TaxTMI 
TaxTMI 
TaxTMI 
1994 (2) TMI 243
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....ment company wherein all the shares were owned by the State Government. The corporation was operating three cement factories situated at Churk, Dalla and Chunar. Since the corporation was running into huge losses from the year 1972 onwards except during the year 1982-83, the State Government in April, 1990, took a decision to privatise the corporation. A cabinet decision was taken on April 29, 1990, to convert the corporation-a wholly public sector undertaking-into a joint sector corporation. The decision was conveyed to the leading cement manufacturers in the country in a meeting held on May 19, 1990, at the office of the Principal Secretary, Industries. The meeting was attended by 25 cement-manufacturers. The State Government appointed a privatising committee (the committee) on September 11, 1990, to consider the offers of the cement manufacturers in that respect. In October, 1990, the State Government appointed S.B. Billimoria and Company to value the share of the corporation. The said company, in December, 1990, submitted its report wherein the share of the corporation was valued at Rs. 20 against its face value of Rs. 100. Initially, there was a good response from the cement ....
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....990, passed by the High Court and, as such, only 49 per cent of share, were transferred by the State Government to the Dalmia Industries and, as such, the purpose of the transfer having not been achieved it was expedient and in the public interest to acquire back the shares in the corporation held by the Dalmia Industries Limited. Section 3 of the Ordinance provided that on the date of its commencement all the shares held by the companies in the share capital of the corporation would stand transferred to and vest in the State Government The expression "companies" was defined to mean the companies specified in the Schedule which included the Dalmia Industries Limited and its associates. Section 4 ensured the payment by the State Government of the full amount at which the corporation had transferred its shares to the companies. At this stage, we may refer to the writ petitions filed before the Allahabad High Court challenging the action of the State Government in privatising the corporation and agreeing to sell 51 per cent, of shares to the appellant. The workmen of the corporation through their unions filed Writ Petition No. 26223 of 1990 challenging the Government decision to pri....
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....e and officers of the Corporation shall co operate with the present management for a better running of the corporation. They shall act subject to the control and directions of the present board of directors. However, the officers and employees shall not be disturbed or shifted from their respective places of posting held by them as on today. If any such shifting is proposed to be effected by the board of directors they must obtain prior approval of this court. (4)In all other respects status quo as on today shall continue pending further orders." On July 22, 1991, Writ Petitions Nos. 26223 of 1990 and 10607 of 1991 came up for hearing before a Division Bench of the Allahabad High Court. The learned judges directed as under: "Once a decision to privatise was taken, and before any offers were invited, one would have expected the Government to have ordered a thorough valuation of the assets and liabilities of the corporation to find out what it is worth. Any reasonable and prudent owner of property would do this before he puts his property for sale. He would first assess for himself, the value of the property he is 'selling. Since that alone would enable him to judge the offers rec....
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....isk of obtaining the transfer of shares knowingly and all the transactions in their favour are at their own risk, since they have been arrived at during the pendency of the writ petition and in violation of the order dated October 16, 1990. The findings recorded by this court in the order dated July 22, 1991, clearly establish that the procedure followed in selling 51 per cent, interest in the corporation in favour of the Dalmias was not proper and bona fide . . ." "...The learned Advocate-General appearing for the State mentioned that he has not received clear instructions in the matter and that, therefore, he is in no position to make any submissions. He stated that the Government will abide by any such orders as this court may pass in the matter . . ." "...The necessary consequence of those findings is not the cancellation of the deal/transaction between the State Government and the Dalmias. The matter is yet to be examined after the receipt of the report of the valuers. Sri Sudhir Chandra further submitted that direction No. (3) (clarification No. (3) as it is called) in the order dated May 24, 1991, is acting as a severe handicap in the proper management of the corporation. ....
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....on under entry 42, List III, Seventh Schedule, Constitution of India, it cannot be sustained because it is not in public interest. 5.The Ordinance is arbitrary in the sense that it deprives the appellants of their property in violation of article 300A of the Constitution of India. 6.Writ petitions were pending before the Allahabad High Court and various orders passed by the High Court were operating. The Ordinance directly interfered with the judicial decisions and, as such, was liable to be struck down on that ground. As mentioned above, the core question for our consideration is whether the Ordinance was directed to take over the management or control of the corporation from the appellants. The High Court has answered the question in the negative. Relying on the documents on the record and various interim orders passed from time to time by it, the High Court reached the finding that on the day when the Ordinance was promulgated, the appellants were neither managing nor controlling the corporation in any manner. We see no ground to differ with the finding reached by the High Court. We briefly give our reasons. The decision of the State Government to privatise the corporation w....
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....will be transferred only after the stay is vacated though all the other formalities would be completed as per clause 6 above, now itself." We may also refer to the letter dated February 23, 1991, from the Joint Secretary, Government of Uttar Pradesh to the chairman of the corporation wherein the contents of para 3 are as under : "In the joint sector, partnership of the share capital of the State Government and Dalmia Industries Ltd. and the companion nominated by them shall be in the ratio of 49 : 51. As a suit in this regard is pending before the Hon'ble High Court and stay order has been granted by the court in view' of these orders only 49 per cent, shares will be transferred at present. In view of the Department of Justice, if at present 49 per cent, shares are transferred it would not amount to contempt of the orders of the Hon'ble High Court as the status of the company shall continue to be that of the Government company." The various interim orders issued by the High Court from time to time and the documents mentioned above clearly show that not only the control and management of the corporation remained with the Government but even the status of the corporation continued....
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....on Bench of this court held that the power to legislate in respect of acquisition of property is an independent and separate power emanating from entry 42, List III. It was further held that the Ordinance in pith and substance was for acquisition of scheduled sugar undertakings and as such it did not impinge on the field occupied by the Act. We, therefore, agree with the conclusion reached by the High Court and reject the contention raised by learned counsel for the appellants to the effect that the State Legislature had no legislative competence to legislate on the subject-matter of the Ordinance and, as such, the Governor had no power to promulgate the same. We agree with the High Court that the legislative competence to promulgate the Ordinance could validly be traced to entry 42, List III. The second and third contentions raised by learned counsel for the appellants have to be rejected in view of the finding reached by us that control and management of the corporation did not vest with the appellants on the date of the promulgation of the Ordinance Section 20 of the Act is as under : "After the commencement of this Act, it shall not be competent for any State Government or a....
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.... the Ordinance was not in public interest. The High Court has elaborately dealt with this aspect. After the transfer of 49 per cent, shares of the corporation, it was found that the corporation suffered deterioration in the production of cement and the overall market position in respect of the availability of cement became worse. The unit of the corporation at Dalla came to stand-still due to stiff opposition put up by the employees of the corporation against the decision to transfer the shares to the appellants. The production of cement at Churk and Chunar was also adversely affected almost to the extent of 90 per cent. The workers of all the units abstained from work to a large extent. As a result of steep fall in the production the prices of cement went up considerably with the result that the construction work in the State suffered badly. The workers of the corporation consistently opposed the privatisation. When the memorandum was signed the workers intensified their agitation virtually paralysing the units. Workers from other State Corporations including the State Industrial Units joined the agitation. Events took such an ugly turn at one point of time that the police had to ....