FINE KNITTING COMPANY LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) The Fine Knitting Mills owned by the Fine Knitting Company Limited was notified as a sick textile undertaking under the Sick Textile Undertakings (Taking Over of Management) Act, 1972 and included in the First Schedule to the Act as Item No. 13. The Company was incorporated in 1908 and its principal activity was then the manfacture of hosiery. In 1924, the company installed spinning machinery, with 9000 spindles with a view to ensure suitable and even supply of yarn for its hosiery manufacture. A question arose in 1961 whether for the purposes of S. 11 of the Bombay Industrial Relations Act, the hosiery and spinning sections of the Company's establishment were a single concern or two separate undertakings. It was the contention of the Company that the undertaking was one and not two. The Supreme Court accepted the finding of the Industrial Court that there were two distinct and independent undertakings. The judgment of the Supreme Court is reported in The Fine Knitting Co. Ltd. v. Industrial Court, Bombay, (1962) 3 Suppl. SCR 196. Subsequently, on August 1, 1970, the Spinning unit was closed down. Thereafter, the management of the undertaking was taken over first under the Sick Textile Undertakings (Take Over of Management) Ordinance and then under the Sick Textile Undertakings (Take Over of Management) Act. This was followed by its nationalisation under the Sick Textile Undertakings (Nationalisation) Act. The take over of management and the subsequent nationalisation are questioned in this writ petition which was originally filed in the High Court of Gujarat and which was later withdrawn to this Court for final disposal as it was thought to involve some important questions of Constitutional Law which, however, have not been pressed before us. Other questions have been raised which we shall presently consider.

(2.) The first submission of Shri Tarkunde was that the hosiery section of the undertaking had never ceased working and, therefore, it would not be considered that the undertaking had stopped working for more than three months so as to bring it within clause (ii) of S. 2(d) of the Sick Textile Undertakings (Taking Over of Management) Act. The second submission of Shri Tarkunde was that the spinning and hosiery sections of the undertaking were two separate and distinct undertakings and, therefore, the hosiery undertaking which would not fall within the definition of a textile undertaking could not be taken over and nationalised. Another submission of Shri Tarkunde was that by the date of the commencement of the Sick Textile Undertakings (Taking Over of Management) Ordinance, the spinning undertaking had become useless beyond redemption and as there was no chance of restarting the undertaking with reasonable inputs the undertaking could not be considered to be a sick textile undertaking within the meaning of the definition in S. 2(d)(ii) of the Sick Textile Undertakings (Taking Over of Management) Act.

(3.) In support of his last submission that the spinning section had been completely closed with no hope of being revived, Shri Tarkunde invited our attention to the agreement entered into by the management with the workmen in 1972, the affidavits of the representatives of the management and the workmen, the cancellation of the licence by the Assistant Controller, the deletion of the entry relating to 'Fine Knitting Company Limited (excluding hosiery section)' from the register maintained under the Gujarat Industrial Relations Act and the circumstances that a major portion of the machinery had been sold. All these circumstances are consistent with a permanent closure of the spinning section as well as with a closure in the hope of reviving the spinning section with perhaps some new machinery. In fact we find in one of the letters dated June 16, 1972 from the Fine Knitting Company Limited to the Additional Textile Commissioner, it is stated, "In connection with this letter, I now inform you that we have decided to run our spinning section after replacing the spinning machinery, by newer model." It cannot possibly be said that replacement of old machinery by new machinery results in the coming into existence of a new undertaking in the place of the old undertaking. The sale of some of the old machinery was perhaps with a view to replace it with new machinery. In fact we notice that what has been produced before us is an agreement of sale only. Whether the sale has in fact taken place pursuant to the agreement of sale is not clear as neither a receipt for the money received nor a receipt for the machinery delivered has been placed before us. We also notice that under Rules 12-B and 12-C of the Cotton Textile Control Order, neither a spinning frame nor a side frame can be disposed of except with the previous permission of the Textile Commissioner. No such permission was ever obtained. We are unable to accept the submission that the closure of the spinning section in August 1970 was intended to be a permanent closure.