Case: Anil Kumar Neotia And Ors Vs. Union Of India &amp; Ors

2. This petition under Article 32 of the Constitution challenges the constitutional validity of the Swadeshi Cotton Mills Limited (Acquisition and Transfer of Undertakings) Act, 1986 (hereinafter called the Act). It appears that there was an order made by the Central Government under Sectionof the Industries (Development and Regulation) Act, 1951 (hereinafter called the IDR Act) for taking over the management of the six undertakings of Swadeshi Cotton Mills, namely, (i) Swadeshi Cotton Mills, Kanpur, (ii) Swadeshi Cotton Mills, Pondicherry, (iii) Swadeshi Cotton Mills, Naini, (iv) Swadeshi Cotton Mills, Maunath Bhanjan, (v) Udaipur Cotton Mills, Udaipur and (vi) Rae Bareli Textile Mills, Rae Bareli for a period of five years. There were several proceedings in the High Court of Delhi and in other High Courts. It is not necessary in view of the judgment of this Court in M/s Doypack Systems Pvt. Ltd. v. Union of India ((1988) 2 SCC 299 ) dated February 12, 1988 to set out in extenso all these facts. By the aforesaid judgment it was held that the 10, 00, 000 shares in Swadeshi Polytex Limited and 17, 18, 344 shares in Swadeshi Mining and Manufacturing Company Limited held by the Swadeshi Cotton Mills vested in the Central Government and National Textile Corporation (hereinafter called "NTC"), under Section 3 and 4 of the Act. It was further held that in view of the amplitude of the language used, the immovable properties, namely, the Bungalow No. 1 and the Administrative Block, Civil Lines, Kanpur had also vested in NTC Directions were given by this Court in the said judgment to enter the name of the NTC in its register of members of the said Companies and to treat the NTC as their shareholder instead of other erstwhile shareholders

Court's reasoning:
All these contentions, in our opinion, are not tenable because all these contentions were directly or indirectly dealt with in the aforesaidthe present case we are satisfied that the shares in question were held and utilised for the benefit of the undertakings for the reasons that (a) the shares in Swadeshi Polytex Limited were acquires from the income of the Kanpur Unit. Reference may be made to page 23 of the Compilation(b) the shares held in Swadeshi Mining and Manufacturing Company were acquired in 1955.It was found by the said judgment that the net wealth of the company was negative and therefore, Section 3 and 4 could be meaningfully read if all the assets including the shares were considered to be taken over by the acquisition. That was the only irresistible conclusion that followed from the construction of the documents and the history of the Act. The Act in question was passed to ensure the principles enunciated in clauses (b) and (c) of Article 39 of the Constitution. In that context, it was held that to leave a company, the net wealth of which was negative at the time of take over of the management with the shares held by it as investment in other company, was not only to defeat the principles of Article 39(b) and (c) of the Constitution but it would permit the company to reap the fruits of its mismanagement. That would be an absurd situation. In this context, in our opinion, the contentions now sought to be urged are no longer open to theThese contentions were dealt with and repelled as mentioned in the passages set out hereinbefore. We reiterate the said reasons. It has further to be borne in mind that the shares held in the Swadeshi Polytex Limited themselves wore the subject matter of both pledge and attachment to secure loans from the U.P. State Government of about Rs. 66 lakhs for payment of wages to workers of the Kanpur undertaking and Rs. 95 lakhs being electricity dues of the Kanpur undertaking owing to the U.P. State Electricity Board. From all these, it would appear that the acceptance of the petitioners case would mean that the State would pump in Rs. 15 crores of public money to release the shares from its liabilities and thereafter hand over the shares free from such liability back to the company when the net worth of the company at the time of take over of management was negative and in the teeth of the present financial liabilities built up by the company the shares would inevitably have been sold in discharge of its liabilities and in any event the shares stood charged with the very liabilities which related to the undertakings of the company which were taken over by the government. Therefore, it is incorrect to say that there was no public purpose for taking over these shares. It would be absurd to say that there was no compensation paid for the said acquisition. The relevant observations in the judgment dealing with thin contention have been set outFurthermore, we are of the opinion that the law as declared by this Court in Doypack Systems Pvt. Ltd. ((1988) 2 SCC 299 ) is binding on the petitioners and this question is no longer res integra in view of Article 141 of the Constitution. See the observations of this Court in M/s Shenoy and Co. v. CTO ((1985) 3 SCR 659 : (1985) 2 SCC 512 : AIR 1985 SC 621 ), where this Court observed that the judgment of this Court in Hansa Corporation case (State of Karnataka v. M/s Hansa Corporation, (1981) 1 SCR 823 : (1980) 4 SCC 697 : AIR 1981 SC 463 ) is binding on all concerned whether they were parties to the judgment or not. This Court further observed that to contend that the conclusion therein applied only to the parties before this Court was to destroy the efficacy and integrity of the judgment and to make the mandate of Article 141In that view of the matter this question is no longer open for agitation by the petitioners. It is also no longer open to the petitioners to contend that certain points had not been urged and the effect of the judgment cannot be collaterally challenged. See in this connection the observations of this Court in T. Govindaraja Mudaliar v. State of Tamil Nadu ((1973) 3 SCR 222 : (1973) 1 SCC 336 : AIR 1973 SC 974 ), where this Court at pages 229 and 230 of the report observed as follows : (SCC pp.We are unable to hold that there is much substance in this argument. Bhanji Munji (State of Bombay v. Bhanji Munji, (1955) 1 SCR 777 : AIR 1955 SC 41 ) and other decisions which followed it were based mainly on an examination of thebetween Article 19(1)(f) and Article 31(2). There is no question of any acquisition or requisition in Chapterof the Act. The relevant decision for the purpose of these cases was only the one given in Kochuni case ((1960) 3 SCR 887 : AIR 1960 SC 1080 ), after which no doubt was left that the authority of law seeking to deprive a person of his property otherwise than by way of acquisition or requisition was open to challenge on the ground that it constituted infringement of the fundamental rights guaranteed by Article 19(1)(f). It was, therefore, open to those affected by the provisions of Chapterto have agitated before this Court the question which is being raised now based on the guarantee embodied in Article 19(1)(f) which was never done. It is apparently too late in the day now to pursue this line of argument. In this connection we may refer to the observations of this Court in Mohd. Ayub Khan v. Commissioner of Police ((1965) 2 SCR 884 : AIR 1965 SC 1623 ) according to which even if certain aspects of a question were not brought to the notice of the court it would decline to enter uponof the question since the decision had been followed in other cases. In Smt. Somavanti v. State of Punjab ((1963) 2 SCR 774 : AIR 1963 SC 151 : (1963) 33 Com Cas 745) a contention was raised that in none of the decisions the argument advanced in that case that a law may be protected from an attack under Article 31(2) but it would be still open to challenge under Article 19(1)(f), had been examined or considered. Therefore, the decision of the court was invited in the light of that argument. This contention, however, was repelled by the following observations at page 794The binding effect of a decision does not depend upon whether a particular argument was considered therein or not, provided that the point with reference to which an argument was subsequently advanced was actuallyIn view of the preamble to the Act which states and proclaims that the Act was passed to carry out the object of Article 39(b) and (c) of the Constitution and in view of the scheme of the Act as analysed before us and as also apparent from the aforesaid judgment, it is clearly manifest that the Act in question was passed for a public purpose and for the acquisition of shares there was a public purpose. The acquisition subserved the object of the Act. The compensation in the manner indicated above and in the manner indicated in the aforesaid judgment for such acquisition has been provided for. No separate compensation need be provided in the circumstances of the case for these shares. The factual basis for the legal challenge made in this writ petition was, therefore, incorrect in the facts of this case. It is apparently too late in the day to contend that there was no compensation for the shares or that the acquisition of the shares amounted to confiscation or there was no public purpose in the Act. The petition, in our opinion, is wholly devoid of any merit