ELIZABETH SAMUEL AARON Vs. STATE OF KERALA

JUDGEMENT

(1.) This Original Petition is filed by the first petitioner Mrs. Elizabeth Samuel Aaron, who is alleged to be one of the major shareholders of the Super Clays and Minerals Mining Company Private Ltd (hereinafter referred to as the Company), which is a company registered under the Indian Companies Act. She challenges Exts. P8 to P11, orders passed by the Government of Kerala under the Kerala Relief Undertakings (Special Provisions) Act, 1961 (Act 6 of 1962) (hereinafter referred to as the Relief Undertakings Act). She also challenges the constitutional validity of S.3(1) of the Kerala Relief Undertakings Act. She has also sought to represent the Company which is mentioned as the second petitioner; but this claim seems hardly sustainable in view of the averments contained in the counter affidavit of the second respondent that the Board of Directors of the Company does not support this move.

(2.) The facts relating to the controversy are the following : The Super Clays and Minerals Mining Company (P.) Ltd., was registered with a share capital of Rupees 5,00,000/- divided into 5000 equity shares of Rs. 100/- each, the main object of the company is 10 mine crude china clay, purity and supply the same to various industries for manufacture of lire bricks, refractors, furnace lining bricks, chinaware, pottery etc. Sri Samuel Aaron, who was the husband of the first petitioner, was the first Managing Director of the. Company. Sri Samuel Aaron was the sole proprietor of M/s. Hindustan China Clay Works; and the Company purchased from Sri Samuel Aaron the Hindustan China Clay Works on 2-1-1973-Sri Samuel Aaron died on 25-9-1975. At the time of his death, the first petitioner had 285 shares and Sri Samuel Aaron had 180 shares. Sri Samuel Aaron in his Will bequeathed all his assets and liabilities in the Company to the first petitioner and appointed her as the executrix. The first petitioner had to her credit 565 shares worth Rupees 56,500/- out of the paid-up share capital of Rs. 90,200/-. She is said to be the major shareholder in the Company.

(3.) The Company commenced business in 1973 and could make a profit of Rs. 27,208/-in the first year of operation. During the two succeeding years, the Company lost Rs. 3,20,167/- and Rs. 5,49,934/- respectively, and could not conduct its operations a ay longer. The employees, over 600 in number, had to be laid off; and their compensation also could not be paid. At the time of lay off, the Company was indebted to the State Bank of India, Cannanore, to the tune of Rs. 6,00,000/- with interest and also to the Kerala Financial Corporation to the extent of Rs. 2,87,484.52. In addition to these, there was another amount of Rs. 5,58,157/-as contingent liability, including salary, wages, compensation etc. due to the staff. The Company had excess liability over its assets amounting to over Rs. 14 lakhs as on 31-12-1975. It was at that time, at the third Annual General Meeting of the Company held on 22-11-1975, that it was resolved to request the Kerala State Government to take over the Company and restart production. The request was made only to prevent the continued unemployment and to avoid complete deterioration of the assets. A copy of the resolution is produced as Ext. R1 along with the counter affidavit filed by the second respondent, the Kerala State Industrial Enterprises Ltd. It is alleged by the petitioners, that on a consideration of Ext. R1 resolution, the Government issued a notification Ext. P1 under S.3(1) of the Kerala Relief Undertaking Act, for the purpose of preventing unemployment and as unemployment relief. It is further alleged that this notification was followed by Ext. P2 notification issued in exercise of the powers under R.3 and 6 of the Relief Undertakings Rules to the effect that the second respondent shall be the agency to manage the Company as a relief undertaking. Similar orders for subsequent periods were issued by the Government: and the latest of these notifications are Exts. P8 to P11. At the meeting of the Board of Directors held on 3-4-1976 more than a month after the issue of Ext. P1 notification. Ext. R2 resolution was passed, handing over the Company to the Government, and the Government was requested to resume work early. The three Directors of the Board of Directors of the Company submitted their resignations so as to enable the second respondent to reconstitute the Board of Directors of the Company. Exhibits P3 and P4 (same as Exts. R3 and R4) are the letters sent by two of the Directors of the Company, M/s. K. W. Arangaden and K.M. Soman. The letter sent by the first petitioner Mrs. Samuel Aaron resigning from the office of the Managing Director for the same purpose has been produced by the second respondent as Ext. R-5. It was expressly mentioned that the resignation was being made With a view to assist the second respondent, to give financial assistance, to re-constitute the Board and nominate a Managing Director. In the meeting of the Board held three months after Ext. P-1. Ext. R-6 resolution was passed, deciding to accept the resignations of the Directors Sri Soman and Sri Arangadan. A new Board including Mrs. Aaron was nominated and the Chairman and Managing Director of the second respondent Company Sri S. Peer Mohammed was elected and appointed as the Managing Director of the Company. Various arrangements were made in relation to the management of the Company by resolutions, and to all these resolutions, the first petitioner was a signatory. The petitioner was also actively associating herself with the affairs of the Company, which was taken over on request and was being administered on the basis of Exhibit R-6 resolution, to which also she was a willing party. Exts. R 7, R-8, R-9 and R-10 are copies of the resolutions of the Board of Directors of the Company in its meetings held on 21st September, 1976. (Ext. R-7), 26-10-1977 (Ext. R-8). 20th July, 1979. (Ext R-9) and 29th Feb. 1980. Some of these resolutions relate to the terms of the take over of the Company by the Government and the petitioner's request to release her personal properties from obligations. It appears from them that action in this regard is in progress. If seems that the Government is dragging its feet in finalising the take over in view of the extension of the aggregate period of the declaration under S.3 of the Relief Undertakings Act from 5 years to 10 years. The term of the declaration was being periodically extended. Ext. P-8 extended it for one year from 2-3-1981 and Ext. P-11 for one more year from 2-3-1982.