Case: Podar Mills Limited Vs. J.K. Synthetics Limited

8(1)(c) refers to proceedings other than winding up proceedings under the Companies Act. We do not see any reason why section 8(1)(c) should be construed in this fashion, The intention of section 8(1) (c) is clearly to prevent a textile Company whose undertaking is covered by the said Act from being wound up. There are other provisions also in the said Act which support this construction. For example under section 4 sub-section (2) on the appointment of a custodian the management of the textile undertaking shall vest in such custodian and all persons in charge of the management shall cease to be in charge of such management. Under sub-section (8) of section 4 every person having possession, custody or control of any property forming part of the textile undertaking is also required to the deliver such property to the custodian. Therefore, every person who is in possession of such textile undertaking is required to hand over possession to the custodian. The Act therefore, clearly contemplates that textile undertakings which are covered by the Act should be in the possession of the custodian an not any other party, including Receiver or Liquidator.11. In the case of (Maharashtra State Textile Corporation Ltd. v. The Official Liquidator and others)2, reported in A.I.R. 1978 S.C. 476 the Supreme Court was required to construe the provisions of Sick Textile Undertakings (Taking Over of Management) Act of 1972. Under section 8(1) of that Act it was provided as follows : No proceeding for the winding up of a textile Company, within the meaning of this Act, shall lie in any Court or be continued whether by or under the supervision of any Court or voluntarily, except with the consent of the Central Government.Analysing this provision the Supreme Court held that the consent of the Central Government was necessary before pending proceedings were continued. In the course of its judgment the Supreme Court observed. In our opinion, the words winding up must be given the widest possible amplitude in order to serve the purpose of the Act namely, to control the proceedings of a textile Company which is in liquidation, by the Central Government. Whether the Company had been wound up or whether the proceedings for the winding up of the Company had been continuing would make no difference so far as the application of section 8 of the Management Act is concerned.12. In the present case also the words winding up in section 8 of the present Act require 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 Undertakings (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 proceeding 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.13. 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. Under section 10 also it is provided, that no suit etc. shall lie against the Central Government or the custodian for anything which is in good faith done or intended to be done under the Act. It is submitted that the words shall lie in section 10 are clearly prospective. The same phrase is used in section 8. Hence in section 8 also the phrase must be construed as prospective. This contention must be rejected. It is the context of section 10 which makes the provisions of section 10 prospective because section 10 deals with proceedings against the Central Government or the custodian for anything done or intended to be done under the Act. Such Proceeding must necessarily be in respect of anything done after the commencement of the Act. The use of the phrase "shall lie" in section 10 is therefore not responsible for making the section prospective. The phrase in both sections 8 and 10 is intended to mean shall be entertained and nothing more. In our view 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.14. It was finally urged by the respondents that the consent order is a self operative order. It provides for admission of the petition and its advertisement. There is no reason why the petition should not be advertised. It was also urged that at the time of the final hearing of the Company petition for winding up after the petition is advertised, the question of applicability of section 8(1)(c) may be considered. There is no reason why any relief should be granted to the appellant in the Judgess Summons at this stage. We are unable to appreciate this submission. When a liquidator cannot be appointed in this winding up petition without the consent of the Central Government it is difficult to see what purpose would be served by advertising the petition for winding up. Construction of section 8 (1)(c) of the said Act is a technical issue where presence or absence of other creditors cannot make any difference. It would be futile to permit the respondents to advertise the petition for winding up when they require the consent of the Central Government before obtaining any final orders in the winding up petition.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]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 subsection (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 thereof 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 thedo not see any reason why section 8(1)(c) should be construed in this fashion, The intention of section 8(1) (c) is clearly to prevent a textile Company whose undertaking is covered by the said Act from being wound up. There are other provisions also in the said Act which support this construction. For example under section 4(2) on the appointment of a custodian the management of the textile undertaking shall vest in such custodian and all persons in charge of the management shall cease to be in charge of such management. Under(8) of section 4 every person having possession, custody or control of any property forming part of the textile undertaking is also required to the deliver such property to the custodian. Therefore, every person who is in possession of such textile undertaking is required to hand over possession to the custodian. The Act therefore, clearly contemplates that textile undertakings which are covered by the Act should be in the possession of the custodian an not any other party, including Receiver or Liquidator.In the present case also the words winding up in section 8 of the present Act require 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 Undertakings (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 proceeding 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.13. 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. Under section 10 also it is provided, that no suit etc. shall lie against the Central Government or the custodian for anything which is in good faith done or intended to be done under the Act. It is submitted that the words shall lie in section 10 are clearly prospective. The same phrase is used in section 8. Hence in section 8 also the phrase must be construed as prospective. This contention must be rejected. It is the context of section 10 which makes the provisions of section 10 prospective because section 10 deals with proceedings against the Central Government or the custodian for anything done or intended to be done under the Act. Such Proceeding must necessarily be in respect of anything done after the commencement of the Act. The use of the phrase "shall lie" in section 10 is therefore not responsible for making the section prospective. The phrase in both sections 8 and 10 is intended to mean shall be entertained and nothing more. In our view 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 intoare unable to appreciate this submission. When a liquidator cannot be appointed in this winding up petition without the consent of the Central Government it is difficult to see what purpose would be served by advertising the petition for winding up. Construction of section 8 (1)(c) of the said Act is a technical issue where presence or absence of other creditors cannot make any difference. It would be futile to permit the respondents to advertise the petition for winding up when they require the consent of the Central Government before obtaining any final orders in the winding up petition.