WEST BENGAL CEMENT LTD Vs. STATE

JUDGEMENT

(1.) The West Bengal Cement Ltd. and Mr. B.K.Sahani, the Chairman of the West Bengal Cement Ltd. and also a share-holder for self and on behalf of the share-holders of the West Bengal Cement Ltd., have filed this writ petition for a writ of mandamus challenging the notices dated 9-10-1987 and 13-11-87 issued by the respondent No. 3 as ultra vires, bad in law and void and for a writ in the nature of mandamus directing the respondents to forbear from proceeding on the basis of or in pursuance of the said notice or any identical notice of such nature and to withdraw and/or to cancel them and also of a writ of mandamus commanding the respondents to forbear from giving any effect and/ or further effect and/ or proceeding on the basis or in pursuance of the said two notices and for consequential reliefs.

(2.) The facts which are material for the purpose of this writ petition may be briefly stated as follows:- The petitioner No. 1, West Bengal Cement Ltd. was under the management of the respondent No. 2, West Bengal Industrial Development Corporation Ltd. As the Cement Company virtually became a sick unit by reasons of mis-management, with a view to rehabilitate the otherwise unviable project, the financial partnership of private sector was found to be the only alternative by the then management of the Cement Company and as such, the respondent No. 2 sought the help of the private sector to rehabilitate the cement company and its Kalyani Unit. M/s. Byford Ltd. a company which was new to the nature of manufacturing activity of the Cement Company but having complete faith in respondent No. 2, the respondent No. 1, the State of West Bengal and fully relying upon and believing in various representations and the offers to render all possible help made by their representatives, the said M/s. Byford Ltd., volunteered to rehabilitate the Cement Company in complete good faith, not only with the hope of rehabilitation but also relying upon positive assurances for active all round assistance from respondents Nos. 2 and 3, namely, the West Bengal Financial Corporation. The respondent No. 2 made promise to the petitioner No. 2 to extend all assistance/ concessions which may be necessary for the rehabilitation and implementation of the project, by initial moratorium, rephasement of repayment schedule and various other concessions, benefits and relaxations under various laws to wipe off the debt burden and make necessary effort for making the unit a viable and profitable one in the industrial interest of the State of West Bengal. The then Chairman of the respondent No. 2, late T.Ghosh, had assured the petitioner No. 2 of all help from respondent No. 2 in the revival of two sick units, namely, the cement company and the West Bengal Scooters Ltd. the petitioner No. 2 took the assurance and promises at the face value in the positive belief that they would be honoured and took the task of making the said two sick units viable in the light of the understanding arrived at by and between the petitioner No. 2 and the respondent No. 2 and after many deliberations, a Memorandum of Understanding was drawn in the meetings held on March 23, 1984, a copy of which is annexed as Annexure `A-4. It was agreed that the Cement Company should amalgamate/merge in M/s. By ford Ltd. It was noted in the said Memorandum that the net worth of the Cement Company was minus Rs.10 lakhs; and that M/s. Byford Ltd. should pay 20% of the total paid up value i.e. Rs. 10.20 lakhs for the entire equity of Rs. 51 lakhs held by respondent No. 2 at the time of transfer of shares in the Cement Company to the petitioner No 2 or his nominees. The respondent No. 2 agreed to rephase certain loans. The various promises -made by the respondent No. 2 acting through its representatives were not specifically mentioned in the said Memorandum of Understanding, at the instance of the representatives of respondent No. 2 with a view to avoid embarassment to the respondent No. 2 and public criticism; but informally many assurances were made to petitioner No. 2 for rendering all necessary financial assistance and other statutory concesions. Relying upon the aforesaid assurance and aforesaid memorandum of Understanding and at the instance of respondent No. 2 M/s. Byford Ltd. merged with the cement company under S.395 of Companies Act 1956 with effect from 21st June 1984. The said agreement was approved by the Board, of Directors of the respondent No. 2.

(3.) After the merger, various steps were made for rehabilitation of the company and: its unit at Kalyani. In anticipation of the reliefs promised by the respondent No. 2, the new management spent over 1.2 crores between July 1984 and. August 1985 in order to revive the unit. But in order to make the unit a viable one the petitioner found certain defects in the machinery which have been specified in paragraph 6 of the writ petition. Pointing out these difficulties the petitioners requested vide their letter dated August 26, 1985 to the respondent No. 2 that it would be more appropriate and pertinent that the petitioner No. 1 be declared a Relief Undertaking under the West Bengal Relief Undertaking (Special Provisions) Act, 1972 at least for one year for the time being, to save the company from the harassment and in order to implement the revival programme but there was no response to the said requests made by the petitioners.