M. Asghar Vs. Union of India and Others
EmailAppeal: Transfer Petition No. 77 of 1982.
Petitioner: M. Asghar
Respondent: Union of India and Others
Apeal: Transfer Petition No. 77 of 1982.
Judges: O. CHINNAPPA REDDY & M.M. DUTT, JJ.
Date of Judgment: Sep 18, 1986
Head Note:
SICK TEXTILE UNDERTAKINGS (NATIONALISATION) ACT:
Sections 5, 21, 39 and the Second Schedule; Sick Textile Under-takings (Taking Over of Management) Act; Constitution of India, Article 39-b – Constitutional validity of Nationalisation Act – Priorities for the discharge of liabilities of the Undertaking – Distinction made between post-take-over management period and pre-take-over management period is prima facie sound.
Sections 5, 21, 39 and the Second Schedule; Sick Textile Under-takings (Taking Over of Management) Act; Constitution of India, Article 39-b – Constitutional validity of Nationalisation Act – Priorities for the discharge of liabilities of the Undertaking – Distinction made between post-take-over management period and pre-take-over management period is prima facie sound.
Held:
(i) It is obvious that any legislation which nationalises an undertaking towards securing the directive principles contained in Article 39 – must ordinarily provided for the discharge of the liabilities of the undertaking and if so, the legislation must also arrange the priorities for the discharge of the liabil-ities. The distinction made between the liabilities of the post-takeover management period and the pre-takeover management period is prima facie such as the former liabilities are those incurred pursuant to the public management of the undertaking under the statute, while the latter liabilities are those incurred in the course of the private management by the owner of the undertaking.
(ii) Section 5(1) of the Nationalisation Act makes the position clear that every lability other than the liabilities specified in sub-section (2) of the owner of a sick textile undertaking, in respect of any period prior to the appointed day, shall be the liability of such owner and shall be enforceable against him and not against the Central Government or the National Textile Corpo-ration. Section 5 (2) (c) expressly provides that any liability arising in respect of wages, salaries and other dues of employees of the sick textile Undertaking, in respect of any period after the management of the undertaking had been taken over by the Central Government shall be the liability of the Central Govern-ment and shall be discharged with and on behalf of that govern-ment by the National Textile Corporation. The classification of the liabilities made in the schedule is in tune with Section 5 of the Act. And, as stated by us, any law far the acquisition of a sick undertaking, must ordinarily provide for the discharge if the liabilities aid arrange priorities among the liabilities. (Para 3)
JUDGEMENT:
CHINNAPPA REDDY, J.:
1. Shri Raju Ramachandran appearing for an employee who claims that a sum of Rs 5712.61 is due to him from the Lord Krishna Textile Mill, Out of which a sum of Rs 3722.20 had become due before the takeover of management of the Mill under the Sick Textile Undertakings (Taking Over of Management) Act, 1972 made a concise, but interesting submission that the low priority given to amounts due to employees relating, to the pre-takeover manage-ment period in the Second Schedule of the Sick Textile Undertak-ings (Nationalisation) Act was unconstitutional both because it did not subserve the object of giving effect to the policy of the Stat towards securing the Directive Principle specified in Arti-cle 39(b) of the Constitution and also, because the classifica-tion had no nexus with the object of the statute as stated in the Preamble.
2. Section 21 of the Sick Textile Undertakings (Nationalisa-tion) Act is as follows :
21. The claims arising out of the matters 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 rat equally and be paid in full, but if the amounts is insufficient to meet such claims in full, they shall abate ‘an equal proportions be paid accordingly
(c) the liabilities specified in category IV shall be dis-charged, 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.
The Second Schedule of the Act is as follows
The Second Schedule
(See Sections 21, 22, 23 and 27)
Order of priorities for the discharge of liabilities in respect of a sick textile undertaking
PART A
Post-takeover management period
Category I-
(a) Loans advanced by a bank.
(b) Loans advanced by an institution other than a bank.
(c) Any ether loan.
(d) Any credit availed of for purpose of trade or manufac-turing operations.
Category II-
(a) Revenue taxes, cesses, rates or any other dues to the Central Government or a State Government.
(b) Any other dues.
PART B
Pre-takeover management period
Category III-
Arrears in relation to provident fund, salaries, and wages, and other amounts, due to an employee.
Category IV-
Secured loans.
Category V-
Revenue, taxes, cesses, rates or any other dues to the Central Government, a State Government, a local authority or a State Electricity Board.
Category VI-
(a) Any credit availed of for purpose of trade or manufac-turing operations.
(b) Any other dues.
3. From Section 21 it is clear that the liabilities of the post-takeover management period are given priority over the li-abilities of the pre-takeover management period and among the liabilities of the pre-takeover management period, arrears in relation to provident fund, salaries and wages and other amounts, due to an employee are given priority. Section 39 of the Act declares that the Nationalisation Act is “for giving effect to the policy of the State towards securing the principles specified in clause (b) in Article 39 of the Constitution”. Article 39(b) of the Constitution enjoins the State to direct its policy to-wards securing “that the ownership and control of the material resources of the community are so distributed as best to subserve the common good”. It is obvious that any legislation which nationalises an undertaking towards securing the directive principles contained in Article 39 – must ordinarily provided for the discharge of the liabilities of the undertaking and if so, the legislation must also arrange the priorities for the dis-charge of the liabilities. The distinction made between the liabilities of the post-takeover management period and the pre-takeover management period is prima facie such as the former liabilities are those incurred pursuant to the public management of the undertaking under the statute, while the latter liabili-ties are those incurred in the course of the private management by the owner of the undertaking. Section 5(1) of the Nationali-sation Act makes the position clear that every lability other than the liabilities specified in sub-section (2) of the owner of a sick textile undertaking, in respect of any period prior to the appointed day, shall be the liability of such owner and shall be enforceable against him and not against the Central Government or the National Textile Corporation. Section 5 (2) (c) expressly provides that any liability arising in respect of wages, salaries and other dues of employees of the sick textile Undertaking, in respect of any period after the management of the undertaking had been taken over by the Central Government shall be the liability of the Central Government and shall be discharged with and on behalf of that government by the National Textile Corporation. The classification of the liabilities made in the schedule is in tune with Section 5 of the Act. And, as stated by us, any law far the acquisition of a sick undertaking, must ordinarily pro-vide for the discharge if the liabilities aid arrange priorities among the liabilities. That is what the schedule has done. There is, therefore, no force in the submission of the learned counsel and the writ Petition is accordingly dismissed.
Writ Petition dismissed.
1. Shri Raju Ramachandran appearing for an employee who claims that a sum of Rs 5712.61 is due to him from the Lord Krishna Textile Mill, Out of which a sum of Rs 3722.20 had become due before the takeover of management of the Mill under the Sick Textile Undertakings (Taking Over of Management) Act, 1972 made a concise, but interesting submission that the low priority given to amounts due to employees relating, to the pre-takeover manage-ment period in the Second Schedule of the Sick Textile Undertak-ings (Nationalisation) Act was unconstitutional both because it did not subserve the object of giving effect to the policy of the Stat towards securing the Directive Principle specified in Arti-cle 39(b) of the Constitution and also, because the classifica-tion had no nexus with the object of the statute as stated in the Preamble.
2. Section 21 of the Sick Textile Undertakings (Nationalisa-tion) Act is as follows :
21. The claims arising out of the matters 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 rat equally and be paid in full, but if the amounts is insufficient to meet such claims in full, they shall abate ‘an equal proportions be paid accordingly
(c) the liabilities specified in category IV shall be dis-charged, 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.
The Second Schedule of the Act is as follows
The Second Schedule
(See Sections 21, 22, 23 and 27)
Order of priorities for the discharge of liabilities in respect of a sick textile undertaking
PART A
Post-takeover management period
Category I-
(a) Loans advanced by a bank.
(b) Loans advanced by an institution other than a bank.
(c) Any ether loan.
(d) Any credit availed of for purpose of trade or manufac-turing operations.
Category II-
(a) Revenue taxes, cesses, rates or any other dues to the Central Government or a State Government.
(b) Any other dues.
PART B
Pre-takeover management period
Category III-
Arrears in relation to provident fund, salaries, and wages, and other amounts, due to an employee.
Category IV-
Secured loans.
Category V-
Revenue, taxes, cesses, rates or any other dues to the Central Government, a State Government, a local authority or a State Electricity Board.
Category VI-
(a) Any credit availed of for purpose of trade or manufac-turing operations.
(b) Any other dues.
3. From Section 21 it is clear that the liabilities of the post-takeover management period are given priority over the li-abilities of the pre-takeover management period and among the liabilities of the pre-takeover management period, arrears in relation to provident fund, salaries and wages and other amounts, due to an employee are given priority. Section 39 of the Act declares that the Nationalisation Act is “for giving effect to the policy of the State towards securing the principles specified in clause (b) in Article 39 of the Constitution”. Article 39(b) of the Constitution enjoins the State to direct its policy to-wards securing “that the ownership and control of the material resources of the community are so distributed as best to subserve the common good”. It is obvious that any legislation which nationalises an undertaking towards securing the directive principles contained in Article 39 – must ordinarily provided for the discharge of the liabilities of the undertaking and if so, the legislation must also arrange the priorities for the dis-charge of the liabilities. The distinction made between the liabilities of the post-takeover management period and the pre-takeover management period is prima facie such as the former liabilities are those incurred pursuant to the public management of the undertaking under the statute, while the latter liabili-ties are those incurred in the course of the private management by the owner of the undertaking. Section 5(1) of the Nationali-sation Act makes the position clear that every lability other than the liabilities specified in sub-section (2) of the owner of a sick textile undertaking, in respect of any period prior to the appointed day, shall be the liability of such owner and shall be enforceable against him and not against the Central Government or the National Textile Corporation. Section 5 (2) (c) expressly provides that any liability arising in respect of wages, salaries and other dues of employees of the sick textile Undertaking, in respect of any period after the management of the undertaking had been taken over by the Central Government shall be the liability of the Central Government and shall be discharged with and on behalf of that government by the National Textile Corporation. The classification of the liabilities made in the schedule is in tune with Section 5 of the Act. And, as stated by us, any law far the acquisition of a sick undertaking, must ordinarily pro-vide for the discharge if the liabilities aid arrange priorities among the liabilities. That is what the schedule has done. There is, therefore, no force in the submission of the learned counsel and the writ Petition is accordingly dismissed.
Writ Petition dismissed.
