MISTRY FOXDAR AND CO Vs. OSMANSHAHI MILLS LTD

JUDGEMENT

(1.) This is an application by way of a judge's summons taken out by the Maharashtra State textile Corporation Ltd. under the Sick Textile Undertakings (Taking Over of Management) Act, 1972, for an order that the official liquidator who was appointed provisional liquidator of the respondent-company on the 28th of April, 1971, and was subsequently discharged by6 this court on the 21st of JUne, 1972, be directed to hand over all the properties and assets of the said company which are still in his possession, including a sum of Rs. 10 lakhs with the state Government and the interest accrued due thereon, to the applicants. The facts of the case are that the respondent-company was registered under the Companies Act, 1956 (1 of 1956). It has its registered office at Nanded and its m8ills are also at Nanded. The affair of the respondent-company and its financial position were in a very bad state and the petitioners filed and its financial position were in very bad state and the petitioner filed a winding-up petition against it in which the official liquidator was appointed provisional liquidator on the 28th of April, 1971, as already stated above. The result was that the Government of Maharashtra moved the Government of India, and by a notification issued under section 18A of the industries (Development and Regulation) Act, 1951, published on the 31st of August, 1971, the present allicants were appointed as Authories Controller to take over the management of the whole of the undertaking of the said company for a period of 5 years. The applicants there4after filed an application for vacating the order appointing the provisional liquidator and for the handing over of the possession of the properties and assets of the respondent-company to the applicants, but whilst the said application was pending, a writ petition was filed in the Delhi High Court challenging the said notification dated 31st August, 1971, and aw stay of the operation of the said notification was obtained form that high Court. Pursuant to an amendment of the Industries (Development and Regulation) Act, 1951, another application for vacating the order appointing provisional liquidator and for the handing over of opposition of the properties and assets of the respondent-company to the applicants was filed which application was granted by this court on the 21st of June, 1972, but in view of the said order passed by the Delhi High Court, this court directed that the official liquidator was not to hand over possession of the properties and assets of the respondent-company till the said order was vacated.

(2.) In the meantime, the State of Maharashtra submitted a scheme to this court to run the mills, and on a report submitted to him by the official liquidator, my brother, Nathwani, by his order dated 11th April, 1972, sectioned that scheme, and a leave and license agreement 3was entered into between the state of Maharashtra and the official liquidator, and the applicants were appointed as the chief executive authority under the said scheme. Possession of the mills was thereafter handed over to the Government of Maharashtra for running the same on leave and licence basis, commencing form 1st May, 1972. One of the provisions of the said scheme was that the Government of Maharashtra would pay to the official liquidator depreciation in respect of the buildings, machinery, plant furniture and fixtures on the market value thereof as ascertained by an independent value, proportionate to the period for which the licence subsisted. It was further provided by the said scheme that the State Bank of Hyderabad, who claimed to be secured creditors, were to be paid by the Government of Maharashtra 1/3rd of the depreciation amount payable for the first year. The Government of Maharashtra did not, however, accept the valuation of the vlauers, and it is not disputed that, under the circumstances, it agreed to pay a sum of Rds. 15 lakhs to the official liquidator towards depreciation for the first year, on an ad hoc basis, under the said scheme.

(3.) Whilst the undertaking of the respondent-company was being run under the said leave and licence agreement, the President of India promulgated an Ordinance, which was followed by an Act entitled "The Sick Textile Undertakings (Taking Over of Management) Act. 1972, which came into force on 31st October, 1972, under which the management of the whole of the undertaking of the respondent- company was vested in the Central Government. It is common ground that the writ petition filed in the Delhi High Court has been dismissed and the stay order granted by it is, therefore, no longer operative. The strand taken up by the applicants after the management was taken over under the said Ordinance and the said Act was that the original leave and licence agreement stood automatically terminated and that the applicants held possession of the undertaking of the respondent-company as from 31st October, 1972, not as the chide executive authority under the said leave and licence agreement, but as the custodian appointed under the said act which came into force on the 31st of October, 1972, as already stated above. As the official liquidator has continued in possession of the assets and properties of the respondent- company, the applicants have taken out the present judge's summons for the reliefs already set out above.