RSA No. 896 of 2010 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH RSA No. 896 of 2010 (O&M) Date of Decision: March 23, 2010 M/s National Textile Corporation Ltd. ...... Appellant Versus Radhasoami Charitable Society, Dayal Bagh, Agra ...... Respondent Coram: Hon'ble Mr. Justice Ajay Tewari Present: Mr.H.N.Mehtani, Advocate for the appellant. **** 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? Ajay Tewari, J. This appeal has been filed against concurrent judgments of the Courts below dismissing the suit of the appellant that it had become owner of the land of Dayal Bagh Spinning and Weaving Mills at Putlighar, Amritsar. Both the courts considered the fact that Dayal Bagh Spinning and Weaving Mills was not the owner of the land which was owned by the respondent but was a mere lessee thereof. Both the Courts further held that in these circumstances the acquisition of the sick textile company viz. Dayal Bagh Spinning and Weaving Mills could not result in vesting of the ownership rights also in the appellant, even though whatever rights which the proprietor or the owners of Dayal Bagh Spinning and Weaving Mills had would so vest in the appellant. RSA No. 896 of 2010 (O&M) 2 The following questions have been proposed:- i) Whether when the judgments and decrees of the learned courts below are based on the misreading of evidence produced by the plaintiff and incorrect interpretation of the provisions of Section 3 and 4 of the 1974 Act are the said judgments and decree not liable to be set aside? ii)Whether when under Section 3 of the 1974 Act, the Sick Textile Undertaking and the right, title and interest etc. of the owner in relation of the sick textile undertaking are transferred and vest absolutely in Central Government on the appointed day and immediately thereafter in the National Textile corporation by the operation of the said Act was it not irrelevant as to who was the owner of the said sick Textile Undertaking viz. D.B.S.W.M. whether the defendant or the Maharaj Mill? iii)Whether when under the 1974 Act there is provision of statutory transfer andvesting of every sick textile undertaking and the right,title and interest of the owner in relation to sick textile undertaking in the Central Government and immediately after it has so vested its transfer and vesting in the National Textile Corporation, have the learned Courts below not erred in law in holding that only the lease hold rights which earlier vested in the Maharaj Mills were acquired by the Central Government for the benefits of the plaintiff/appellant and the ownership rights in the D.B.S.W.M. and land etc. did not vest in Central Government and therefore the plaintiff is not entitled to the relief of declaration and that of permanent injunction? iv)Whether when from the bare perusal of sections 3 and 4 of 1974 Act an inference can be drawn that u/s 3(1) of the Act, there is a provision of vesting of lease hold rights, have the learned Courts below not given findings on issues No. 1 and 2 contrary to the provisions of section 3 and 4 of the Act? v) Whether when there is no provision of vesting of the lease hold rights under section 3 and 4 of the 1974 Act in the RSA No. 896 of 2010 (O&M) 3 Central Government have the learned courts below not wrongly interpreted the provisions of section 3 and 4 of the Act and thereby committed an error of jurisdiction by giving findings contrary to the provisions of the 1974 Act? vi)Whether even if the plaintiff executed the lease deed and kept on renewing the same till the year 1994 (as mentioned in the plaint) though on the misrepresentation of the respondent and by inadvertence on the part of the plaintiff, but when in view of the provisions of section 3 and 4 of the 1974 Act, that did not in any manner effect the transfer and vesting of the right of ownership in the Central Government and immediately thereafter in the National textile Corporation have the Learned courts below not committed any error of jurisdiction in deciding issue No. 1 and 2 against the appellant/plaintiff and dismissing the suit filed by it? vii)Whether when there was absolute transfer and vesting of the ownership rights as mentioned in Section 3 and 4 of the act of the Sick Textile Undertaking viz. D.B.S.W.M. in the Central Government/National Textile corporation by virtue of operation of 1974 Act with effect from 1.4.1974, have the learned Courts below not erred in law in holding that the appellant stepped into the shoes of Sir Sahabji Maharaj Mills Limited and thereby wrongly deciding issues No. 1 to 3 against the appellant? viii)Whether even if the defendant had not received any amount under Section 8 of the 1974 Act, will it effect the transfer and vesting of the rights, title and interest of the owner of the Sick Textile Undertaking in relation to Sick Textile Undertaking in the Central Government/National Textile Corporation by operation of 1974 Act more particularly when the defendant had a remedy of preferring claim under chapter VI of the Act? ix)Whether when the ratio of judgment of this Hon'ble court in RSA No. 949 of 1990 is applicable to the facts and proposition of law involved therein have the Learned courts RSA No. 896 of 2010 (O&M) 4 below not committed an error of jurisdiction in not relying upon the ratio of the aforesaid judgment? x) Whether when the facts and proposition of law involved in the judgment of the Hon'ble Delhi High Court dated 31.1.2001 in civil Misc. Petition No. 75 of 2000 in case National Textile Corporation V. Tek Chand is distinguishable (and not applicable) to the facts of the present case have the Courts below not erred in law in relying upon the said judgment? It would be seen that questions No.(i), (ii), (iii), (iv), (v), (vii), (viii), (ix) and (x) are overlapping. Before proceeding to discuss the questions it would be appropriate to reproduce the Preamble and Sections 3, 4, 20 and 21 of The Sick Textile Undertakings (Nationalisation) Act, 1974 here since all the arguments of learned counsel are based on the same :- “Preamble of the Act:- An act to provide for the acquisition and transfer of the sick textile undertakings, and the right,title and interest of the owners in respect of the sick textile undertakings, specified in the First Schedule with a view to re- organising and re-habilitating such sick textile undertakings so as to subserve the interests of the general public by the augmentation of the production and distribution, at fair prices, of different varieties of cloth and yarn, and for matters connected therewith or incidental thereto.” S.3 Acquisition of rights of owners in respect of sick textile undertakings - (1) On the appointed day, every sick textile undertaking and the right, title and interest of the owner in relation to every such sick textile undertaking shall stand transferred to, and shall not vest absolutely in, the central Government.” S.4 General effect of vesting,- (1) The sick textile undertaking referred to in section 3 shall be deemed to include all assets, rights, lease-holds, powers, authorities and privileges RSA No. 896 of 2010 (O&M) 5 and all property, movable, and immovable, including lands, buildings, workshops, stores, instruments, machinery and equipment, cash balances, cash on hand, reserve funds, investments and book debts and all other rights and interest in, or arising out of, such property as were immediately before the appointed day in the ownership, power or control of the owner of the sick textile undertaking, whether within or outside India, and all books of account, registers and all other documents of whatever nature relating thereto and shall also be deemed to include the liabilities and obligationis specified in sub-section (2) of section 5. (2) All property as aforesaid which have vested in the Central government under sub-section (1) of section 3 shall,by force of such vesting, be freed and discharged from any trust, obligation, mortgage, charge, lien and all other incumbrances affecting it and any attachment, injunction or decree or order of any court restricting the use of such property in any manner shall be deemed to have been withdrawn. (3) Where any licence or other instrument in relation to a sick textile undertaking had been granted at any time before the date on which the Ordinance was promulgated, to an owner by the Central Government or a State Government or any other authority, the National Textile Corporation shall, on and from such date be deemed to be substituted in such licence or other instrument in place of the owner referred to therein as if such licence or other instrument had been granted to it and shall hold such licence or the sick textile undertaking specified in such other instrument for the remainder of the period for which the owner would have held such licence or the sick textile undertaking under such other instrument. (4) Every mortgagee of any property which has vested under this Act in the Central Government and every person holding any charge, lien or other interest in or in relation to such property shall give, within such time and in such manner as may be prescribed, an intimation to the Commissioner of such RSA No. 896 of 2010 (O&M) 6 mortgage, charge, lien or other interest. (5) For the removal, of doubts, it is hereby declared that the mortgage of any property referred to in sub-section (2) or any other person holding any charge, lien or other interest in or in relation to,any such property shall be entitled to claim, in accordance with his rights and interests, payment of the mortgage money or other dues, in whole or in part, out of the amount specified in relation to such property in the First schedule,but no such mortgage, charge, lien or other interest shall be enforceable against any property which has vested in the central Government. (6) If, on the appointed day, any suit,appeal or other proceeding of whatever nature in relation to any matter specified in sub-section (2) of section 5 in respect of the sick textile undertaking, instituted or preferred by or against the textile company, is pending, the same shall not abate, be discontinued or be, in any way, prejudicially affected by reason of the transfer of the sick textile undertaking or of anything contained in this Act but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the National Textile Corporation. (7) Any person, who, on the date on which the Ordinance was promulgated, was in possession of, or had under his custody or control, the whole or any part of any sick textile undertaking referred to in section 3, the management of which could not be taken over by the Central Government by reason of any decree, order or injunction of any court or otherwise, shall deliver forthwith the possession of such undertaking or part and all books of account, registers and all other documents of whatever nature relating to such undertaking or part to the central Government or the National Textile corporation or such other person as the Central government or the National Textile Corporation, as the case may be,may specify in this behalf. S. 20 Claims to be made to the Commissioner -Every person having a claim against the owner of a sick textile undertaking RSA No. 896 of 2010 (O&M) 7 shall prefer such claim before the Commissioner within thirty days from the specified date: Provided that if the commissioner is satisfied that the claimant was prevented by sufficient cause from preferring the claim within the said period of thirty days he may entertain the claim with a further period of thirty days but not thereafter. S. 21 Priority of claims.-the claims arising out of the mattes specified in the Second Schedule shall have priorities in accordance with the following principles namely:- (a) Category I will have precedence over all other categories and Category II will have precedence over Category III and so on; (b) the claims specified in each of the categories except category IV shall rank equally and be paid in full,but if the amount is insufficient to meet such claims in full, they shall abate in equal proportions and be paid accordingly; ( c ) the liabilities specified in category IV shall be discharged, subject to the priorities specified in this section, in accordance with the terms of the secured loans and the priority inter se of such loans, and (d) the question of payment of a liability with regard to a matter specified in a lower category shall arise only if a surplus is left after meeting all the liabilities specified in the immediately higher category.” A perusal of Sections 3 and 4 as well as the Preamble makes it clear that on the date of acquisition whatever right, title or interest which the owner had in the sick textile undertaking, the same would be transferred to the appellant. Pointed attention can be drawn to the fact that the expression 'leasehold' has been specifically mentioned in Section 4 as one of the bundles of rights which would stand transferred to the appellant. The judgment of the Hon'ble Delhi High Court referred to in question No. (x) directly deals with this issue. The learned Lower Appellate Court has also RSA No. 896 of 2010 (O&M) 8 rightly distinguished the facts of RSA No. 949 of 1990 since in that case there was no dichotomy between the owner of the textile mill and the owner of the land. Here admittedly the facts are that the owner of the textile mill was a lessee of the owner of the land and building. It is inconceivable that even in the face of the word 'leasehold', the intention of the Act would be that even those rights which were not possessed by the owner of the textile mill would still be transferred to the appellant. To stretch this argument to test its validity, I put it to learned counsel that if a rank trespasser broke into a closed factory and started his own textile mill which subsequently became sick and was taken over by the appellant, whether in such a suit also the real owner of the land and building would be divested of the ownership. Learned counsel has not been able to persuade me that such indeed could be the case. Learned counsel has relied upon a judgment of the Hon'ble Supreme Court in Vidarbha Mills Berar Limited and another v. Union of India and others reported as AIR 1987 SC 378 wherein the issue was whether that property of the owner of the sick mill which was not used directly for the running of the mill would also stand acquired. It was in that context that the Hon'ble Supreme Court held as follows:- “There is no dispute that the property is the property of the Textile Undertaking. Once it is found to be the property of the Textile Undertaking there is no escape from the provisions of S.4(1) read with S. 4(3) of the 'Sick Textile Undertakings' (Taking Over of Management) Act. The Writ Petition is, therefore, dismissed.” To my mind this judgment does not support the case of the appellant. What the Hon'ble Supreme court has emphasised is the ownership RSA No. 896 of 2010 (O&M) 9 of the disputed property by the same owner. At the cost of repetition it may be mentioned that in the present case the property was owned by the respondent. Learned counsel has also relied upon M/s Doypack Systems Pvt. Ltd. v. Union of India and others reported as (1988) 2 Supreme Court Cases 299. Here also the question was whether the shares ( in a different company) which were owned by the owner of the sick textile unit were also to be transferred, the Hon'ble Supreme Court held that they would be so transferred. Again this case would not strengthen the argument of learned counsel since there is a complete identity of the owner of the textile mill and the property sought to be vested. Learned counsel has also relied upon National Textile Corporation Ltd. and others etc. v. Sitaram Mills and others etc. reported as AIR 1986 S.C.1234. Again the dispute was in relation to what was alleged to be surplus land. Also in that case there was no dispute that the ownership of such surplus land was vested in the same persons who were the owners of National Textile Mill. Consequently I hold that none of the above judgments advance the case of the appellants. Thus questions No. (i), (ii), (iii), (iv), (v), (vii), (viii), (ix ) and (x) are answered against the appellants. As regards question No. (vi) even this fact goes against the appellants. It is not disputed that right from 1974 to 1994 the appellant kept on paying the due lease money to the respondent. The argument was that it was mistakenly paid as was sought to be raised in this question as it was neither here nor there. Once I have held that it is only those rights which could vest in the appellant which were owned by the owner of the sick textile unit, the question whether the lease money was paid mistakenly or not does not arise. RSA No. 896 of 2010 (O&M) 10 Consequently holding all the questions proposed against the appellant, this appeal as well as the application for stay are dismissed. No costs. Since the main case has been decided, the pending Civil Misc. Applications, if any, stand disposed of. (AJAY TEWARI) JUDGE March 23 , 2010 sunita