares in M/s. Kerala Spinners Limited. Petitioners state that M/s. Kerala Spinners Limited (hereinafter referred to as “the Company” for brevity) is a Private Sector Company promoted by Birlas and was engaged in the manufacture and sale of textile yarn in its factory at Komalapuram in Alappuzha District. Since the year 1998, the Company was incurring losses for various reasons. At this stage, in the year 2001, the petitioners acquired a majority of equities of the Company, with an intention to make the Company viable and profitable.

2. Things did not go in the desired direction and the Company declared lock out on 22.03.2003. The Company applied for closure under Section 25(O) of the Industrial Disputes Act, 1947. The Company had to be referred to the Board for Industrial and Financial Reconstruction (hereinafter called “BIFR” for short). Pending consideration of rehabilitation of the Company, the BIFR appointed Indian Overseas Bank as the Operating Agency invoking Section 17 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The Company was declared sick on 07.09.2006. While the issue of revival of the Company was pending consideration before the BIFR, the 1st respondent-State of Kerala promulgated Ordinance dated 19.11.2009, subsequently replaced by the Kerala Spinners Limited, Alappuzha (Acquisition and Transfer of Undertaking) Act 4 of 2010.

3. By the impugned Act 4 of 2010, the right of the ownership of the petitioners in respect of the Company has been acquired by the Government and transferred to the Kerala State Textiles Corporation Limited. According to the petitioners, the assets of the Company were undervalued. The assets are of value of about Rs. 45 Crores. The Act 4 of 2010 values the assets at Rs. 454.67 lakhs only. Petitioners contended that the gross undervaluation is in violation of the right of the petitioners under Article 14 of the Constitution of India. The right of the petitioners to trade and business has been deprived by the Act 4 of 2010, in violation of Article 19(1)(g) of the Constitution of India.

4. The meagre amount of compensation of Rs. 1,000/- per annum given for the deprivation of Management is illusory and violates Article 300-A of the Constitution of India. Arbitrariness is writ large in the State action, since from among a number of companies from Kerala pending reference before the BIFR, only the petitioner’s Company has been chosen for acquisition. Enacting Act 4 of 2010 during the pendency of reference proceedings before the BIFR would make the Act 4 of 2010 illegal and unconstitutional, contended the petitioners.

5. The 1st respondent filed a counter affidavit in the writ petition. The 1st respondent pointed out that the Company was lying closed with effect from 23.03.2003. Livelihood of 500 workers and their families were adversely affected. They were put to penurious conditions. The Company was declared sick by the BIFR on 07.09.2006 and the BIFR appointed M/s. Indian Overseas Bank as Operating Agency. Due to non-cooperation of the management, revival programs could not be materialised in the BIFR proceedings.

6. In such circumstances, the Government convened several meetings with the management of the Company and representatives of trade unions for a viable solution. In view of the recalcitrant attitude of the management of the Company, the Government felt it absolutely necessary and expedient to take over the Company by Government itself. Accordingly, Ordinance No. 24/2009 was promulgated on 17.11.2009. The Ordinance was replaced by a Bill and the Bill was passed by the Legislative Assembly on 29.12.2009. The valuation of assets as projected by the petitioners is exorbitant, contended the 1st respondent. The 1st respondent stated that, the liability of the company towards workmen alone was about Rs. 5.18 Crore