.. [D, .A. DESAI, AMARENDRA NATH SEN AND R. B. MISRA, JJ.].

Defen<e of Indid Rules,

1962. Rules j15 and . 125A Sutor Mill Ciosed-Order of Central Gov(3rnmenr taking over Managemet-Authorisd control/er appointed order of Central GoVernm, nt-Whethei valid. . ' . ·- . .

WOrds & Phrases: 1Undertaking'-'Engaged_ inthe product{on of'- Meanint of-Rule 125A Defence of Indian Rules, 1962. . - .

E •

The management of the Suar Mill of th.e. Appellant was tal<en over under Rule 125 of the l>efence of India Rules 1962 and an Authorised _Con• !roller was appointed • . 1nthe appeal by certificate to this Court, it was .contended on behalf _ pf the Appellant that long before passing.of the order and even before sugar was decl, ared to be an essential. commodity; the appellant bad, completely .F stopped the. rUnning of the Mill with no intent{on to starfit again, there_was, therefore, no undertaking within the me&ning of Rule 125.A and the ordr passed under Rule 125A whicb was not attracted mu't. be held to 1"', bad ai; id inv31id.

_ .• on behalf o.f the Union of India, it was contended that Rule 12SA G confers juisdiction and authority to_ pass. ao order eveo in respect of.an undertaking cloSed and int.ended to be permallently shut own.

Dismissing the app~1,

' HELD: the taking over of the manag<m<nt Of the sugar mill of the appellant and the appointment cf the aU1hcri<Cd contrclkr "ere perfectly valid and lawful and. the act dote by iheauthorim! contro!Juin tecours~ of roantiiement is bindill\l op the app~)lant• (SS3Al ·

y '.

'\'.D. JHUNJHUNWALA V. UNION 531

2. Although Ru)e 125 confers very wide powers for genbral controi of an undertaking, there is no provision in .the said ruie to ta.ke over the management of any_ underta\ing. Rule: 12.SA by way of amendment was; therefore. inserted to confer further power of taking over the ruanag{tn<nt of-partculr undertakings and of appointing authorised controllers for running such undertakings. [541G, 542AJ

3. Rule 125A makes it clear that the rule was not intended to apply to each and every undettaing within the meaning of Rule 125. Speciitl provision. is. P, ade i.n ule 125A i0' respect of particular undertakings only.

Rule 125A describes and particularises the undertakings to which this rule will be applicabie. [542B] ·

4. 1'.he provision in Rule 12SA that "in this rule unless the context -.otherwise requires, an •undertaking' means any undertaking (includfJg an

underiaking vested ill or contro1led or managed by, a lcicalauthority) which is , engaged in--_;,, is merely descriptive ofte undertaking to_ which this rule is applica, b1e. The words "which is engaged in the production" . merely

D : i:Iescribes. the .kind Of und.ertakinS .by referring to _the nature of the activity qf the -Undert.akirig for bringing it within the purview of Rule 12SA and they hav'e no be>-ar-ing on the question. hether the activities. are in the prOcess of being carried on or have been stopped. The expression any undertaking whi, ch

is 'engaged in' has been used to d..escribe the nature of business of the undf; rt<iking and is m:rely descriptive of the undertaking w which t.kis rule willapply. [542C-EJ · E

. CIVIL APPELl\A.TE JURISDICTION : Civil Appeal No. 481 9f 1971.

From the Judgment and Decree dated the 22nd Deci:_mber, F' 1969 of the Allahabad High Court in Writ Petition No. 210 of 1967 ..

S.T. Desai and H.S. Parihar for the Appellant.

Harbans Lal, Miss A. Subhashini and V, B, SDharya for the Respondent.

. Mrs. Shobha Dikshit fqr Respondent. No. 3.

The Judgment of t)le Cort was deliveed ~

E·

SUPREME COURT REPORTS [1984) 3 s.c.R.

. .

AMARENDRA NATH Sm, J.

Whether the order of the Central oovernment taking, over the management of t)\e Sugar Mill of the Appellant. under Rule 125A of the Defence of India Rule;; and appointing an authorised Controller of the .said Mill thereunder is valld, is the principal question which falls for determination in this appeal by certificate.

The main contention of Mr. S. T, Deasi, learned Counsel for the appellant, is that .on a proper construction of Rule l 25A of the Defence of.Indi~ Rules (hereinafter referred to as the Rules) . the o.rder taking over the management of the Sugar Mill under this rule is invalid, as on the date ofthe order the Sugar Mili was · closed .and the appellant had.no intention ofre-op<!ning the snme.

It has not .been dispnted that if the order of the take. over of. the

manaeme!lt is held. to be valid the appellent will not be entitled to any relief and the appeal must fail. . .

We may observe that the question whether the Mill was closed or n.ot on the date the order taking over the management and appointing an authorised Controller under Rule 125 was passe<l, is in serious dispute.

However; for the purpose of <leciding the question raised in this appeal it does not become necessary . . . to go Jnto any dispute with regard to the. facts.

We propose to. proceed on the basis that the Mill haq remained closed and the appellant had shut it down permanently on the date the order came' to be passed, as, in our opinion, the order in .question, even. if the same be held to have been passed at the time when the Mill was lying so closed, must be held to be . perfectly vaild on a proper interpretation of Rule 125A As.in out opinion, on a propr interpretation of R.ule 125A, the -order.in question is lawfuland justified even if we accept the submission of Mr. Desai that the Mill was fatually s9 closed, it does not becon1e necessary for us to advert to the facts of this particular case. The real question is one of interpretation of Ru1e 125A.

Rule 125A was introduced by an amendment and inserted by a. S. R. 1813 dated 28ih December, 1962.

The provisions of this Rule relevant for the purpose of thjs appeai are .contained in sub• rules 0) and (2) which provide as follows :-

"125A '(!).

In this rule. unless the contellt otherwise requires, 'undertaking' means- .

- . . . (a) any undertaking (including an unertaking vested ip1

, k i

V.D. lHUNJf!liNWALA v, UNION (t!..N. Sen, J.) 533

or con.trolled or managed by, a local ulhor, ity) which is engaged in the production, generation, supply,· distribution 0r provision pf water, transport, fuel,. lighi electricity or other power, ot any other thing or service which is notified by the Government as .. . essential to the life of the community ;

(b) any system of public conservancy and sanitation and any hospital or dispensary ; •

and also includes an.Y part or . property of an . c undertaking.

 (2) If. it appears . to the C.entral Government or the State Government that for maintaining supplies and services essential to the life of the community, it is necessary to tak.e over. the managcinent of any .undertaking, .that Government may, by notified order, authoi:ise any . . . p¢rson or body of persons to take over the management of any undertaking specified in the order and thereupon such undertaking shall be manageo in accordance with the provisions of that order ;

Provided that powers UJlder this sub-rule shall he exercised by the State Government in respect of a. company to which the Comp<tnies Act 1956 applies .

. Mr. Desai referring to sub-rule (I) (a) ofRule 125A of the.

I!' Rules has argued that the Mill of the Appellant was not an undertaking within the meaning of this Rule, as the Mill on the date of the order was not engaged in .. production, generation, supply,

distribupn, or provision of water, transport, fuel, light, elect(icity or other power or any other thing or service which is notified by the Government as esse.ntial to the life of the community because the Mill bad been lying closed. It is his argument that an order under Rule 125A ca.n only be validly passed in respect of an under• . takin~ within the meaning of the Rule and in terms of the definition of 'undertaking' in the rule, an undertaking to which this rule may apply, must be one which is .engaged in the production,

g:nertifln, supp!y: distribution or provision of water, transport, fuel, hght, electnc1ty or other power or an}' other thing or service

~ .. .

. A.

c, D.

5~4 SUPRl!ME COtJRt REPORtS [1984]3 s, c.R.:

which is notified by the Government as essntial to the life of the community. He contends that the Mill had been closed and had not been fUnctioning and therefore, the. Min was not engaged in the production, generation, supply or distribution oL any sugar or ·

any other .thing or service essent_ial_ to the life of the coinmunity.

It is his contention .that as the _appellant had !OJ]~ before the pas-. sing of the order and even before sugar was declared to be iln essential co:nmodity. completely_ stopped th.e running of the Mill . witQ.: .no intention to start it again, the. Mill had ceased to be engaged in the manufacture or production of sugar and there was •therefore, no undertaking within the meaning of Rule 125A and. the order passed under Rule 125A which was not attracted must . be held. to be. bad and invalid. He has submitte<; l that an. order

under Rule 125A call only be• passed in respect of an undertakig which is actually engaged in 'the activ.ity of production 'at the time the order is passed; In support of the submissions made-, Mr.

Desai has' referred to :the decision of this Court in R. C Cooper v.

Union of India"l and also !o the decision of the Delhi High Court 'in the case of , National Projects Constructio11 Corporation Ltd.v. · Cinnmissioner of Wealth Tax. Delhi"'.

On behalf of the. Union: of India, it has been submitted that stoppage of production and non-fonctioning of the Mill even with ·

an intent to close it down permneritly does not, _in any way, affect the power to take over. the_ management under Rule J25A and thejurisdiction and authority to pass an order even in respect of an undertaking cloed and intended to be permanently shut down" can validly be exercised under rule 125A. The submission is that merely because an undertaking has been shut down with no intention of being. reopened ii will not on that ground only cease .to be an undertaking wiihin the meaning of the rule,· The learned counsel argues that for a proper appreciation of the (rue import and meaning of the word 'undertaking' and for under§ianding the true. scope and effect of rule l2SA, it is necessary to refer to rule-

125. It is his argument that in the light of the provision contained in rule 125, rule 125A which was introduced by way of amendment to confer' further power of take. over _of ihe management of an undertaking will have to be understood anq construed ; anti on. proper interpretation it is clear that fa the larger public interest,

(l} [19701 3 S. C. R. 530

(2) [1969] 74 I. T. R. 4'65 .

. .,

. I

~- •••

.. ..

.. .

. -.

' -

' -._.

v:o. ; fiuii1IluNWALA v~ UNION (A.N. Sen, J.) · 535

 . . ·. : .· • f . d . . d. . ule !25A can undoubt- A the power and authority con erre un er r .. . . . , . 'edly be exercised in respect of an undertaking which, may not be . functlonin.a and may have even been closed with intent•. of not

' ' - 0 . • . . ··, :

reopening the same;. ·

• •

. . ' . . . . The relevant proviSions of rule 125 read :-

" 125. General control of indusiry, etc . ..::(!) rule, unless the ontext otherwise requires,~.. .

Io this

(a) ~~Y reference to ay artile or thing shall be const-

. rued .as including a reference to electricai energy ; ·

:' _-.. ·

(b) the . exprssion 'undertakiiis mean's any undertaking

 : by way of any industry~ trade or business and includes.

, the occupation of hanJ!ing, loading or unloading Of . gcicidsio the course. f trasport, · ·

(:l) If the C.entral Gvernmnt (; r the . State Gi1ver.n" ment is of.opinion . that it is necessary or expedient so to . -do for securing the defence. of• India and civil defence,.· . 'the efficient conduct of military operations or the mainte- . . nance or. increase of supPlies . and services ssential to the Ufe of the community or for securing.: the equitable distribution and availability of any article or thing ai, fair .prices, . it may;. by 'order, provid~ for regulating or prohibiting the production, manufacture, supply and distribution, use and consumption of articles 'or thing and. trade . and . comineri:e therei.n or . for. preventing any corrupt paictke of abuse of authority ln respect of. any such .matter;. ·

c '

,. -·,

.• .F

(3) Without. prejudice . to the generality of the . powers tonferred by 'sub' rule. (2); an order made there~

. G under my provide' . ..

(a) . for regulating' by iicences, . permits or otherwiSe the

the :production, manufacture,: treatment;': keeping •. st9rage; movement; transport, '.distribution, disposal; . acquisition/ use or consumption ofarticles or things

of any description whatsoever ~: · ·

. •.· ..

.• H

, I

. 536.

SUPR, EME COURr REPORTS

(1984] 3 S.C.R •

(aa) for regulating o.r prohibiting any. class of commercial or financial transactions. iri respect of any artiC!e or thing which in the opinion of the Government are, or, if not regulated or prohibited, are likely to be, detrimental to any of the purposes specified.in subrule (2). ·

(b) . for prohibiting the. with holding from sale, either generally or to specified persons 'or clilsses of persons, of articles or things ordinarily kept for sale and for requiring articles or things ordinarily kept for sale to be sold either generally or to specified persons or class. or classes of persons or in specified circumstances ;

(c) for requiring any perspn holding in tock any article or thing to sell !he whole or a specified part of the stock to the Government or to an officer or agent of the Government . or to such other person. or class .or classess of persons and in such circumstances as may be specified in the order and if the 'order relates to food-grains, at such prices.as. may be' specified in the order having ri;.gard to ;-

(i) the maximum price, if any, fixed by order under clause (e) or by or under any other law for the time being in force,· for the grade or variety of food-grains to which the order this clause

(ii)

applies ; and ·

the price: for that grade or variety of foodgrains prevailing or likely . to prevail during the post. harvest period. in the. area to Which the order applies ;

(d) for securipg. the production or manufacture of specified articles. or things in specified quantities and for

effecting modification in the pattern of production .or manufacture of.su'ch article_s or things ;

. (dd) for securing the production, manufacture supply or

sale according to the prescribed standards" and. speci- . fications, of any article or thing appearing to .the . Government essential to any of the purposes specified in sub-rule (2) ; ·

.· "- •

' '

. ..,.

V.D. JHUNJJIUNWALA v. UNION (A.N. Sen, J.)' 531

(ddd) for the minimum and maximum stock of any article

or thing appearing to the Government essential to any the pur-poses specified in sub-rule (2),, to be held by any . consumer or by any producer, manufcturer, distributor, dealer or.other person;

 (e) for controlling the prices or rates at which articles

QT things of any description whatsoever may be sold or hired or for relaxing any maximum or minimum limits otherw'ise imposed on such prices or rates;

(() for controlling the rates at . which any vessel registered in India may be hired and the rates at which C. persons or goods may be carried in or on any such vessel ;

(g) for requiring any employers or class or classes of employers to suppli to all or any class of their employees or to any class of dependants of such employees such articles or things in such quantities £nd at such price as may be specified in the order and to provide such accommodation and other • facilities for taking meals at or near. the place of employment as may be so .specified ;

(h) for controlling the recruitment and employment of labour in such areas as may be specified in the ord.er with a view to seuring that efficient workers are available for undertakings which, .in the opinion of the Government, are essential undertakings ;

(i) for regulating the carrying . on of any undertaking engaged in or capable of doing, work appearing to the Government essential to any of the above men- . tioned purposes, and, in particular :

(i) for requiiing work to be done by ari under

taking ; • G

(ii) for determining the ordr of priority in which, and the period or periods within which work shall be done by an undertaking ; ·

(iii) for controlling or fixing the charges which may be made by undertaking in respect of .the doing of any work by it ;

- •

53s

• A

• D

; H

SUPREME COURT REPORTS [1984] 3 s.c.R. ~- "'

(iv) for requiring, regulating or prohibiting the engageroent in the undertaking of any employees or class or classes of employees ; •· ..

. (v) for requiring the undertaking io provide adequate safeguards against sabotage ;

(j) for requiring rersons .engagep in the production, manufacture, supply or distribution of or trade and commerce in any article or thing, to maintail) and produce for inspection sµch . books, accounts and records relating . to. their bussiness and to . furnish such inforroation relating thereto and to .employ such accounting and auditing staff as may be specified in the order;

{k) for collecting any informatio_n or ·.statistics with a view to regulating or prohibiting any of the aforesaid matters ;

(i) for requiring persons carrying on any Int!ustry, trade

. r+

-or business or employed in conl)ection with any undertaking to produce to such authority as may be specified in . the order, any books, account or other documents relati"ng thereto ; and for requiring-such . persons to furnish such authority as may be specified in the. order such estimates returns or other information relating to any industry. irade or business or any undertaking .as m_ay . be specified ill the order or demanded thereunder ; ¥'"

(m) for the grant or issue of licenpes, permits or other

 documents, the charging of fees therefor, the depost of such sum; if aoy as may be specified.· in . the order as security for the due perfo)'mance of the conditions of any such lic:ence, permit or other document, "the forfeiture ., f the sum to deposited for any part ·

thereof for 'contravention of any such conditions, and the adjudication of such forfeiture by such authority

• ,.;

V.D. JHUNJHUNIYALI\ v. UNION (A.M Sen, J.) 539 " as may be specified in the order ;

* * .. • • • • • • • • • • • • • • • * • • • * * • •• • • • • • . * . • • • • • • .. • • • • • • • • • •

(4) Ifit appears to the Central Government or the State Government that in the interests of the defence of India and civil defence; or the efficient co_nduct of .military operations,. or for maintaining supplies and services esential to the life ofthe community, it is necessary to exercise control over the whole or any part of an existing undertaking, that Government may by order . authorise any person (hereinafter referred t'o as an auth- ·

rised controller) to exercise, with respect to the undertak ing or. any part thereof specified in the order, such. functions of control as may be provided by the order ; aad so Icing as an order made undeF this sub-rule is in force with respect to any undertaking or part of an undertaking-.· ·

(a) the authorised controller shali exercise his functions E . in accordance with any instructions given to him by. the Central Government or the State Government, s_o, however, that he shall not have power to . give any directions inconsistent with the provisions of any

ACl or other instrument determining the functioning of the undertakers except in so far as may be specifica)iy provided b.J' the order ; and

(b) the undertaking or part shall be. carried on in acco1-

'dance with any directions given by the authoiised

controller in accor.dance with the provisions of the order, and an JC person having any function of manage ment in relation to the undertaking or part shall comply with any such directions ;

(5) The Central Government, so far -as it appears to it to be necessary or expedient for securing .the defence of.

India and civil defence or the efficient conduct of military

SUPREME COURT REPORTS (1984 j J S.C, lt.

'A operations, or for maintaining. supplies and• services essential to the life of the community, may direct the employment of persons subject to .the Army Act, 1950 o.r . ·, the Air Force Act; 1950, or the Navy Act, 1957~ .

D ..

(a)· in any public utility service as defined in section 2 of the Indusirial Disrutes Act. 1947; or ·

(b) in any undertaking or part thereof,

(i) wl1icb is being carried on by the Central or a

State Government, or . .

(ii) • which in the opinion of the Ceniral Gvernment is engaged in any trade or business esse.ntial to , the life of the community, or

(iiii with respect to whi.ch an order made under' sub-·

rule (4) is in force. ·

~- ..

and thereupon it shall be the duty of every person so sub:. ject to obey any command given by. any superior offic.er • . in relation tci such employment •and every such command

shall be. deemed. to . be. a lawful command within the. meaning .dnd for t11e purpose of the Ar111y Act,1950, or Air Force Act, 1.950, or the Navy Act,· 1957, as the case may be. ·.>-.

(6) A direction under sub-rule (5) may be made with or without the consent of the person carrying .on the undertaking ·.or part thereof to which the direction relates but if made without his consent shall. ]?e comm uni: cated to such person who shMI thereupon be deemed to hRVC contravened an order made under this rule jf ne obstructs or fails to facilitate the employment of perons subject to the Army Act, 1950, or the Air Force Act; 1950 . or the Navy Act,.1957, in pursuance of the direction."

Sub-rule (2) of rule 125 makes it clear that for securing the defence of India and civil defence, efficient conduct of.military operations.or .the maintenance or' increase of supplies and servic.es. essential to the life ofthe community or for seeking equitaqle distri- bU:tioi1and availability of any article or thing at fair 'price, s very' . .wide powrs which are indicated in sub:section(3) without prejudice .. to the gen<; ratity of the powers conferred by this sub-section have .

. '

V.D. i!IUNl~NWALA v. UNION (A.N. Sen, J.) 541

'provided for regulatin& or prohibiting production,_ manufacture; supply and distribution, use and consumption of articles or things and trad_e ang commerce and for preventing any corrupt practlcli or abuse of authority ln .tesp.ct of any such matter. Rule 125())(b) which defines all undertaking makes it clear thar the expression 'undertaking' meaus any undertaking by way of any industry, trade or business and includes the occupation. of handling, loading or-unloading of goods in the course of transport. Sub, rule 3(i) of rule 125 makes provision for regulating the carrying on of an undertaking engaged in, . or capal)le of doing work appearing to the Government .essential to any of the purposes mentioned above in sub-rule (3) and in particular Ii) for requiring work 'to be done by an undertaking and (ii) for determining tbe order of Priority in which, and the period or periods within whiph the work shall be done by an undertaking. It has to be noted that'the expression undertaking has been given a very wide. meaning in rll!e 125(1)(b) and.is i; iot limited to any undertaking which is functioning, or is a going concern. Sub-rule 3(i) confers powers and jurisdiction for regulating the carrying on of any undertaking not only engage<! in but a!so capable or doing, work appearing to the Gqvernment essential and this provision makes this position abundantly clear, Iii the larger interest of the country a.nd particularly for the purpose specifically mentioned fo rule 125, power of general control of very wide amplitude is conferred under rule 125 and th. ere is . noth!Dg to indicate in the s!id rule that the power~ conferr~

under rule 125 cannot be exercised over any undertaking which h'as stopped functioning. Indeed; such a construction is clearly unwarranted on a plain reading_ of the section which clea:i; ly provides that such powers can be exercised not only in respect of an undertaking engaged but also capable of doing the kind 'of activity contemplated in the rule. Such a narrow construction is likely to defeat the .very purpose for which the rule has been enacted.

Although rule 125 confers very wide powers for general control of an_ undertaking, there is no provision in the said rule to take over the management of any undertaking.

Orders and directions under .rule 125 to exercise general control over an undertaking were not considered o be sufficient and the authority felt that further power to take over the management of" an undertaking in appropriate oases was necessary, when such general control may not prove effective particularly in respect of certain undertakings. Rule

J25A by way of ?mendment was, therefore, inserte\l to co!Jfer

SUPREME. COURT REPORTS

U9 84) 3 S.C.R A .

•. !!1rther power of taking over. the . mnagement of prlicular uiidr

takings and of appointing auhorised .. c0ritollers for running such undertakings .. The 'meaning of the.· •word. 'undertaking' inrule

125A has to be nnde_rstood in .this background and context .. Rule

: 125A makes it clear thafthe rule"l25A is not. intended to apply to each and every uqdertakingiwithin the m<; aning of rule 125. Special. . provision is made .in rule 125A in respect of particul.ar undertakings... ·.

Only Rule 125A describes and particularises the undertakings to . which this rule will. be applicable. Tbe proyision in this rule that ''in this rule unless the. context otherwise r; iquire~ an under-. taking' means ariy undertaking (including an un.dertaking vested in . or controlled o.r managed by, a 1.ocal authority) .. which is eng:ige_d

iii the production; generation, "supply, distribution .or provision of . water,_transfer, fuel, light, electricity or other power 'or any other

thing or.service which is notified by the Government 'as essential.to the life of the< community", is. merely .descriptive of the tlnderta: . . ing to which this rule .is applicable. The words. "which .is engagd

in the pruduction. * * *" merely describes the kind of undertaking by.referring to the. nature of. the .activity of the undertaking for : ·.bringing it within the . purview of rule. 125A and they have no ·

.bearing on the question whether. the activities ae in t!ie. process :or being carried on or have been . stor.ped. . The expression any undertaking which is. 'engaged. in' has been.used.to.describe the . nature of business of .. the undertaking and is merely descriptive of :-the undertaking to which this rule wilt'.· apply. The take over of the management. of an undertaking to which rule 125A.is _applica- . ble may become. ali the more necessary in larger public. interest

.and for effectively serVing the purposes for which this 'rule has been.

incorpo.rated; particularly when an undertaking engaged in any kind of.· activity coming within the purview . of this rule stops. functioning, to enable. tee.· undertaking to function. for achieving '>'(", the purposes for which , these provisions have been made .. The 'construction '.contended for by Mr .. Desai wiU be inconsistent with . the provisions of the rule ·:and will defeat the purposes \Vhich .. this

rule seeks to serve •.. The. decisions relied on by Mr. Desai are of ... no. assistance as the expressions 'undertaking'. and 'engaged' .. which'

•. caine to be considered in these cses, wer~ usd in different status · and jn entiely different context. . . ·

c We must, th(refote~ -hfld ttitthe td<iqg over of the manage rrent cf tl:e iug•r mi11 cf tle . app(Uel\tar.d the apoointment of

, • '.: • 4 ,,_

..+ v.D. JHUNJHUNWALA v; UNION (A.N: Sen, J.) 543

the authorised controller were perfectly valid and lawful and the A . act done by the authorised control.ler in the course of management

by virtue ofthe provl:; ions ofthese rules must be held to be bind ing on the appellant. iii<

The appeal, therefore, fails and is dismissed with no order as to costs.

N.V.K. . Appewl dismissed,

. ''1' .

.'t • •