CUSTODIAN OF TEXTILES UNDERTAKING, BOMBAYversusHALL & ANDERSON LTD. & ORS.

                        [2011] 2 S.C.R. 134

A    CUSTODIAN OF TEXTILES UNDERTAKING, BOMBAY
                                 v.
               HALL & ANDERPQN LTD. & ORS.
                 (Civil Appeal 11Jo. 666 of 2011)
                   )    JANUARY 17, 2011
B
        [P. SATHASIVAM AND DR. B.S. CHAUHAN, JJ.]

          Textile Undertaking Nationalisation Act, 1995 - s.8 -
    Textiles Undertakings (Taking Over of Management) Act,
C · 1983 - Respondent-company had premises at Calcutta and
    textile undertaking in Bombay - Besides textile business, the
    company also had the business of letting out various portions
    of the Calcutta premises to different business organizations
    - Textile undertaking was taken over by the Government -
D Whether the Calcutta premises also could be said to be taken
    over by the Government - Held, No, since the Calcutta
    premises was by no means related to the textile business -
    The premises in Calcutta did not form part of the textile
    undertaking nor was it appurtenant thereto - It was not shown
E that for the purpose of determining total compensation (on
    nationalization of the textile undertaking), the premises at
    Calcutta was also included.

        Mis Hall & Anderson Ltd., incorporated under the
  Indian Companies Act, 1913, was running a departmental
F ::;tore business on the premises in question (situated at
  Calcutta). Subsequently, in 1950, the company
  purchased a textile mill in Bombay from M/s.
  Madhusudan Mills Ltd. and commenced business of
  manufacturing and selling of cotton. In 1959, the name of
G the company was changed to M/s Shree Madhusudan
  Mills Ltd., having its registered office at the premises in
  question. In 1976, the business of departmental store was
  stopped due to economic loss and the premises was let

H                               134
CUSTODIAN OF TEXTILES UNDERTAKING, BOMBAY 135
         v. HALL & ANDERSON LTD.
out on rent. In 1989, because of strike by workers of A
textile mills, several mills suffered losses and It became
difficult to run the business and therefore, the
Government after having due deliberations with Reserve
Bank of India and other authorities first came with the
Ordlnanc.e and later on replaced It by the Textile 8
Undertakings (Taking over of Management) Act, 1983.

    Respondent no.1 filed writ petition before the High
Court challenging the provisions of the 1983 Act
whereupon an injunction was granted by the High Court         C
restraining the appellant from interfering with the bank
accounts relating to the property business as, well as
textile undertaking business. Meanwhile, the Textile
Undertaking Nationalisation Act, 1995 came into
existence and the mills stood acquired and M/s Shree          D
Madhusudan Mills Ltd. was renamed as M/s Hall &
Anderson on 11.2.1999.
     The High Court, ultimately, allowed the said writ
petition holding that the premises in question was by no
means related to the textile undertakings and therefore,      E
it could not be part and parcel of textile undertakings and
not covered by the said 1983 or the 1995 Act. The
appellant, therefore, filed the instant appeal.
    Dismissing the appeal, the Court
                                                              F
     HELD:1.1. From the factual matrix of the case, it is
evident that the respondent initially started the business
of selling various goods and articles from the
departmental store operating from the premises in
question (situated at Calcutta) under the name and style      G
of M/s Hai: & A'1derson. The Company purchased the
textile mill in bombay on 12.6.1950 and commenced the
additional business of manufacturing and selling cotton
textile. The departmental store continued its business
                                                              H
    136     SUPREME COURT REPORTS             [2011) 2 S.C.R.

A upto 1976. Subsequent thereto, the building was
  developed as an income yielding asset and as such
  started the business of letting out various portions of the
  said building to different business organizations. The
  total area of the premises is about 4 acres and on an area
B of 345 sq. ft. the registered office of the company is
  situated. The business of textile mill remained completely
  separate from the premises business of letting out. They
  had not been interconnected and the premises business
  has no connection with running the textile undertakings.
c The accounts of the property business were separately
  and independently maintained. Staff engaged in the
  property business were also not connected. They had no
  concern. with the working of the textile mill, except the
  Secretary of the Company, as he had to be the same
  person in view of the requirement of the proyisioni:. .A
0
  Companies Act, 1961. No amount for the textile mill
  business had ever been borrowed from any financial
  institution or utilized for its running. Profit and Loss
  accounts of both the business have been prepared
  separately in spite of amalgamation since 1970. The
E books of account had been maintained for both the
  business separately. The premises had been mortgaged
  with the Central Bank of India, Bombay by deposit of title
  deeds with a view to secure advance granted by the
  Central Bank of India to the Company for the purpose of
F running the textile mill, but it stood only as a security. It
  had not become an integral part of the textile industries
  or had any nexus or relation with the working of textile
  mill. [Para 10) [141-D-H; 142-A-D]
G       1.2. The textile mill had been under the ownership of
    Mis Hall & Anderson at Calcutta. Mis Shree Madhusudan
    Mills Ltd., Bombay, had been purchased using funds
    generated from the premises at Calcutta. Section 8 of the
    Textile Undertaking Nationalisation Act, 1995 provides for
H
CUSTODIAN OF TEXTILES UNDERTAKING, BOMBAY137
         v. HALL & ANDERSON LTD.
payment of amount to owners of textile undertaking by              A
the Central Government, in cash and in the manner
specified in Chapter VI, for the transfer to, and vesting in,
it, under sub-section (1) of section 3, of such textile
undertaking and the right, title and interest of the owner
in relation to such textile undertaking, an amount equal           B
to the amount specified against it in the corresponding
entry in column (4) of the First Schedule. So far as the
present textile industry is concerned, it is evident from
column (4) of the First Schedule, that what has been
acquired is the property at Bombay. Column 3 of the First          c
Schedule makes it clear that it was under the ownership
of Mis Shree Madhusudan Mills Ltd., Calcutta, and after
the property acquired at Bombay, a sum of
Rs.2,70,85,0001- had been paid as compensation. No
compensation was paid for the premises at Calcutta. The            D
quoted chart does not show that for determining the
compensation, premises property at Calcutta had also
been included. The premises in Calcutta did not form part
of the textile industry nor was it appurtenant thereto. In
view of the above, there is no cogent reason not to                E
concur with the view expressed by the High Court. [Paras
12 to 15 & 17) [143-F; 144-B-E; 145-A-B; F-G; 146-G]

     National Textile Corporation Ltd. & "Ors etc. v. · Sita ram
Mills Ltd. & Ors. etc., AIR 1986 SC 1234; Mis. Doypack
Systems Pvt. Ltd. v. Union of India & Ors., AIR 1988 SC 782        F
- distinguished.

    Minerva Mills Ltd. v. Union of India, AIR 1986 SC 2030
- referred to.
                      Case law reference:                          G

    AIR 1986 JC 1234           distinguished         Para 8
    AIR 1988 SC 782            distinguished         Para 8
    AIR 1986 SC 2030           referred to           Para 16       H
    138       SUPREME COURT REPORTS              [2011] 2 S.C.R.


A        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 666
    of 2011.

      From the Judgment & Order dated 14.12.2007 of the High
  Court of Calcutta in FMA No. 761 of 2005 in CAN No. 7885 of
B 2007.

      Goolam E. Vahanvati, AG, R.F. Nariman, L. Nageshar Rao,
  Uday U. Lalit Ranjit Kumar, Sanjay Ghose, Anitha Shenoy,
  Prateek Jalan, Siddharth Bhatnagar, Sonia Dube, S.
  Chakraborty, Legal Options, Ankur S. Kulkarni, Nirmimesh
C Dube, Anand Srivastava for the appearing parties.

          The Judgment of the Court was delivered by

          DR. B.S. CHAUHAN, J. 1. Leave granted.

D      2. This appeal has been preferred against the judgment
  and order dated 14.12.2007 in FMA No.761/05 and CAN
  No.7885/07 passed by the High Court of Calcutta affirming the
  judgment and order of the Learned Single Judge dated
  6.1.2005 in CR No. 10289(W)/83 by which the Learned Single
E Judge has held that the appellant cannot take the management
  or possession of the suit premises, No.31, Chowringhee Road,
  Calcutta, in view of the provisions of the Textile Undertakings
  (Taking Over of Management) Act, 1983, (hereinafter called the
  'Act 1983').
F
       3. Facts and circumstances giving rise to this case are that
  Hall & Anderson Ltd. (hereinafter called 'Hall'), incorporated
  under the Indian Companies Act, 1913, came into existence
  on 8.11.1946 and started primarily a departmental store
  business on the premises at No.31, Chowringhee Road
G (hereinafter called the premises styled as Hall & Anderson).
  Hall purchased the textile mill situated at Globe Mills Passage
  (Lower Parel) from M/s. Madhusudan Mills Ltd. on 12.6.1950
  and commenced business of manufacturing and selling of
  cotton. The name of the company M/s. Hall & Anderson Ltd.
H
CUSTODIAN OF TEXTILES UNDERTAKING, BOMBAY 139
v. HALL & ANDERSON LTD. [DR. B.S. CHAUHAN, J.]
was changed to Mis Shree Madhusudan Mills Ltd,, having its A
registered office at the premises on 21.7.1959. Amalgamation
of Profit & Loss Account was prepared henceforth for Mis
Shree Madhusudan Mills Ltd. from 1970.                       ·
                     ;

     4. In 1976, the business of departmental store was             B
stopped due to economic loss and after winding up of the said
business, the premises was let 01,1t on rent. In 1989, because
of strike by workers of textiles mills; several mills suffered
losses and it became difficult to run the business and therefore,
the Government after having due deliberations with Reserve
Bank of India and other authorities first came with the Ordinance   C
and later on it was replaced by Act 1983.

     · 5. The respondent No.1 herein filed Writ Petition
No. 10289/83 before the Calcutta High Court challenging the
provisions of the Act 1983 and an injunction was granted by         D
the High Court vide order dated 26.10.1983 restraining the
present appellant from interfering with bank accounts relating
to the property business as well as textile undertaking business.
It was during pendency of the business that Textile Undertaking
Nationalisation Act, 1995 came into existence and the mills         E
stood acquired. M/s Shree Madhusudan Mills Ltd. was
renamed as Hall on 11.2.1999. Learned Single Judge allowed
the said writ petition vide judgment and order dated 6.1.2005
holding that the suit premises situated at Calcutta was by no
means related to the textile undertakings and therefore, it could   F
not be part and parcel of textile undertakings and not covered
by the said Acts 1983 or 1995.

    6. Being aggrieved, the present appellant preferred the
FMA No.761105 which has been dismissed by the Division
Bench, and in concurrence with the learned Single Judge.            G
Hence, the present appeal.

   · 7. Shri G.E. Vahanvati, Learned Attorney General for India
has submitted that the Division Bench, as well as the Learned
                                                                    H
    140      SUPREME COURT REPORTS                [2011] 2 S.C.R.


A Single Judge of the High Court of Calcutta, failed to appreciate
  the purpose of taking over the management of textile
  undertakings. Because of mismanagement and strike of
  workers, the textile undertakings became unworkable and the
  Government of India in public interest and taking recourse to
B the provisions of Articles 39B & 39C of the Constitution
  appointed a Committee to examine the issue and after
  considering its report with consultation and considering the
  guidance of the Reserve Bank of India, it took up a decision to
  take over the management of the same units of the textile
c undertakings. The present textile industry was in category Ill, and
  it was evident that the undertaking made viable after investment
  e>f a huge amount which could be raised by selling the extra land
  with the textile industries. In the instant case, the accounts of
  the textile undertakings and of the premises stood
  amalgamated in 1970. The courts below failed to appreciate
0
  the law laid down by this Court in various judgments and held
  that the premises was not related to textile industries by any
  means and was a separate and independent entity and the
  business of letting out the premises was totally separate
  business having no nexus to the textile undertakings. Thus, the
E appeal deserves to be allowed.

        8. On the contrary, S/Shri R.F. Nariman, L. Nageswar Rao,
  U.U. Lalit and Ranjit Kumar, learned senior counsel appearing
  for the respondents, have opposed the appeal contending that
F the judgments cited by the Learned Attorney General in the
  cases of National Textile Corporation Ltd. & Ors etc. v. Sitaram
  Mills Ltd. & Ors. etc., AIR 1986 SC 1234 and Mis. Doypack
  Systems Pvt. Ltd. v. Union of India & Ors., AIR 1988 SC 782
  have no bearing in this case for the reason that the facts therein
G are quite distinguishable. In the case of Sitaram Mills (supra}
  there had been the finding of fact recorded by this Court
  reversing the finding of the courts below that the real estate
  division of that company was not having separate and
  independent business and the income of real estate division
H
 CUSTODIAN OF TEXTILES UNDERTAKING, BOMBAY 141
 v. HALL & ANDERSON LTD. [DR. B.S. CHAUHAN, J.]
 · came into existen.ce from the funds of the company itself. A
   Therefore, it was the assets of that company, namely, Sitaram
   Mills. In the instant case as the Calcutta High Court has held
   that the premises had totally separate entity having no nexus
   to the textile undertakings or its activities had not come into
  .existence from the funds of textile undertakings, it could not be ·B
   the asset of the said company. More so, the premises had been
. mortgaged wherein the mortgagee had already sold this
   property because it could not be redeemed. In fact, the
   mortgage became the liability and under the Act 1995, it is the
   only assets which have been taken over and not the liabilities c
   of the nationalised company. The appeal lacks merit and is
   liable to be dismissed.              ·

      9. We have considered the rival submissions made by
 learned counsel for the parties and perused the records.
                                                                     D
    : 10. The pleadings in the writ petition before the High Court
 revealed the factual matrix of the case and it is evident from
 the same that the respondent initially started the business of
 selling various goods and articles from the departmental store
 operating from the premises under the name and style of M/s         E
 Hall & Anderson: The Company purchased the textile mill in
 Bombay on 12.6.1950 and commenced the additional business
 of manufacturing and selling cotton textile. The departmental
 store continued its business upto 1976. Subsequent thereto,
 the building was developed as an income yielding asset and          F
 as such started the business of letting out various portions of
 the said building to different business organizations. The total
 area of the premises is about 4 acres and on an area of 345
 sq. ft. the registered office of the company is situated. The
 business of textile mill remained completely separate from the      G
 premises business of letting out. They had not been
 interconnected and the premises business has no connection
 with running the textile undertakings. The accounts of the
 property business were separately and independently
 maintained. Staff engaged in the property business were also        H1
    142        SUPREME COURT REPORTS               (2011] 2 S.C.R.


A not connected. They had no concern with the working of the
  textile mill, except the Secretary of the Company, as he had to
  be the same person in view of the requirement of the provisions
  of Companies Act, 1961. No amount for the textile mill business
  had ever been borrowed from any financial institution or utilized
B for its running. Profit and Loss accounts of both the business
  have been prepared separately in spite of amalgamation since
  1970. The books of account had been maintained for both the
  business separately. The premises had been mortgaged with
  the Central Bank of India, Bombay by deposit of title deeds with
c a view to secure advance granted by the Central Bank of India
  to the Company for the purpose of running the textile mill, but it
  stood only as a security. It has not become .an integral part of
  the textile industries or had any nexus or relation with the
  working of textile mill. In the counter affidavit, reference has
0 been    made to the report of the Committee that disposal of
  immovable property of the Company, i.e., premises would
  provide substantial amount'for making the undertaking -viabte··'
  within a few years provided, the said premises was sold.
  Further reference had been made to the observations made
E by the task force under the terms of reference that Company
  would be viable with the sale of land.

        11. After considering the pleadings as well as the
  submissions made on behalf of the parties, a learned Single
  Judge as well as the Division Bench recorded the following
F findings:

          (i) Mis Hall and Anderson premises at Calcutta deals with
          different business and cannot be treated as part and parcel
          of the textile undertaking at Bombay.
G         (ii) The company was engaged in multifarious activities.
          (iii) The textile undertaking at Bombay carries no other
          business other than the textile business.

H
 CUSTODIAN OF TEXTILES UNDERTAKING, BOMBAY 143
 v. HALL & ANDERSON LTD. [DR. S.S. CHAUHAN, J.]
      (iv) The bank accounts and balance-sheets of both the units    A
      are different.

      (v) The lump sum compensation ,to the tune of
      Rs.2,70,85,000/- has been fixed and paid under the .Act
      1995. 415 acres of land, building and the niater1a1 acquired    8
      at Bombay leaving aside the premises at Calcutta. ·

      (vi) The textile mill at Bombay had been purchased as an
      asset of M/s Hall & Anderson as it had been purchased
                                          I
      totally out of the resources of M/s Hall & Anderson. The
      premises at Calcutta by no means can be part and parcel        C
      having any nexus or related to the textile undertaking at
      Bombay.                      ·

        12. The judgment in Sit.aram Mills (supra) was
  distinguishable as it had been argued in that case that the land o
. .apf)tlTtenant to the said mill was not a part of the textile
   undertaking. However, this Court came to the conclusion that
   as a result of modernization resulted in a formation of mill of a
   much smaller size, the land had become surplus. It was lying ·
  vacant. It was not in dispute that the surplus land was under the E
   ownership of the textile undertaking. It was in fact the land on
  which the different division of the old mill had been functioning.
  Thus, this. Court held that the land was an integral part of the
  textile undertaking. In the instant case, position is otherwise. The .
  textile mill has been under the ownership of Mis Hall & F
   Anderson at Calcutta.

      13. In M/s Doypack Systems Pvt. Ltd. v. Union of India
 & Ors., AIR 1988 SC 782, this Court while interpreting the
 provisions of Section 3 of the Swadeshi Cotton Mills
 (Acquisition and Transfer of Undertaking) Act, 1986, observed        G
 that the provisions of such a statute require broad and liberal
 interpretation in consonance and conformity with the principles
 enshrined in Articles 398 and 39C of the Constitution.

      In the said case, the issue was whether shares purchased        H
    144       SUPREME COURT REPORTS                  [2011] 2 S.C.R.


A         using funds of the textile company could be held to be
          covered under the terms of said provision. The ratio of the
          said case has no application in the present case, as,
          admittedly, in that case the shares in question had been
          purchased from the funds of the textile company. In the
B         instant case, the fact situation is the other way around.
          M/s Shree Madhusudan Mills Ltd., Bombay, had been
          purchased using funds generated from the premises at
          Calcutta.

c        14. We have gone through the provisions of the Act 1995.
    Section 8 thereof, provides for payment of amount to owners
    of textile undertaking:

          UB. Payment of amount to owners of textile undertakings
          - The owner of every textile undertaking shall be given by
D         the Central Government, in cash and in the manner
          specified in Chapter VI, for the transfer to, and vesting in,
          rt, under sub-section (1) of section 3, of such textile
          undertaking and the right, title and interest of the owner in
          relation to such textile undertaking, an amount equal to the
E         amount specified against it in the corresponding entry in
          column (4) of the First Schedule."

         However, the column (4) of the First Schedule, so far as
    the present textile industry is concerned, reads as under:
F
    SI.     Name of the textile         Name of the        Amount
    No.     undertaking                 owner              (in rupees)

    (1)           (2)                       (3)            (4)
G 11. Shree Madhusudan Mills,            Shree             2,70,85,000
          Pandurang Budhkar Marg,        Madhusudan
          Bombay                         Mills Ltd., 31,
                                         Chowringhee
                                         Road,
H                                        Calcutta - 16
 CUSTODIAN OF TEXTILES UNDERTAKING, BOMBAY 145
 v. HALL & ANDERSON LTD. [DR. B.S. CHAUHAN,' J.]
       From the above, it is evident that what has been acquired     A
 is the property at Bombay. Column 3 makes it clear that it was
 under the ownership of Mis Shree Madhusudan Mills Ltd.,
 Calcutta, and after the property acquired at Bombay, a sum of
 Rs.2,70,85,000/- had been paid as compensation. No
 compensation has been paid for the premises at Calcutta.            B

      15. The relevant part of the judgment in Sitaram Mills
 (supra) reads as under:

             ''The High Court completely ignored the fact that all
      the assets of the company were held in relation to the         C
      textile business. The company required all its real estate
      in the nineteenth century when it was formed for carrying
      on textile business and, admittedly, no new assets had
      been acquired by it thereafter. ....... .
                                                                     D
            Even for determining the total compensation to be
      paid on nationalization, the Task Force takes values into
      account the total surplus lands of the company and does
      not exclude any land belonging to the so-called Real Estate
      Division ..... ."                                              E
       Therefore, it is evident that in the said case, the land
  appurtenant to the textile undertaking and belonging to it, was
  converted into real estate and even on nationalisation, for the
, purpose of determining the compensation, the said land had
  been included in the assets. In the instant case, a contrary F
  picture emerges as explained h.ereinabove. More so, the chart
  quoted from the Act, does not show that for determining the
I compensation, premises property at Calcutta had also been
: included. As the premises in Calcutta does not form part of or
  has been appurtenant to the textile industry, the judgment in M/ G
  s Doypack Systems Pvt. Ltd. (supra) is also distinguishable. ·
      16. This Court in Minerva Mills Ltd. v. Union of India, AIR
 1986 SC 2030, dealt with judgment of this Court in Sitaram
 Mills (supra) and held as under:                                    H
    146        SUPREME COURT REPORTS                    [2011) 2 S.C.R.


A               "25. The learned Counsel for the petitioners has
          placed reliance upon an observation of this Court in
          National Textile Corpn. Ltd. v. Sitaram Mills Ltd. The
          question that was involved in that case was whether surplus
          land in the precinct of the taken-over undertaking was an
B         asset in relation to the undertaking. It was observed: (SCC
          p. 133 bottom) "The test is whether it was held for the
          benefit of, and utilised for, the textile mill". Relying upon this
          observation, it is contended by the learned Counsel for the
          petitioners that as the vacant land, in the instant case, has
c         not been utilised for the undertaking, it is not an asset of
          the undertaking. We do not think that in Sitaram Mills case
          this Court really meant to lay down a proposition that in
          order that a piece of land be considered as the asset of
          the textile undertaking, it must be held for the benefit of and
          utilised for the undertaking in question. Can it be said that
0
          a piece of land which is held for the benefit of but not
          utilised for the textile undertaking, as in the instant case,
          is not an asset of the undertaking? The answer must be
          in the negative. In Sitaram Milks case that observation
          was made in the context of facts of that case, namely, that
E         the surplus land was held for the benefit of and also
          utilised for the textile undertaking. "

                                                      (Emphasis added)

F        17. In view of the above, we do not see any cogent reason
    not to concur with the view expressed by the High Court. The
    appeal lacks merit and is, accordingly, dismissed. In the facts
    and circumstances of the case, there will be no order as to
    costs.
G B.B.B.                                             Appeal dismissed.