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Issues: (i) Whether, on takeover of the textile undertakings, the right to receive the sanctioned refund vested in the custodian and could be recovered by the appellant. (ii) Whether the pre-takeover excise demand could be adjusted against the refund under Section 11 of the Central Excises and Salt Act, 1944, in view of the Textile Undertaking (Taking Over of Management) Act, 1983.
Issue (i): Whether, on takeover of the textile undertakings, the right to receive the sanctioned refund vested in the custodian and could be recovered by the appellant.
Analysis: On a conjoint reading of Section 3(1) and Section 3(2) of the Textile Undertaking (Taking Over of Management) Act, 1983, the management of the undertaking stood vested in the Central Government, and the undertaking was deemed to include all assets, rights, interests and receivables. The refund had accrued before takeover but was sanctioned after the appointed day, and therefore formed part of the rights and interests that passed to the custodian.
Conclusion: The refund amount was payable to the appellant custodian.
Issue (ii): Whether the pre-takeover excise demand could be adjusted against the refund under Section 11 of the Central Excises and Salt Act, 1944, in view of the Textile Undertaking (Taking Over of Management) Act, 1983.
Analysis: Section 3(7) of the Textile Undertaking (Taking Over of Management) Act, 1983 specifically declares that liabilities incurred before the appointed day are enforceable against the textile company and not against the Central Government or the custodian. As a special enactment dealing with a specified class of undertakings, it prevails over the general recovery mechanism under Section 11 of the Central Excises and Salt Act, 1944. Permitting adjustment would amount to indirect enforcement of pre-takeover liabilities against the custodian, which the special statute prohibits.
Conclusion: The adjustment of the refund against the pre-takeover excise demand was not permissible.
Final Conclusion: The statutory takeover regime protected the custodian from pre-appointed-day liabilities while preserving the receivables of the undertaking, and the impugned adjustment could not be sustained.
Ratio Decidendi: Where a special takeover statute vests all receivables in the custodian but expressly excludes pre-appointed-day liabilities from enforcement against the custodian, the special statute overrides the general recovery provision and prevents set-off or adjustment of such liabilities against the vested refund.
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