Holding

The Ordinance was a valid exercise of the State’s power to acquire property under Entry 42 List III and did not violate the Industries Act, the High Court’s orders, or the Constitution.

Summary

The Uttar Pradesh Government decided to privatise the loss‑making Uttar Pradesh State Cement Corporation Ltd. and entered into a memorandum with Dalmia Industries Ltd. for the latter to acquire 51% of the shares. While the transfer was pending, the High Court stayed the privatisation and issued several interim orders. On 11 October 1991 the Governor promulgated the Uttar Pradesh State Cement Corporation Ltd. (Acquisition of Shares) Ordinance, 1991, which vested all the corporation’s shares in the State Government and provided compensation to the shareholders. Dalmia challenged the Ordinance on the ground that it was beyond the State’s legislative competence, violated the Industries (Development and Regulations) Act, 1951 and interfered with the High Court’s orders. The Supreme Court held that the Ordinance dealt solely with the acquisition of property, a power that lies under Entry 42 of List III of the Constitution, and did not amount to a takeover of management or control, nor did it contravene Section 20 of the Industries Act or the pending judicial orders. Consequently, the Ordinance was upheld as a valid exercise of State power in the public interest, and the appeal was dismissed.

Issues considered

The legislative competence of the Uttar Pradesh State Cement Corporation (Acquisition of Shares) Ordinance, 1991 under Entry 42 List III of the Constitution versus Entry 24 List II/Entry 52 List I.
Whether the Ordinance infringed Section 20 of the Industries (Development and Regulations) Act, 1951 by taking over control and management of the corporation.
Whether the Ordinance was a colourable piece of legislation aimed at usurping management, rendering it invalid.
Whether the Ordinance interfered with the High Court's interim orders and the power of judicial review.
Whether the acquisition of shares was arbitrary, violative of Article 300‑A and not in public interest.

Legislation cited

Industries (Development and Regulations) Act, 1951s. 2, s. 20

Subjects

administrative lawjudicial reviewordinanceacquisition of sharesconstitutional competencepublic interestcompensationprivatizationstate-owned enterprisecement industry

Judgment

'

A DALMIA INDUSTRIES LTD. AND ANR.
v.
THE STATE OF UITAR PRADESH AND ANR.

FEBRUARY 9, 1994

B [KULDIP SINGH AND S.P. BHARUCHA, JJ.)

Uttar Pradesh State Cement Corporation Ltd. (Acquisition of shares)
Ordinance 1991-Competence of State to promulgate the ordinance in exercise
of power emanating from Entry 42 List III, Seventh Schedule of Constitution
C of India-Independent and separate from legislative power of Union of India,
emanating from Entry No. 52 in List I, seventh sc_hedule, control of Industries.

Administrative Law: Judicial Review-U.P. State Cement Corporation
(Acquisition of shares) ordinance-Whether takes away power of Courts.

D The respondent-State Government decided in April 1990 to privatise
the Utter Pradesh State Cement Corporation Ltd. as the Corporation was
running into huge losses, and converted the wholly public sector undertak-
ing, into a Joint Sector enterprise.

The workmen of the Corporation, through their Unions filed Writ
E Petitions in the High Court, challenging the State Government's decision
to privatise the Corporation and seeking mandamus to maintain it as
Government company. The High Court, by interim order stayed the final
implementation of the decision to hand over the factory. It also gave
certain interim directions. Another Writ Petition was also filed in this
F connection.

During the pendency of these petitions, and while interim orders
passed by the High Court were operating, on October 11, 1991, the State
Government promulgated the Uttar Pradesh State Cement Corporation
G Ltd. (Acquisition of Shares) Ordinance, 1991, providing that on the date
of its commencement all the shares of the Corporcttion held by any com-
pany, including the appellant and its associates would stand transferred
to and vest in the State Government.

The appellant challenged the validity of the Ordinance and the High
H Court upheld the same. Hence this appeal by the appellant-Company.
798
DALMIAIND. v. STATEOFU.P. 799

Dismissing the appeal, this Court A
HELD: 1. The Ordinance had been legislated to acquire shares of
the Corporation and not for taking over its control and management.
Neither management nor control of the Corporation was transferred to the
appellant. With 51% of shares in hand, the government was controlling
and managing the corporation. The day-today functioning of affairs of the B
,. ).- corporation, was being done by the appellants under directions ofth2 High
Court. The question of transferring control and management of the Cor·
poration to the appellants, could be decided after the assets of the cor·
poration were evaluated. In view of the various interim order issued by the
High Court, not only the control and management of the Corporation C
remained with the gov2rnment, but even the status of the corporation
continued to be that of a Government company. Factually as well as legally
the appellants were not in the management of the corporation. (808-F-G]

2. Entry 52, List I, and Entry 24 List II, seventh schedule of the
Constitution of India, read with section 2 of the Industries (Development D
and Regulations) Act, 1951, take away the legislative competem:e of State
Legislature to legislate about control of cement industries; However, the
power of State legislatures to legislate for acquisition of property, is
independent and separate, emanating from Entry 42 List ID Seventh
Schedule of the Constitution. [807-F] E
Ishwari Khetan Sugar Mills v. State of U.P. & O!"s., (1980] 3 S.C.R. 331
relied on.

3. The Qrdinance was promulgated for acquisition of shares of the
Corporation. The field of acquisition under Entry 42 List ID Seventh F
Schedule of the Constitution is not occupied by the Industries (Develop·
ment and Regulations) Act, which deals with the control and management.
The power conferred upon the Union under the Act can be effectively
exercised after acquisition of shares of companies. The Ordinance related
to acquisition of property (shares) of the corporation and therefore falls G
under Entry 42 List III Seventh Schedule of the Constitution. [810-G]

4. The Ordinance is not hit by the provisions of Section 20 of the
Industries (Development and Regulations) Act, 1951, as the Ordinance
had been promulgated for acquisition of shares of the Corporation. The
Management and control of the Corporation being under the state govern· H
800 SUPREME COURT REPORTS [1994) 1 S.C.R.

A ment, when the Ordinance was issued, it is not a colourable piece of
legislation. [812-F]

5. The Corporation suffered deterioration in the production of ce-
ment, after transfer of 49% shares of the corporation to the Appellants.
The market position in respect of availability of cement became worse; the
B production of cement in the units of the Corporation was adversely af-
fected almost to the extent of 90%. The workers of all the units abstained
from work. Consequently construction work in the state sufferd badly.
Deteriorating condition of the corporation affected financial resources of
the government. It was in public interest to acquire back the shares of the
c Corporation. [812-G-H, 813-A]

6. The promulgation of the ordinance was not arbitrary exercise of
power. The ordinance provided for just compensation for the acquisition
of shares. The owners of the property (appellants) were to be given the
same price at which they had purchAsed the shares. The Ordinance was
D promulgated not only in public interest and for public purpose but was
also just and fair. [813-E]

7. The Ordinance did not interfere with the exercise of power of
judicial review by the High Court. None of the orders made by the High
E Court, finally determined the rights of the parties. The orders were neither
final nor preliminary judgments. They could not even be called prelimi-
nary. The ordinance was in no manner contrary to any order. The acquisi-
tion of shares under the ordinance did not in any manner nullify any order
of Court. The Ordinance did not interfere in any manner with the power
of the High Court. [813-F-H]
F
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 441 of
1992.

From the Judgment and Order dated 24.1.1992 of the Allahabad
G High Court on W.P. No. 29448 of 1991.
G. Ramaswamy, Harish N. Salve, Dr. Shankar Ghose, S.R. Agrawal,
Ms. Bina Gupta, A.T. Patra and Sanat Jain for the Appellants.

Soli. J. Sorabjee, Arun Jaitley, D.B. Sehgal, Uday Lalit, Ms. S.
H Banerjee, Vishwajlt Singh and R.B. Misra for the Respondents.
DALMIAIND. v. STATE OF U.P. [KULDIP SINGH, J.l 801

The Judgment of the Court was delivered by A

KULDIP SINGH, J. 1. The validity of the Uttar Pradesh State
Cement Corporation Limited (Acquisition uf shares) Ordinance 1991 (the
Ordinance) was challenged before the Allahabad High Court by way of a
v.Tit petition under Article 226 of the Constitution of India. The High Court
by its judgment dated January 24, 1992 upheld the validity of the Ordinance
B
and dismissed the writ petition. This appeal by way of special leave is
directed against the judgment of the High Court.

2. The Uttar Pradesh State Cement Corporation Limited (the Cor-
poration) was a government company wherein all the shares were owned C
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 dt:cision to privatise
the Corporation. A cabinet decision was taken on April 29, 1990 to convert D
the corporation - a wholly public sector undertaking - into a joint sector
corporation. The decision was conveyed to the leading cement manufac-
turers in the country in a meeting held on May 19, 1900 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 E
cement manufacturers in the respect. In October 1990, the State Govern-
ment appointed S.B. Billimoria & Company to value the share of the
corporation. The said company, in Decemh~r 1990, submitted its report
wherein the share of the corporation was valued at Rs. 20 against its face
value of Rs. 100. F

3. Initially there was a good response from the cement manufacturers
for the purchase of the corporation - shares but finally the Dalmia In-
dustries Limited (the appellant) alone remained in the field and all others
backed out. The Committee considered the offer of the appellant to buy
the shares of the corporation at a price of Rs. 75 per share against the face G
value of Rs. 100 and finally accepted the same. The cabinet approved the
recommendation of the committee. On February 14, 1991 a Memorandum
of Understanding (the Memorandum) was entered into between the State
Government and the appellant. The memorandum, inter alia, provided that
the appellant would hold 51 % shares of the corporation, it would take over H
802 SUPREME COURT REPORTS [1994] 1 S.C.R.

A the management of the corporation with all its assets and liabilities, it
would nominate 5 directors, the State Government could nominate 4
directors and the appellant would also be entitled to have one of its
directors as the managing director. On February 21/22, 1991 share transfer
agreement and financial agreement were signed providing for the transfer
of 49% of the shares to the appellant. On March 7, 1991 a meeting of the
B Board of Directors of the corporation was held wherein 5 directors
nominated by the appellant were appointed. On April 12, 1991 Praveen
Kumar, one of the 5 directors nominated by the appellant, was appointed
as the managing director of the corporation. According to the memoran-
dum, the total amount payable by the appellant for 51 % of the shares at
C Rs. 75 per share was a little above 26 crores. Out of the said amount the
appellant paid one crore at the time of signing the memorandum. It was
agreed to pay further two crores within three months of the signing of the
Memorandum which was paid. Another two crores was to be paid within
six months of the signing of the Memorandum and the balance amount of
D about Rs. 20 crores was payable within twenty four months. Various other
financial arrangements were agreed between the parties but it is not
necessary for us to go into the same.

4. On October 11, 1991, the Governer promulgated the Ordinance.
The Ordinance clearly stated that its purpose was to acquire the shares of
E the corporation in public interest. The Preamble to the Ordinance stated
that the agreement between the State Government and the Dalmia In-
dustries could not be given effect to on account of the interim order dated
October 16, 1990 passed by the High Court and, as such, only 49% of the
shares were transferred by the State Government to the Dalmia Industries
F 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 Dalniia Industries Limited. Section 3 of the Or-
dinance 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 "com-
G panies" was defined to mean the companies specified.in the Schedule which
included the Dalmia Industries Limited and its associates. Section 4 en-
sured the payment by the State Government of the full amount at which
the corporation had tranferred its shares to the companies.

H 5. At this stage we may refer to the writ petitions filed before the
DALMIA IND. v. STATE OF U.P. [KULDIP SINGH, J.] 803

Allahabad High Court challenging the action of the State Government in A
privatising the corportion and agreeing to seel 51 % of shares to the
appellant.

6. The workmen of the corporation through their unions filed writ
petition No. 26223 of 1990 challenging the Government decision to
privatise the corporation and seeking a mandamus to maintain the status B
of the corporation as a government company. The High Court on Octorber
... ).- 16 1990 passed the following interim order in the writ petition:

"The learned counsel for the petitioner has stated that the
State Government has taken a decision to privatise the
Uttar Pradesh State Cement Corporation Ltd. and neces-
c
sary steps are being taken to implement the said decision.

Until further orders, the fmal implementation of the
decision to hand over the factory, run by the Corporation,
shall remain stayed during pendency of the writ petition. D
However, in the meantime, other formalities may be com-
pleted."

7. Churk Cement Adhikari Kalyan Samiti filed a writ petition before
the Lucknow Bench of the High Court on March 15, 1991. The Lucknow
Bench transferred the writ petition to the Allahabad Bench to be heard E
along with Writ Petition No. 26223 of 1990. The transferred writ petition
was re-numbered at Allahabad as Writ Petition No. 10607 of 1991.

8. On may 24, 1991 the interim order dated October 16, 1990 (quoted
above) was clarified in the follov.ing terms:
F
"We do not wish to express any opinion on the merits
of the several contentions reaised while hearing the writ
petitions or raised before us today at the hearing of this
application. Our limited concern at this stage is that the
Corporation be allowed to run on proper lines till the
G
disposal of these writ petitions. It is with that view that
the following clarifications of the aforesaid interim order
are made;

(1) The Registrar of Companies, Kanpur sh;:ill verify
whether transfer of 49 per cent of shares of Uttar Pradesh H
804 SUPREME COURT REPORTS [1994] 1 S.C.R.

A Cement Corporation has been effected in favour of Dal-
mia Industries or their nominees, as the case may be, as
on today i.e. 24.5.1991.. On such verification, if he is
satisfied that such a transfer has taken place, he shall issue
a certificate to that effect both to the Government of Uttar
Pradesh, Uttar Pradesh Cement Corporation and Sri S.B.
B Gupta, Senior Advocate appearing for the petitioners.

(2) If the certificate is issued by the Registrar of
Companies affirming transfer of shares as contemplated
by clause (1) above, the present Board of Directors will
c be allowed to manage the affairs of the Corporation pend-
ing disposal of these writ petitions and subject to such
further orders or directions as may be issued by this Court
in these matter.

(3) That the employee and officers of the Corporation
D shall cooperate 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 dis-
turbed or shifted from their respective places of posting
E 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 --4--"
continue pending further orders."
F
9. On July 22, 1991 writ petitions No. 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
G offers were invited, one would have expected the Govern-
ment to have ordered a thorough valuation of the assets
and liabilities of the Corporation to find out what is worth.
Any reasonable and prudent owner of property would do
this before he puts his property for sale. He would first
H assess for himself the value of the property he is selling.
DALMIAIND. v.STATEOFU.P.[KULDIPSINGH,J.J 805

Since that alone would enable him to judge the offers A
received unless, of course, it is a distress sale. This ought
to have been done by the State Government both as a
prudent owner and also because it is in the nature of a
trustee of the public property. It is, however surprising to
note that no such effort was made ...... .
B
Though we are not satisfied with the manner in which the
Government and its agencies have proceeded in the mat-
ter. We are of the opinion that before we can pass any
final orders in the Writ Petitions, we should have the net
worth of the Corporntion valued, at least now, through a c
reputed and well known agency. For this purpose, we fall
back upon the very same material as is disclosed in the
minutes of the first meeting of the PC. Five agencies were
mentioned, who, according to Sri AK Pur~ were com-
petent to value the assets and liabilities of the Corporation
to find out its net worth. Accordingly, we appoint two
D
agencies, namely, AF. Forguson & Co., New Delhi and
Price Water House Associates, New Delhi, and request
them to independently value the assets and liabilities of
the UPSCCL and to determine the net worth of the
Corporation as on 1.2.1991. Both the agencies shall inde- E
pendently do their job and submit their reports separately.
The reports shall be submitted within two months of
service of a copy of this order upon them."

10. While dealing with the two miscellaneous applications filed in the F
abov~,said two writ petitions, a Division Bench of the Allahabad High
Court passed the following order on August 21, 1991:

"...... On 16.10.1990, a learned Single Judge passed an
order directing the State Government not to hand over
the Corporation to any person. The idea was to maintain G
status quo obtaining as on that day pending disposal of
CMWP No. 26223 of 1990 wherein the said order was
passed. In spite of the same, the Government chose to
transfer 49% of the share holding to Dalmia as against
51 % agrei~d to be transferred under the MOU and GO H
806 SUPREME COURT REPORTS [1994] 1 S.C.R.

A based thereon. Though only 49% of the share-holding was
transferred to Dalmias. They were allowed to nominate
five directors by a resolution of the Corporation dated
7.3.1991. This resolution of the Corporation was stayed by
Lucknow Bench on 15.3.1991, though the said order was
vacated 1ater on 10.4.1991. The above circumstances lead
B to the inference says the counsel, that Dalmias took the
risk of obtaining the transfer of share 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 16.10.1990.
c The findings recorded by this Court in the order dated
22.7.1991 dearly establish that the procedure followed in
selling 51 % interest mthe Corporation in favour of Dal-
mias was not proper and bonafide ......"

"......The learned Advocate General appearing for the
D 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......"
E
11
•••••• The necessary consequence of those findings is not

the cancellation of the deal/transaction between the State
Government and Dalmias. The matter is yet to be ex-
amined after the receipt of the report of the valuers. Sri
F Sudhir Chandra further submitted that <.µrections No. (3)
(clarification No. (3) as it is called) in the order dated
24.5.1991 is acting as a severe handicap in the proper
management of the Corporation. Because of the said
restriction the management is not in a position to transfer
recalcitrant officials whc ·e disobeying and defying lawful
G and valid orders of the management.. ...."

"......We have heard both Sri S.P. Gupta and Sri Sudhir
Chandra at some length. We are, however, not satisfied
that any direction as sought for ought to be made. The
H Writ Petitions are not finally disposed of. The hearing will
DALMIAIND. v. STATE OF U.P. [KULDIP SINGH, J.] 807

continue after the report of the valuers is received in A
pursuance of the order dated 22nd July 1991. At this stage
we do not wish to alter the status quo obtaining as on
today, nor do we propose to pronounce upon the correct-
ness of otherwise of the several suggestions made by both
the counsel... ... "
B
11. There is, thus, no dispute that Civil Writ Petitions Nos. 26223 of
1990 and 1()61)7 of 1991 were pending for fmal adjudication before the
Allahabad High Court and various interim orders passed by the High
Court in the said writ petitions were operating when the Ordinance was
promulgated on October 11, 1991. C
12. The learned counsel for the appellants vehemently contended
that the High Court failed to appreciate the arguments advanced before it
challenging the validity of the Ordinance. Since the fate of the challenge
to the validity of the Ordinance primarily depends on the question whether D
the control and the management of the corporation on the date of the
Ordinance was with the appellants or with the State Government, the main
arguments were advanced by the learned counsel on the said question. The
learned counsel for the appellants, however, for his own convenience,
styled his contentions as under: -
E
1. Admittedly cement is an industry specified in the First Schedule
to the Industries (Development and Regulation) Act 1951 (the Act). Entry
52 List I, Entry 24 List II Seventh Schedule to the Constitution of India
-+
read with Section 2 of the Act takes away the legislative - competence of
the State Legislature to enact the subject matter of the Ordinance and, as F
such, the Governor was not competent to promulgate the Ordinance.

2. The Ordinance in pith and substance is intended to take over the
management and control of the corporation. That being so, it is hit by the
provisions of Sedion 20 of the Act.
G
3. The Ordinance being a colourable piece of legislation could not
be a legislation under Entry 42 List III Seventh Schedule Constitution of
India.

4. Assuming it is a legislation under Entry 42 List III Seventh H
808 SUPREME COURT REPORTS (1994) 1 S.C.R.

A 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 300-A of the Constitution
of India.
B
6. Writ Petitions were pending before the Allahabad High Court and
various orders passed by the High Court were operating. The Ordinance
directly interfered \l<ith the judicial decisions and, as such, was liable to be
struck down on that ground.
c
13. 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 appeallants. 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
D Court reached the finding that on the day when the Ordinance was promul-
gated, the appellants were neither managing nor controlling the Corpora-
tion in any manner. We see no ground to differ with the finding reached
by the High Court. We briefly give our reasons.

E 14. The decision of the State Government to privatise the corporation
was challenged before the Allahabad High Court by way of two writ
petitions under Article 226 of the Constitution of India. The High Court
passed interim 'orders dated October 16, 1990, May 24, 1991, July 22, 1991
and August 21, 1991. We have reproduced the relevant parts of these
orders in the earlier part of the judgment. A bare reading of the orders
F clearly show that neither the management nor the control of the corpora-
tion was transferred to the appellants. With 51 % shares in hand, the
Government was controlling and managing the corporation. The day-
to-day functioning of the affairs of the corporation, if any, was being done
by the appellants under the directions of the High Court. The High Court
G by its order dated July 22, 1991 deJ.-,.!Cated the action of the State Govern-
ment in taking a decision to transfer 51 % shares of the corporation to the
appellants without even getting the assets of the corporation valued. The
High Court appointed two agencies to value the assets of the corporation.
The report was awaited when the Ordinance came into operation. The
question of transferring the control and management of the corporation to
H the appellants could only be decided after the assets of the corporation
)

DALMIAIND. v. STATEOFU.P.[KULDIPSINGH,J.] 809

___..j..___ were evaluated. The High Court orders, thus conclusively show the the A
appellants were nowhere near controlling or managing the corporation.

15. Paras 2 and 20 of the Memorandum dated February 14, 1991 are
as under:-

"2. Dalmia will take over the management of the Cor- B
poration.

20. This M.O.U. is subject to the decision of the court
whenever cases pending against them."

16. It is thus obvious that the Memorandum on the basis of which C
the appellants claim to have acquired the control and management of the
corporation, itself stated that the terms of the Memorandum were subject
to the decision of the High Court in the pending cases. Similarly paras 1
and 15 of the finandal agreement dated February 22, 1991 were as
under:-
D
"1. The parties hereto agree to collaborate in the
conduct of the affairs and business of the Corporation in
the manner and to the extent as contained hereinafter.

15. While Uttar Pradesh Government has decided to
sell 51 % shares of the Corporation as mentioned above E
to Dalmia and others, due to pending stay of Allahabad
High Court, only 49% shares will be transferred at
present. Balance 2% shares will be transferred only after
the stay is vacated though all the other formalities would
be completed as per clause 6 above, now itself."
F
17. 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 M/s. Dalmia Industries Ltd. G
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 order only 49% shares will
be transferred at present. In view of the Department of H
'
810 SUPREME COURT REPORTS [1994) 1 S.C.R.

A Justice, if at present 49% 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."

18. The various interim orders iSsued by the High Court from time
B to time and the documents mentioned above clearly show that not only the
control and management of the corporation remained with the Govern-
ment but even the status of the corporation continued to be that of a
Government company. We have, therefore, no hesitation in agreeing with
the finding of the High Court that factually as well as legally the appellants
C were not in the management of the corporation on the day when the
Ordinance was promulgated.

19. With this background we may take up the first contention of the
learned counsel for the appellants. The Act has been enacted by the
D Parliament under Entry 52 List I. Section 2 of the Act read with Item 35
in the First Schedule to the Act makes it clear that the union has taken
over under its control the cement - industry. It follows that the State
Legislature cannot legislate with respect to the cement industry under
Entry 24 List II Seventh Schedule Constitutiqn of India. The question,
however, for our consideration is whether the Ordinance was promulgated
E under Entry 24 List II or Entry 42 List III? The High Court has dealt with
the question in detail and has reached the conclusion that the Ordinance
was promulgated under Entry 42 List III. We are inclined to agree with
the High Court. Section 3 of the Ordinance provided for the transfer of all
the shares held by the companies in the share capital of the corporation to
the State Government. All the shares, stood vested in the State Govem-
F ment with effect from the date of the commencement of the Ordinance.
On the plain language of it& provisions, the Ordinance related to the
acquisition of property (shares of the corporation). The Ordinance, there-
fore, falls under Entry 42 List III which reads "acquisition and requisi-
tioning of property." The field of acquisition under Entry 42 List III is not
G occupied by the Act which deals with the control, management, regulation
and development of the declared industries. The power conferred upon the
Union under the Act can as well be effectively exercised after the acquisi-
tion of the shares of the companies.

20. This Court in Ishwari Khetan Sugar Mills v. State of Uttar Pradesh
H & Ors., [1980) 3 S.C.R. 331, had an occasion to deal with a similar situation
DALMIAIND. v. STATEOFU.P.[KULDIPSINIGH,J.] 811

relating to sugar industry. Sugar was a scheduled indus1try 1 mder Section 2 A
of the Act. An Ordinan,ce called the Uttar Pradesh Suga1r Undertaking
(Acquisition) Ordinance 1971 was promulgated by which th .e sugar under-
takings were transferred to and vested in the Uttar Prade sh State Sugar
Corporation Limited. The validity of the Ordinance was challenged on
similar ground. A Constitution Bench of this Court held that the pmyer to B
legislate in respect of acquisition of property is an ind· ependent and
separate power emanating from Entry 43 List III. It was fut ther held that
the Ordinance in pith and substance was for acquisition of sc heduled sugar
undertaking and as such it did not impinge on the field oc cupied by the
Act.
c
21. We, therefore, agree with the conclusion reached by the High
Court and reject the contention raised by the learned c01 msel for the
appellants to the effect that the State Legislature had no leg jslative com-
petence to legislate on the subject matter of the Ordinan<:1~ amd, 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 D
could validly be traced to Entry 42 List III.

22. Second and third contentions raised by the leaimed , counsel for
the appellants have to be rejected in view of the finding wached I by us that
the control and management of the cor-poration did not ves1 t with the E
appellants on the date of the promulgation of the Ordinance. ~ )ection 20
of the Act is as under: -

"After the commencement of this Act, it shall not be ·
competent for any State Government or a local authority
to take over the control and management of any industrial F
undertaking under any law for the time being in force
which authorises any State Government or local authority
so to do."

23. This Court considered the scope of Section 20 of the 1 \ct in G
Ishwari Khetan's case (supra) as under:-

"The impugned legislation was not enacted for taking
over management or control of any industrial undertakini g
by the State Government. In pith and substance it we is
enacted to acquire the scheduled undertakings. If an a .t- H
'
812 SUPREME COURT REPORTS (1994) 1 S.C.R.

A tempt was made to take over management or control of
any industrial undertaking in a declared industry indis-
putably the bar of S. 20 would inhibit exercise of such
executive power. However, if pursuant to ct valid legisla-
tion for acquisition of scheduled undertaking the manage-
ment stands transferred to the acquiring body it cannot
B be said that this would be in violation of S. 20. Section 20
forbids executive action of taking over management or
control of any industrial undertaking under any law in
force which authorises State Government or a local
authority so to do. The inhibition of Section 28 is on
c exercise of executive power but if as a sequel to an
acquisition of an industrial undertaking the management
or control of the industrial undertaking stands transferred
to the acquiring authority S. 20 is not attracted at all.
Section 20 does not preclude or forbid a State Ligislature
exercising legislative power under an entry other than
D
Entry 24 of List II, and if in exercise of that legisl~tive
power, to wit, acquisition, such taking over of management
or control pursuant to an exercise of legislative power is
not within the inhibition of S. 20. TJierefore, the eonten-
tfon that the impugned legislation violates S. 20 has no
E merits."

24. We have held that the Ordinance was promulgated under Entry
42 List III and not under Entry 24 List II. We do not agree with the learned
counsel that the Ordinance is a colourable piece of legislatioin and in pith_
and substance it falls under Entry 24 List II. We, therefore, reject the
F
contentions of the learned counsel in this respect.

25. We do not agree with the learned counsel for the appellants that
the promulgation of the Ordinance was not in public interest. The High
Court has elaborately dealt with this aspect. After the transfer of 49%
G shares of the corporation, it was found that the corporation suffered
deteriorati~n 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
H to the appellants. The production of cement at Churk and Chunar was also
DALMIAIND. v. STATEOFU.P.[KULDIPSlNGH,J.] 813

,,...,__~ adversely affected almost to the extent of 90 per cent. The workers of all A
the units abstained from work to a large extent. As 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 Memoran-
dum was signed the workers intensified their agitation virtually paralysing
the units. Workers from other State Corporations including the State
B
Industrial Units joined the agitation. Events took such an ugly turn at one
..... )..
point of time that the police had to open fire resulting in the death of nine
persons and injuries to many. The deteriorating condition of the corpora-
tion affected the financial resources of the Government in so far as there
was a reduction in the revenue receipts of the State Government through c
various taxes which the corporation was payi.-ig to the Government before
the transfer of the shares. It was in the above background t:bat the Or-
dinance was promulgated. We have no hesitation in holding that it was in
the public interest to acquire the shares of the corporation.

26. We do not agree with the learned counsel for the appellants that
D
~
the promulgation was an arbitrary exercise of power by the Governor. The
pleadings on the record referred to by us go to show beyond reasonable
doubt that the acquisition of the shares of the corporation was in public
interest. The Ordinace also provided for just compensation for the acquisi-
tion of shares. The owners of the property, who are affected by the E
Ordinance, were to be given the same price for the shares at which they
purchased them. The Ordinance was thus not only in public interest and
for public purpose but also just and fair.

27. The last argument advanced on behalf of the appellants, is that F
the impugned Ordinance is bad because it interfered with the exercise of
the power of judicial review by the High Court. It is also contended that
the Ordinance virtually effaced the orders of the Court passed from time
to time. We do not agree. It is clear from the bare reading of the orders
of the Court that they were interim in nature and passed during the
pendency of the writ petitions. None of the aforesaid orders finaJly deter- G
mined the rights of the parties before the Court. The orders were neither
-....(
final judgments nor preliminary judgments. They could not even be ca1led
as interlocutory judgments. Even otherwise, the Ordinance does not in any
manner go contrary to the various interim orders passed by the High Court.
In none of the orders there is a direction contrary to the purpose for which H
'
·814 SUPREME COURT REPORTS [1994] 1 S.C.R.

A the Ordinance wa.s promulgated. The acquisition of shares under the
Ordinance did not, in any manner, have the effect of nullif;ing any of the
orders of the Court. We are, therefore, of the view that, in the facts of the
present case, the ar,gument that the promulgation of the Ordinance had
encroached upon the power of the judicial review of the Court is wholly
misconceived.
B
28. We, therefore, see no force in any of the contentions raised by
the learned counsel for the appellants and, as such, dismiss the appeal. In
the facts and circumstances of this case, we leave the parties to bear their
own costs.

l.S.G. Appeal dismissed.