WP(C) 2430/1987

Page 1 of 14

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IN THE HIGH COURT OF DELHI AT NEW DELHI

W.P.(C) No.2430/1987

Date of Decision: January 09, 2009

GRINDLAYS BANK

….Petitioner

Through: Mr.Sanjeev Anand with

Mr. Vikas Kakkar & Mr.

D. Nishant, Advs.

Versus

UNION OF INDIA & Ors. .…Respondents

Through: Mr. Naveen Sharma with

Ms. Swati B. Sharma for

Respondent No. 3.

CORAM:

Hon’ble Mr. Justice Vikramajit Sen

Hon’ble Mr. Justice S.L. Bhayana

1. Whether reporters of local papers may be allowed

to see the judgment?

Yes

2. To be referred to the Reporter or not? Yes

3. Whether the judgment should be reported

in the digest or not?

Yes

S.L. BHAYANA, J.

This Writ Petition has been filed under Article 226 of the

Constitution of India challenging the constitutional validity of the

Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of

Undertakings) Act, 1986 (hereinafter referred to as „the Act‟) with the

prayer that an appropriate Writ, order or direction be issued

declaring that the Petitioner‟s claim as a secured Bank creditor is

entitled to preference and priority over the claims of all other

unsecured creditors and that the Petitioner is entitled to receive

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WP(C) 2430/1987

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payment of its secured debt simultaneously with payments that may

be made to other secured creditors/Banks including Nationalized

Banks under the Act and further declaring that the Act is arbitrary,

discriminatory and, therefore, bad in law. The Petitioner has further

prayed that a Writ of Mandamus be issued directing Respondent Nos.

1 and 2 to make payment of the Petitioner‟s secured debt along with

payments made to any other secured creditors including Nationalized

Banks. The Petitioner further prayed to declare that the classification

of the Petitioner‟s claim by Respondent No. 2 under Category VI Part

II of the Schedule to the Act is bad in law.

2.

The brief facts of the case of the Petitioner are that the

Petitioner is a banking company with limited liability incorporated

under the English Companies Act having its registered office at

Minerva House, P.O. Box No. 7 Montague Clase, London, SE 1 9 DH

U.K. The Petitioner is registered under Section 592 of the Indian

Companies Act and is carrying on its business of banking at New

Delhi and also at other places in India. In the year 1973, the

Petitioner had advanced a loan facility of Rs. 25 lacs to Respondent

No. 4 for financing the import of six diesel generating sets from

Russia and Czechoslovakia for installation at its industrial units at

different locations in UP. Consequently a Charge was created by way

of hypothecation of the said generating sets in favour of the Petitioner

by Respondent No. 4. Respondent No. 4 repaid a sum of Rs. 6.11 lacs

of the said principal loan of Rs. 25 lacs to the Petitioner. In August,

1977, Respondent no. 4 further repaid a sum of Rs. 1,23,000/- to the

Petitioner and the Company‟s principal liability was reduced to Rs.

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WP(C) 2430/1987

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18.89 lacs and approximately Rs. 2.5 lacs was then due towards

unpaid interest. On 13^th April, 1978, Respondent No. 1/Union of India

through the Ministry of Industry authorized Respondent No. 3 to take

over the management of the following six industrial undertakings

belonging to respondent No. 4:-

(i) The Swadeshi Cotton Mills, Kanpur

(ii) The Swadeshi Cotton Mills, Pondicherry

(iii)

The Swadeshi Cotton Mills, Naini

(iv)

The Swadeshi Cotton Mills, Maunath Bhanjan

(v) The Udaipur Cotton Mill Ltd, Udaipur, and

(vi)

The Rae Bareli Taxtile Mills Ltd., Rae Bareli.

3.

On

24^th

January,

1979 and

8^th

February,

1979, Respondent No. 3 which had taken over the management of

Respondent No. 4‟s six undertakings, made a payment of Rs.

1,71,606.60/- towards reduction of Respondent No.4‟s liability to the

Petitioner under the aforesaid loan account. Ther