TaxTMI 
TaxTMI 
1988 (2) TMI 61
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....as to one more property known as Shrubbery property whether it has been taken over or not is still to be argued and is not covered by this judgment. 2. In order to appreciate the question in these matters it has to be borne in mind that there were six original proceedings initiated by various parties which gave rise to these civil appeals, special leave petitions and the transferred cases to this Court. These six original proceedings are as follows : On 18th of February, 1987 Suit No. 418 of 1987-was filed before the Delhi High Court by one Naresh Kumar Parti against Dr. Raja Ram Jaipuria, Swadeshi Polytex and others, praying for an order of injunction restraining the company from holding the 17th annual general meeting on the ground that 34% shares in Swadeshi Polytex have vested in National Textile Corporation (briefly referred to as NTC) in view of Sections 3 and 4 of the said Act. In this suit an application for grant of interim injunction was also filed praying that in the event the annual general meeting of the Company is allowed to be held, an Independent Chairman should be appointed to conduct the meeting. Notice in respect of the said application was served upon the ....
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....pplication. The learned Judge in that case was prima facie satisfied that the plaintiff in that case was entitled to an injunction claimed by him in the meeting to be presided over by Shri Jaswant Singh. He granted injunction restraining the defendants Nos. 3 and 4 in that suit from exercising any right whatsoever attached to 34% shares of defendant No. 2 held by them and particularly any voting rights in the annual general meeting which was scheduled to be held on 9th of March, 1987 till decision of that suit. This order was brought to the notice of this Court by CMP forming part of Civil Appeal Nos. 577-79 of 1987. On 9th of March, 1987 on that CMP this Court passed an order directing that NTC, Swadeshi Cotton and Swadeshi Mining, all shall be entitled to vote at the annual general meeting and the question as to who were the rightful voters would be decided by the Chairman of the meeting. It was further directed that the Chairman would keep these votes separately. This is the Transferred Case No. 14 of 1987 herein. On 7th of March, 1987 one Mukesh Jasnani a shareholder in Swadeshi Polytex filed a writ petition in the Allahabad High Court (Lucknow Bench). The High Court by its ord....
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....st which an appeal was preferred before the High Court of Allahabad which was also declined and, consequently, NTC filed Special Leave Petition No. 7045 of 1987 in this Court. This application is still pending and is awaiting disposal. In this background these matters will have to be disposed of. 3. Swadeshi Mining and Manufacturing Co. Ltd. and others submitted that these shares did not vest in the Central Government. The main thrust of Shri Nariman's contention, who appeared on their behalf, was that Section 3 of the Act provided that every textile undertaking and right, title and interest of the company, i.e. Swadeshi Cotton Mills Company Limited vested in the Central Government. The "textile undertakings" mentioned in Section 3 included all assets 'pertaining' to the textile undertaking as per Section 4 of the Act. It is common ground that whether a particular asset is part of the textile undertaking and vests under Section 3 or not, has to be considered in the context of the Act with reference to the language used in Section 4 of the Act. Shri Nariman submitted that there are different modes by which Parliament can resort to nationalisation. These modes according to him are....
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....v. Swadeshi Polytex Ltd. and Others (1985 2 S.C.R. 854), There it was observed that the fact that 3,50,000 shares had been pledged in favour of the Government of Uttar Pradesh would not make any difference. The contention that was urged on behalf of the appellant therein, namely, Balkrishan Gupta related to the effect of an order made by the Central Government on 13th of April, 1978 under Section 18AA(1) (a) of the IDR Act taking over the management of Swadeshi Cotton Mills along with five other industrial units belonging to the Company which was the subject matter of dispute in Swadeshi Cotton Mills v. Union of India (1981 2 S.C.R. 533) and the order of extension passed by the Central Government on 26th November, 1983 which was the subject matter of dispute in that case before this Court. It was urged in Balkrishan v. Swadeshi Polytex (supra) on behalf of the appellants therein that on the passing of the above orders under Section 18AA(1) (a), the Cotton Mills Company lost its voting rights in respect of the shares in question. This Court held that was not so. This Court emphasised that what was taken over was the management of the six industrial units referred to therein and not ....
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....r of the management this submission has to be stated to be rejected. 7. Reliance was also placed before us on the decision of the Delhi High Court in Writ Petition No. 408 of 1978. The Delhi High Court held that the shares did not vest in the Government under the order dated 13th of April, 1978 issued under Section 18AA of the IDR Act. This judgment of the Delhi High Court was challenged in appeal before this Court. This Court in its judgment in Swadeshi Cotton Mills v. Union of India (supra) set aside the order of take-over dated 13th April, 1978 for violation of the principles of natural justice. But this Court did not give any finding or order with regard to the finding of the High Court that the shares were not included in the take-over order. 8. It was further urged before us that this Act was preceded by an ordinance namely, Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Ordinance, 1986 which was promulgated on 19th of April, 1986. Section 10 of the Ordinance entitled, it was submitted, NTC to exercise control over the business of the undertakings taken over. The NTC passed an order to this effect on 25th April, 1986, but did not purpor....
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....x Limited were attached for recovery of electricity dues of Swadeshi Cotton Mills and 3,50,000 shares were already pledged with the State Government of U.P. for securing the loans and advances made by the State Government for payment of wages. These dues fall in Part II) of the Schedule to the Act and are not payable under Section 25 of the Act by the Government. Shri Nariman submitted that compensation payable under the Act was not enough to pay all the dues falling in Part I. He drew our attention to the Financial Memorandum of the Bill which showed that the Government would have to pay a further sum of Rs. 15 crores over and above the compensation amount. It could not have been the intention of the Act to discharge these encumbrances, according to him, if they were to vest in the Central Government under Section 3 of the Act and the result of which would be that the State of U.P. and the Electricity Board would not get anything towards their large dues. We are unable to accept this submission. This, in our opinion, is not the proper approach to the construction of the Act on the question whether the shares were taken over or not. 14. Shri Nariman submitted that while applying....
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....ion of these shares having controlling interests in the said two companies was never intended and could never be said to be within the scope of the Act. The expression "in relation to the six textile undertakings" appearing in Sections 3 and 4 of the Act, was an expression of limitation, according to him, indicative of the intention of acquiring of only the textile undertakings and no other. There existed no public purpose, according to Shri Nariman, for acquiring these shares. The public purposes mentioned in the Act with reference to Article 39(b) and (c) related to the acquisition of only the textile undertakings of Swadeshi Cotton Mills and not acquisition of the synthetic fibre undertakings of Swadeshi Polytex or sugar undertakings of Swadeshi Mining and Manufacturing Company Limited. 16. Dr. Chitale appearing on behalf of Swadeshi Mining and Manufacturing Company Limited (as respondent in SLP (Civil) No. 5240 of 1987 in which NTC is the petitioner) supported Shri Nariman and advanced certain arguments. His main arguments were: (1) Swadeshi Polytex Limited and Swadeshi Mining and Manufacturing Company Limited were two distinct undertakings different from the six textile ....
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....thin their fold shares held by Swadeshi Cotton Mills, an independent company doing its business, according to him. 18. Learned Solicitor General of India appearing on behalf of the National Textile Corporation in all these cases submitted that the facts stated by way of background and the sequence of events up to the date of enactment of the Act were not relevant to the decision as to the scope, ambit and effect of the vesting provisions contained in Sections 3 and 4 of the Act. The sequence of events narrated by the petitioners prior to the enactment of the Act all related to the order of take-over of the undertakings of Swadeshi Cotton Mills Company issued on 13th April, 1978 by the Central Government in exercise of its powers under Section 18AA of the IDR Act. The object and purpose of the said order of take-over of management of the textile undertakings was completely different from the object and purpose of the Act which related to acquisition and transfer of the undertakings. We agree. The scope of the vesting provisions contained in Section 3 of the Act would have to be determined per force of its own language employed by Parliament and not with reference to what transpir....
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....ngs and all other rights and interests in, or arising out of such property as were immediately before the appointed day in the ownership, possession, power or control of the Company in relation to the said undertakings, whether within or outside India, and all books of account, registers and all other documents of whatever nature relating thereto. (2) All property as aforesaid which have vested in the Central Government under sub-section (1) of Section 3 shall, by force of such vesting, be freed and discharged from any trust, obligation mortgage, charge, lien and all other encumbrances affecting it, and any attachment, injunction or decree or order of any court or other authority restricting the use of such property in any manner shall be deemed to have' been withdrawn. (3) ............... (4) ............... (5) ............... (6) ............... 21. Section 7 deals with the shares to be issued by the National Textile Corporation for the value of the assets transferred to It by the Central Government. It reads as follows: "7. An amount equal to the value of the assets of the textile undertakings transferred to and vested in the National Te....
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....esent case is directly covered by several decisions of this Court. He referred to the following decisions ; National Textile Corporation v. Sita Ram Mills (1986 Suppl. S.C.C. 117), Minerva Mills v. Union of India (1986 4 S.C.C. 222), Govardhan Das Narasingh Das Daga v. Union of India (1986 4 S.C.C. 249), Vidharba Mills Berar Ltd. v. Union of India (1986 4 S.C.C. 248) and Fine Knitting Co. Ltd. v. Union of India (1986 4 S.C.C. 276). 26. It was emphasised that Section 3 of the Act provided that in addition to the textile undertaking "the right, title and interest of the company in relation to every such textile undertaking is to vest". Therefore, it was urged by Shri Venugopal that so applying the five decisions cited earlier, if the shares were held for the benefit of and/or utilised for the textile undertakings they would vest in the Government under the provisions of Section 3 of the Act itself. He emphasised like others that "pertaining to" would mean "in relation to" in the species of properties mentioned in Section 4(1) of the Act. He further submitted that if the amount of compensation declared to be payable to the erstwhile owners of the undertakings acquired, was a test f....
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....ing Coal Ltd. and Another (1983 1 S.C.R. 1000 at 1029). It was submitted that the documents which were prepared for the submission to the Cabinet and which related to the inner working of the Government were not admissible and/or legitimate aids to the construction of statute and therefore not relevant in deciding which assets of SCM vested in the Central Government under Sections 3 and 4 of the Act. It was further submitted that etymological and plain meaning of the word "relation" is relation by birth or relation by sacrament like marriage or relation in the form of business connection or dealings. It was further submitted that an asset or investment which is created from the earnings of the undertakings is clearly related to the undertakings by its inception or birth. An asset or investment, according to Shri Anil B. Diwan, which is utilised to preserve and/or give vitality to an undertaking is equally related or pertained to the same. 29. Shri A. K. Ganguly, Counsel appearing on behalf of M/s. Doypack Systems Pvt. Ltd. in SLP (Civil) Nos. 4826 and 7045 of 1987 submitted that even assuming (though not admitting) that the expressions "pertaining to" and "in relation to" appear....
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....ond part of Section 7 provided that for the contribution so made by the Central Government, National Textile Corporation shall issue to the Government paid-up shares in its equity capital having a face value equal to the amount specified in Section 8. 32. If the legislative intention, it was urged by Shri Ganguly, was that the National Textile Corporation shall issue paid-up shares (in its equity capital) to the Central Government of the value equal to the value of the asset which was deemed to be the contribution of the Central Government, then the language of the second part of this section would have been the same as used in the opening words of Section 7 itself. 33. Shri S.N. Kacker elaborated the submissions of the petitioners mentioned hereinbefore and submitted that the shares could not have been intended in view of the facts and circumstances of the case, the language used and the data available to take over by Sections 3 and 4 of the Act. 34. Before we deal with the main question we have to consider the application made by Shri Nariman for production of certain documents. The production of the documents has been resisted by the learned Attorney General on the grou....
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....at the shares etc., were excluded in computing the figures of 24.32 crores. it was submitted that these documents were required to establish this factual foundation. The petitioner alleged that shares have been excluded in the computation of compensation and the petitioner had been so informed by the Hon'ble Minister. In reply the Central Government asserted that compensation has been computed lumpsum and not itemwise. According to the petitioner, the stand of the Government that the compensation was computed lumpsum, was not borne out by the documents. It was, therefore, necessary to seek production of those documents. It was submitted by Shri Nariman that the submissions of the Solicitor General insofar as these dealt with the balance-sheet made it even more important that the Government should be directed to produce these documents. The calculations made by the petitioner had merely been denied by NTC which had in its possession the books of account as also all balance-sheets prior to the balance-sheet as on April 1,1985. It is wrongly suggested that the calculations are hypothetical, it was urged by the petitioner that the calculations made by the petitioners were not hypotheti....
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....proceedings on the Bill which became the Act in question, are of obvious relevance to its meaning. They are often of doubtful reliability however, (emphasis supplied). The documents in question which are sought for do not relate to the enacting history or any past enactment or the present enactment. The notings made in various Departments at various levels by the officers namely, the Under Secretary, Deputy Secretary, Joint Secretary, Secretary etc., whatever their view might be, is not the view of the Cabinet. The ultimate decision is taken by the Cabinet. So the notings cannot and are not guides as to what decision the Cabinet took. See for example the Task Force report referred to in National Textile Corporation Ltd. v. Sitaram Mills Ltd. and Others (supra). This Task Force Report demonstrated the irrelevancy of the documents summoned to be produced. The Task Force Report manifested that certain mills were viable. But from the circumstance under which managements of these mills were taken over, it was clear that the Cabinet had taken the decision contrary to what was contained in the Task Force Report. But it appears that the decision of the Cabinet was different from the views ....
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....ong Shang & Another etc. v. Commander S.D. Baijat & Others (J.T. 19881 S.C. 202). The documents now sought for by the petitioner do not fall within this category. It is neither the object and scheme of the enactment nor the language used therein, that is sought for in the instant case. It is certainly relevant to know the mischief that was intended to be remedied. But in the documents in question which the petitioner is seeking no such correlation has been established. These are, therefore, not relevant. We reiterate that no officer of the Department can speak for the Parliament even after the Act has been passed. This Court has to interpret the Act on the basis of informed basis by applying external and internal aids to the language is ambiguous. In the words of Lord Scarman "We are to be governed not (by) Parliaments intentions but by Parliament's enactment's". See Cross "Statutory Interpretation" 2nd Edition page 22. Blackstone in his "Commentaries on the Laws of England" (Fascimile of 1 st edn. 1765, University of Chicago Press 1979) Vol. 1 at 59 suggests 'The fairest and most rational method to interpret the will of the legislator is by exploring his intention at the time when....
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.... in S.P. Gupta v. Union of India and Others (1982 2 S.C.R. 365 at page 594) that the documents sought for herein were not privileged. The context and the nature of the documents sought for in S.P. Gupta's case (supra) were entirely different. In this case these documents as we see are part of the preparation of the documents leading to the formation of the advice tendered to the President of India and as such these are privileged under Article 74(2) of the Constitution which provides that the question whether any, and if so what, advice was tendered by Ministers to the President shall not be enquired into in any court. This Court is precluded from asking for production of these documents. In S.P. Gupta's case (supra) the question was not actually what advice was tendered to the President on the appointment of Judges. The question was whether there was the factum of effective consultation between the relevant constitutional authorities. In our opinion that is not the problem here. We are conscious that there is no sacrosanct rule about the immunity from production of documents and the privilege should not be allowed in respect of each and every document. We reiterate that the claim ....
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....uments falling within this class are granted immunity from disclosure not because of their contents but because of the class to which they belong. This class includes cabinet minutes, minutes of discussions between heads of departments, high level inter-departmental communications and dispatches from ambassadors abroad (vide Conway v. Rimmer (1968 Appeal Cases 910 at pp. 952, 973, 979, 987 and 993) and v. Lewes J.K.Ex pante Home Secretary (1973 A.C. 388 at 412). Papers brought into existence for the purpose of preparing a submission to cabinet vide Lanyon Property Ltd. v. Commonwealth (129 Commonwealth Law Reports 650) and indeed any documents which relate to the framing of Government policy at a high level (vide re. Grosvenor Hotel, London(1964 3 All E.R. 354 (CA)". 44. Cabinet papers are, therefore, protected from disclosure not by reason of their contents but because of the class to which they belong. It appears to us that Cabinet papers also include papers brought into existence for the purpose of preparing submission to the Cabinet. See Geoffrey Wilson - Cases and Materials on Constitutional and Administrative Law, 2nd Edition pages 462 to 464. At page 463 para 187, it was ....
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.... words "pertaining to" and "in relation to" have the same wide meaning and have been used interchangeably for among other reasons, which may include avoidance of repetition of the same phrase in the same clause or sentence, a method followed in good drafting, the word "pertain" is synonymous with the word "relate", see Corpus Juris Secundum, Volume 17, page 693. 48. The expression "in relation to" (so also "pertaining to"), is a very broad expression which pre-supposes another subject matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context, see State Wakf Board v. Abdul Aziz (A.I.R. 1968 Madras 79, 81 paragraphs 8 and 10,following and approving Nitai Charan Bagchi v. Suresh Chandra Paul (66 C.W.N. 767), Shyam Lal v. M. Shayamlal (A.I.R. 1933 All. 649) and 76 Corpus Juris Secundum 621. Assuming that the investments in shares and in lands do not form part of the undertakings but are different subject matters, even then these would be brought within the purview of the vesting by reason of the above expressions. In this connection reference may be made to 76 Corpus Juris Secundum at pages 6....
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....It has no bearing either on the vesting section or on Section 7 except that the figure of Rs.24 crores 32 lakhs mentioned therein was introduced into Section 7. The provisions of this section are no different from the provisions of the similar sections in the earlier Act of 1974. For example, under Section 8 of the Sick Textile Undertakings Nationalisation Act, 1974 (page 59 of Vol. X), the amount mentioned is specified in the first schedule as there are a number of companies involved. This provision cannot be the starting point for investigation as to which amount relates to which property or as a guide to construction. 53. It appears to us that in the Delhi High Court decision (supra) and the decision of this Court in Balkrishan Gupta 's case (supra) as well as the statement of the Minister in December, 1985 that there were legal difficulties, were in respect of taking over, under the 1951 IDR Act. The IDR Act was - (a) concerned with the management of scheduled industries in, inter alia, running of factories, where there was no deeming provision in such wide terms; (b) it was concerned with setting up of machinery for imposing controls on industrial undertakings, see Harakcha....
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.... literal construction should not be given effect to See Chandravarkar S.R. Rao v. Asha Lata (1986 4 S.C.C. 447 at page 476), approving 44 Halsbury's Laws of England, 4th Ed. paragraph 856 at page 552. Nokes v. Doncaster Amalgamated Colliery Limited (1940 Appeal Cases W14 at 1022). It must be emphasised that interpretation must be in consonance with the Directive Principles of State Policy in Article 39(b) and (c) of the Constitution. 57. It has to be reiterated that the object of interpretation of a statute is to discover the intention of the Parliament as expressed in the Act. The dominant purpose in construing a statute is to ascertain the intention of the legislature as expressed in the statute, considering it as a whole and in its context. That intention, and therefore the meaning of the statute, is primarily to be sought in the words used-in the statute itself, which must, if they are plain and unambiguous, be applied as they stand. In the present case, the words used represent the real intention of the Parliament as we have found not only from the clear words used but also from the very purpose of the vesting of the shares. If we bear in mind the fact that these shares wer....
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....s to lead us to this forbidden track by referring to various extraneous matters which we have indicated before. Furthermore those external aids sought before us do not support the petitioners' approach to this question at all. 60. It appears that the shares held in SPL themselves were the subject matter of both pledge and attachment to secure loans from the U.P. State Government of about Rs. 66 lacs for payment of wages to workers of the Kanpur undertaking and Rs. 95 lacs being electricity dues of the Kanpur undertaking owing to the U.P. State Electricity Board. From all these, the acceptance of the petitioner's 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....
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....g to" does not mean "forming part of'. Even assuming that the expression "pertaining to" appearing in the first limb of Section 4(1) means "forming part of", it would mean that only such assets which have a direct nexus with the textile mills as would fall under the first limb of Section 4(1). The shares in question would still vest in the Central Government under the second limb of Section 4(1) of the Act since the shares were brought out of the income of the textile mills and were held by the company in relation to such mills. The shares would also fall in the second limb of Section 3(1) being right and title of the company in relation to the textile mills. 64. On the construction of Sections 3 and 4 we have come to the conclusion that the shares vest in the Central Government even if we read Sections 3 and 4 in conjunction with Sections 7 and 8 of the Act on the well settled principles which we have reiterated before. The expression "in relation to" has been interpreted to be the words of widest amplitude. See National Textile Corporation Ltd. and Others v. Sitaram Mills Ltd. (supra). Section 4 appears to us to be an expanding section. It introduces a deeming provision. Deemi....
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.... crores at least for discharging those liabilities. To leave a company, the new wealth of which is negative at the time of take-over of the management, with the shares held by it as investment in other company, in our opinion, is not only to defeat the principles of Article 39(b) and (c) of the Constitution but it will permit the company to reap the fruits of its mismanagement. That would be an absurd situation. It has to be borne in mind that the net wealth of the company at the time of take-over, was negative, hence Sections 3 and 4 can be meaningfully read if all the assets including the shares are considered to be taken over by the acquisition. That is the only irresistible conclusion that follows from the construction of the documents and the history of this Act. We have to bear in mind the Preamble of the Act which expressly recites that it was to ensure the principles enunciated in clauses (b) and (c) of Article 39 of the Constitution. The Act must be so read that it further ensures such meaning and secures the ownership and control of the material resources to the community to subserve the common good to see that the operation of economic system does not result in injustice....