KEMTRODE PRIVATE LIMITED BANGALORE Vs. JOINT DIRECTOR SSI GOVERNMENT OF KARNATAKA DEPARTMENT OF INDUSTRIES AND

JUDGEMENT

(1.) VALIDITY of clarification and the show-cause notice issued by the Development Commissioner of Small Scale Industries, Ministry of Industry, Government of India have been assailed. It was observed in the clarification as under: "if the fixed investment on plant and machinery of one or more units (clubbed together) set up by common proprietor/part-ner (s)/director (s) within the country for the manufacture of similar/different product (s) exceeds the fixed investment ceiling prescribed in the definition of small scale/ancillary industrial undertaking, then all such units would be liable for de-registration". It is pointed out by the learned Counsel for the respondents that subsequently the Department of small Scale Industries, have issued a clarification on 17-5-1993 where it was observed thus: "it should be understood that industrial undertaking is different from its form of ownership. The forms of ownership as stated in the notification are of three types viz. , proprietary, partnership and company. As per clauses C (i), C (ii) and C (iii) of the notification the provisions of "controlled" and "clubbing" will apply only to similar forms of ownership of industrial undertakings, e. g. an industrial undertaking owned by a proprietary concern cannot be clubbed with one owned as a company or an industrial undertaking owned by a partnership firm cannot be clubbed with an industrial undertaking owned as a proprietary concern irrespective of the concerned persons (proprietor, partner or equity holder) being common. In other words, in the above examples the provisions of "controlled" and "clubbing" will not apply".

(2.) IT is pointed out that in the case of M/s. Konark Industries v The Joint Director (SSI), in view of the circular of the Government of India, show-cause notice issued were considered as otiose. Clarification dated 15-3-1989 refers to setting up of the unit by common proprietor, partner/director. A proprietor can be a common, if he is the same person. Similarly a partner can be common if two firms are constituted with similar number of partners. Same is the position of a company having common Director. If the number of partner/directors differs, then it cannot be said that the unit is set up with common partner or Director. The intention has been clarified by the subsequent clarification dated 17-5-1993 where the controlling power was considered as the criteria for clubbing of two units. In view of the clarification issued on 17-5-1993, the action of the respondents in issuing the order Annexurc-F in W. P. No. [25224] of 1992 and the show-cause notice in W. P. No. 38247 of 1992 for de-registration cannot be considered to be in accordance with law and therefore they are quashed. Writ petitions are allowed.