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					                             UNIT-II

   SICK INDUSTRIAL COMPANY
   INQUIRY     INTO    WORKING   OF   SICK   INDUSTRIAL   COMPANIES,
    POWERS OF BOARD TO MAKE SUITABLE ORDER
   REHABILITATION BY GIVING FINANCIAL ASSISTANCE
   WINDING-UP OF SICK INDUSTRIAL COMPANY.
   DE REGULATION OF ESSENTITAL COMMODITIES
   INDUSTRIAL POLICY
   LIBERALISATION OF THE LOCATIONAL POLICY
   LICENSING          OF   NEW        INDUSTRIAL     UNDERTAKINGS.




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                                            UNIT-TWO


REGULATION OF SICK UNDERTAKINGS

DEREGULATION OF ESSENTIAL COMMODITIES

LICENSING POLICY AND LEGAL PROCESS-GROWING TRENDS OF
LIBERALIZATION


The regulation of Sick Undertakings has been dealt under the Sick Industrial Companies (Special
Provisions) Act,1985. Some of the prominent provisions of the Act are as follows:

PREAMBLE of the Act:
An Act to make in public interest, special provisions with a view to securing the timely detection
of sick and potentially sick companies owning industrial undertakings, the speedy determination
by a Board of experts of the preventive, ameliorative, remedial and other measures which need to
be taken with respect to such companies and the expeditious enforcement of the measures so
determined      and     for    matters      connected      therewith     or     incidental     thereto.
Be it enacted by Parliament in the thirty-sixth year of the Republic of India as follows :-
1. SHORT TITLE, EXTENT, COMMENCEMENT AND APPLICATION.
(1) This Act may be called the Sick Industrial Companies (Special Provisions) Act, 1985.
(2) It extends to the whole of India.
(3) It shall come into force on such date 2 as the Central Government may, by notification in the
Official Gazette, appoint and different dates may be appointed for different provisions of this Act
and any reference in any provision of this Act to the commencement of this Act shall be
construed as a reference to the commencement of that provision.
(4) It shall apply, in the first instance, to all the scheduled industries other than the scheduled
industry relating to ships and other vessels drawn by power.
(5) The Central Government may, in consultation with the Reserve Bank of India, by
notification, apply the provisions of this Act, on and from such date as may be specified in the
notification, to the scheduled industry relating to ships and other vessels drawn by power.
2. DECLARATION.
It is hereby declared that this Act is for giving effect to the policy of the State towards securing
the principles specified in clauses (b) and (c) of Article 39 of the Constitution.


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3. DEFINITIONS.
(1) In this Act, unless the context. otherwise requires, -
(a) "Appellate Authority" means the Appellate Authority for Industrial and Financial
Reconstruction constituted under section 5;
(b) "Board" means the Board for Industrial and Financial Reconstruction established under
section, 4;
(c) "Chairman" means the Chairman of the Board or, as the case may be, the Appellate
Authority;
(d) "company" means a company as defined in section 3 of the Companies Act, 1956 (1 of 956);
(da) "date of finalisation of the duly audited accounts" means the date on which the audited
accounts of the company are adopted at the annual general meeting of the company;
(e) "industrial company" means a company which owns one or more industrial undertakings;
(f) "Industrial undertakings" means any undertaking pertaining to a scheduled industry carried on
in one or more factories by any company but does not include -
(i) an ancillary industrial undertaking as defined in clause (aa) of section 3 of the Industries
Development and Regulation) Act, 1951 (65 of 1951); and
(ii) a small scale industrial undertaking as defined in clause (j) of the aforesaid section 3;
(g) "Member" means a member of the Board or, as the case may be, the Appellate Authority and
includes the Chairman thereof;
(ga) "net worth" means the sum total of the paid-up capital and free reserves.
Explanation : For the purposes of this clause, "free reserves" means all reserves credited out of
the profits and share premium account but does not include reserves credited out of re-evaluation
of assets, write back of depreciation provisions, and amalgamation;
(h) "notification" means a notification published in the Official Gazette;
(i) "operating agency" means any public financial institution, State level institution, scheduled
bank or any other person as may be specified by general or special order as its agency by the
Board;
(j) "prescribed" means prescribed by rules made under this Act;
(l) "Reserve Bank" means the Reserve Bank of India constituted under section 3 of the Reserve
Bank of India Act, 1934 (2 of 1934);




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(m) "Scheduled bank" means a bank for the time being included in the Second Schedule to the
Reserve Bank of India Act, 1934 (2 of 1934);

(n) "Scheduled industry" means any of the industries specified for the time being in the First
Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951);
(o) "sick industrial company" means an industrial company (being a company registered for not
less than five years) which has at the end of any financial year accumulated losses equal to or
exceeding its entire net worth.

Explanation : For the removal of doubts, it is hereby declared that an industrial company existing
immediately before the commencement of the Sick Industrial Companies (Special Provisions)
Amendment Act, 1993, registered for not less than five years and having at the end of any
financial year accumulated losses equal to or exceeding its entire net worth, shall be deemed to
be a sick industrial company;

(p) "State level institution" means any of the following institutions, namely :-
(i) State Financial Corporations established under section 3 or section 3A and institutions
notified under section 46 of the State Financial Corporations Act 1951 (63 of 1951);
(ii) State Industrial Development Corporations registered under the Companies Act, 1956 (1 of
1956);
(iii) such other institutions, being companies and not being public financial institutions, engaged
in the development or financing of industrial undertakings, as the Central Government may, by
notification, specify

Provided that no institution shall be so specified unless not less than fifty-one per cent of the
paid-up share capital thereof is held by any State Government or Governments or by any
institution or institutions mentioned in sub-clauses (i) and (ii) or partly by one or more public
financial institutions or institutions mentioned in sub-clauses (i) and (ii) and partly by one or
more State Governments.

(2)(a) Words and expressions used and not defined in this Act shall have the meanings, if any,
respectively assigned to them in the Companies Act, 1956 (1 of 1956);




                                                                                                    4
(b) Words and expressions used but not defined either in this Act or in the Companies Act, 1956
(1 of 1956), shall have the meanings, if any, respectively assigned to them in the Industries
(Development and Regulation) Act, 1951 (65 of 1951).
(3) Any reference in this Act to any other enactment or any provision thereof, shall, in relation to
an area in which such enactment or such provision is not in force, be construed as a reference to
the corresponding law or the relevant provision of the corresponding law, if any, in force in that
area.

Sec.4. ESTABLISHMENT OF BOARD.
(1) With effect from such date as the Central Government may, by notification, appoint, there
shall be established a Board to be known as the "Board for Industrial and Financial
Reconstruction" to exercise the jurisdiction and powers and discharge the functions and duties
conferred or imposed on the Board by or under this Act.
(2) The Board shall consist of a Chairman and not less than two and not more than fourteen other
Members, to be appointed by the Central Government.
(3) The Chairman and other Members of the Board shall be persons who are or have been or are
qualified to be High Court Judges, or persons of ability, integrity and standing who have special
knowledge of, and professional experience of not less than fifteen years in science, technology,
economics, banking industry, law, labour matters, industrial finance, industrial management,
industrial reconstruction, administration, investment, accountancy, marketing or any other
matter, the special knowledge of, or professional experience in which, would in the opinion of
the Central Government be useful to the Board.

Sec.6. TERM OF OFFICE, CONDITIONS OF SERVICE, ETC., OF CHAIRMAN AND
OTHER MEMBERS.

(1) Before appointing any person as the Chairman or other member, the Central Government
shall satisfy itself that the person does not and will not, have any such financial or other interest
as is likely to affect prejudicially his functions as such Member.
(2) The chairman and every other member shall hold office for such period, not exceeding five
years, as may be specified by the Central Government in the order of his appointment, but shall
be eligible for reappointment :



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Provided that no person shall hold office as the chairman or other member after he has attained
the age of sixty-five years.

(3) Notwithstanding anything contained in sub-section (1) a Member may -
(a) by writing under his hand and addressed to the Central Government resign his office at any
time;
(b) be removed from his office in accordance with the provisions of section 7.
(4) A vacancy caused by the resignation or removal of the Chairman or any other member under
sub-section (3) or otherwise shall be filled by fresh appointment.
(5) In the event of the occurrence of a vacancy in the office of the chairman by reason of his
death, resignation or otherwise, such one of the Members, as the Central Government may, by
notification, authorise in this behalf shall act as the chairman till the date on which a new
Chairman, appointed in accordance with the provisions of this Act to fill such vacancy, enters
upon his office.

(6) When the chairman is unable to discharge his functions owing to absence, illness or any other
cause, such one of the Members as the chairman may authorise in writing in this behalf shall
discharge the functions of chairman, till the date on which the chairman resumes his duties.


(7) The salaries and allowances payable to and the other terms and conditions of service of the
chairman and other members shall be such as may be prescribed :


Provided that neither the salary and allowances nor the other terms and conditions of service of
the Chairman or any other Member shall be varied to his disadvantage after his appointment.
(8) The Chairman and every other Member shall before entering upon his office, make a
declaration of fidelity and secrecy in the form set out in the Schedule.
(9) The Chairman or any other Member ceasing to hold office as such shall not hold any
appointment or be connected with the management or administration in any company in relation
to which any matter has been the subject-matter of consideration before the Board, or as the case
may be, the Appellate Authority, for a period of five years from the date on which he ceased to
hold such office.




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S.16. INQUIRY INTO WORKING OF SICK INDUSTRIAL COMPANIES.


(1) The Board may make such inquiry as it may deem fit for determining whether any industrial
company has become a sick industrial company –

(a) upon receipt of a reference with respect to such company under section 15; or
(b) upon information received with respect to such company or upon its own knowledge as to the
financial condition of the company.
(2) The Board may, If it deems necessary or expedient so to do for the expeditious disposal of an
inquiry under sub-section (1), require by order any operating agency to enquire into and make a
report with respect to such matter as may be specified in the order.
(3) The Board or, as the case may be the operating agency shall complete its inquiry as
expeditiously as possible and endeavour shall be made to complete the inquiry within sixty days
from the commencement of the inquiry.
Explanation : For the purposes of this sub section, an inquiry shall be deemed to have
commenced upon the receipt by the Board of any reference or information or upon its own
knowledge reduced to writing by the Board.
(4) Where the Board deems it fit to make an inquiry or to cause an inquiry to be made into any
industrial company under sub-section (1) or, as the case may be, under sub-section (2), it may
appoint one or more persons to be a special director or special directors of the company for
safeguarding the financial and other interests of the company or in the public interest.
(4A) The Board may issue such directions to a special director appointed under sub-section (4)
as it may deem necessary or expedient for proper discharge of his duties.
(5) The appointment of a special director referred to in sub-section (4) shall be valid and
effective notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of
1956) or in any other law for the time being in force or in the memorandum and articles of
association or any other instrument relating to the industrial company, and any provision
regarding share qualification, age limit, number of directorships, removal from office of directors
and such like conditions contained in any such law or instrument aforesaid, shall not apply to any
director appointed by the Board.
(6) Any special director appointed under sub-section (4) shall -



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(a) hold office during, the pleasure of the Board and may be removed or substituted by any
person by order in writing by the Board;
(b) not incur any obligation or liability by reason only of his being a director or for anything
done or omitted to be done in good faith in the discharge of his duties as a director or anything in
relation thereto;
(c) not be liable to retirement by rotation and shall not be taken into account for computing, the
number of directors liable to such retirement;
(d) not be liable to be prosecuted under any law for anything, done or omitted to be done in good
faith in the discharge of his duties in relation to the sick industrial company.

S.17. POWERS OF BOARD TO MAKE SUITABLE ORDER ON THE COMPLETION
OF INQUIRY.
(1) If after making an inquiry under section 16, the Board is satisfied that a company has become
a sick industrial company, the Board shall, after considering all the relevant facts and
circumstances of the case, decide, as soon as may be by order in writing, whether it is practicable
for the company to make its networth exceed the accumulated losses within a reasonable time.
(2) If the Board decides under sub-section (1) that it is practicable for a sick industrial company
to make its networth exceed the accumulated losses within a reasonable time, the Board shall, by
order in writing and subject to such restrictions or conditions as may be specified in the order,
give such time to the company as it may deem fit to make its networth exceed the accumulated
losses.
(3) If the Board decides under sub-section (1) that it is not practicable for a sick industrial
company to make its networth exceed the accumulated losses within a reasonable time and that it
is necessary or expedient in the public interest to adopt all or any of the measures specified in
section 18 in relation to the said company it may, as soon as may be, by order in writing, direct
any operating agency specified in the order to prepare, having regard to such guidelines as may
be specified in the order, a scheme providing for such measures in relation to such company.


(4) The Board may –
(a) if any of the restrictions or conditions specified in an order made under sub-section (2) are
not complied with by the company concerned or if the company fails to revive in pursuance of



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the said order, review such order on a reference in that behalf from any agency referred to in sub-
section (2) of section 15 or on its own motion and pass a fresh order in respect of such company
under sub-section (3);


(b) if the operating agency specified in an order made under sub-section (3) makes a submission
in that behalf, review such order and modify the order in such manner as it may deem
appropriate.

Sec.18. PREPARATION AND SANCTION OF SCHEMES.

(1) Where an order is made under sub-section (3) of section 17 in relation to any sick industrial
company, the operating agency specified in the order shall prepare, as expeditiously as possible
and ordinarily within a period of ninety days from the date of such order, a scheme with respect
to such company providing for any one or more of the following measures, namely :-
(a) the financial reconstruction of the sick industrial company;
(b) the proper management of the sick industrial company by change in or take over of,
management of the sick industrial company;
(c) the amalgamation of -
(i) the sick industrial company with any other company, or
(ii) any other company with the sick industrial company (hereafter in this section, in the case of
sub-clause (i), the other company, and in the case of sub-clause (ii), the sick industrial company,
referred to as 'transferee company');
(d) the sale or lease of a part or whole of any industrial undertaking of the sick industrial
company;
(da) the rationalisation of managerial personnel, supervisory staff and workmen in accordance
with law;

(e) such other preventive, ameliorative and remedial measures as may be appropriate;
(f) such incidental, consequential or supplemental measures as may be necessary or expedient in
connection with or for the purposes of the measures specified in clauses (a) to (e).
(2) The scheme referred to in sub-section (1) may provide for any one or more of the following,
namely -



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(a) the constitution, name and registered office, the capital, assets, powers, rights, interests,
authorities and privileges, duties and obligations of the sick industrial company or, as the case
may be, of the transferee company;
(b) the transfer to the transferee company of the business, properties, assets and liabilities of the
sick industrial company on such terms and conditions as may be specified in the scheme;
(c) any change in the Board of Directors, or the appointment of new Board of Directors, of the
sick industrial company and the authority by whom, the manner in which and the other terms and
conditions on which, such change or appointment shall be made and in the case of appointment
of a new Board of Directors or of any director, the period for which such appointment shall be
made;
(d) the alteration of the memorandum or articles of association of the sick industrial company or,
as the case may be, of the transferee company for the purpose of altering the capital structure
thereof, or for such other purposes as may be necessary to give effect to the reconstruction or
amalgamation;
(e) the continuation by, or against, the sick industrial company or, as the case may be, the
transferee company of any action or other legal proceeding, pending against the sick industrial
company immediately before the date of the order made under sub-section (3) of section 17;
(f) the reduction of the interest or rights which the shareholders have in the sick industrial
company to such extent as the Board considers necessary in the interests of the reconstruction,
revival or rehabilitation of the sick industrial company or for the maintenance of the business of
the sick industrial company;

(g) the allotment to the shareholders of the sick industrial company, of shares in the sick
industrial company or, as the case may be, in the transferee company and where any shareholder
claims payment in cash and not allotment of shares, or where it is not possible to allot shares to
any shareholder the payment of cash to those shareholders in full satisfaction of their claims -
(i) in respect of their interest in shares in the sick industrial company before its reconstruction or
amalgamation; or
(ii) where such interest has been reduced under clause (f) in respect of their interest in shares as
so reduced;




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(h) any other terms and conditions for the reconstruction or amalgamation of the sick industrial
company;
(i) sale of the industrial undertaking of the sick industrial company free from all encumbrances
and all liabilities of the company or other such encumbrances and liabilities as may be specified
to any person, including a co-operative society formed by the employees of such undertaking
and fixing of reserve price for such sale;
(j) lease of the industrial undertaking of the sick industrial company to any person including a
co-operative society formed by the employees of such undertaking;
(k) method of sale of the assets of the industrial undertaking of the sick industrial company such
as by public auction or by inviting tenders or in any other manner as may be specified and for the
manner of publicity therefore;
(l) transfer or issue of the shares in the sick industrial company at the face value or at the
intrinsic value which may be at discount value or such other value as may be specified to any
industrial company or any person including the executives and employees of the sick industrial
company;
(m) such incidental, consequential and supplemental matters as may be necessary to secure that
the reconstruction or amalgamation or other measures mentioned in the scheme are fully and
effectively carried out.
(3)(a) The scheme prepared by the operating agency shall be examined by the Board and a copy
of the scheme with modification, if any, made by the Board shall be sent, in draft to the sick
industrial company and the operating agency and in the case of amalgamation, also to any other
company concerned, and the Board shall publish or cause to be published the draft scheme in
brief in such daily newspapers as the Board may consider necessary, for suggestions and
objections, if any, within such period as the Board may specify;
(b) The Board may make such modifications, if any, in the draft scheme as it may consider
necessary in the light of the suggestions and objections received from the sick industrial
company and the operating agency and also from the transferee company and any other company
concerned in the amalgamation and from any shareholder or any creditors or employees of such
companies:
Provided that where the scheme relates to amalgamation the said scheme shall be laid before the
company other than the sick industrial company in the general meeting for the approval of the



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scheme by its shareholders and no such scheme shall be proceeded with unless it has been
approved, with or without modification, by a special resolution passed by the shareholders of the
company other than the sick industrial company.
(4) The scheme shall thereafter be sanctioned, as soon as may be, by the Board (hereinafter
referred to as the 'sanctioned scheme') and shall come into force on such date as the Board may
specify in this behalf :
Provided that different dates may be specified for different provisions of the scheme.
(5) The Board may on the recommendations of the operating agency or otherwise, review any
sanctioned scheme and make such modifications as it may deem fit or may by order in writing
direct any operating agency specified in the order, having regard to such guidelines as may be
specified in the order, to prepare a fresh scheme providing for such measures as the operating
agency may consider necessary.

(6) When a fresh scheme is prepared under sub-section (5) the provisions of sub-sections (3) and
(4) shall apply in relation thereto as they apply to in relation to a scheme prepared under sub-
section (1).
(6A) Where a sanctioned scheme provides for the transfer of any property or liability of the sick
industrial company in favour of any other company or person or where such scheme provides for
the transfer of any property or liability of any other company or person in favour of the sick
industrial company, then, by virtue of, and to the extent provided in, the scheme, on and from the
date of coming into operation of the sanctioned scheme or any provision thereof, the property
shall be transferred to, and vest in, and the liability shall become the liability of, such other
company or person or, as the case may be, the sick industrial company;


(7) The sanction accorded by the Board under sub-section (4) shall be conclusive evidence that
all the requirements of this scheme relating to the reconstruction or amalgamation, or any other
measure specified therein have been complied with and a copy of the sanctioned scheme certified
in writing by an officer of the Board to be a true copy thereof, shall, in all legal proceedings
(whether in appeal or otherwise) be admitted as evidence.


(8) On and from the date of the coming into operation of the sanctioned scheme or any provision



                                                                                                    12
thereof, the scheme or such provision shall be binding on the sick industrial company and the
transferee company, or as the case may be, the other company and also on the shareholders,
creditors and guarantors and employees of the said companies.
(9) If any difficulty arises in giving effect to the provisions of the sanctioned scheme, the Board
may, on the recommendation of the operating agency or otherwise, by order do anything, not
inconsistent with such provisions, which appears to it to be necessary or expedient for the
purpose of removing the difficulty.
(10) The Board may, if it deems necessary or expedient so to do, by order in writing, direct any
operating agency specified in the order to implement a sanctioned scheme with such terms and
conditions and in relation to such sick industrial company as may be specified in the order.
(11) Where the whole of the undertaking of the sick industrial company is sold under a
sanctioned scheme, the Board may distribute the sale proceeds to the parties entitled thereto in
accordance with the provisions of section 529A and other provisions of the Companies Act, 1956
(1 of 1956).
(12) The Board may monitor periodically the implementation of the sanctioned scheme.

Sec.19. REHABILITATION BY GIVING FINANCIAL ASSISTANCE.

(1) Where the scheme relates to preventive, ameliorative, remedial and other measures with
respect to any sick industrial company, the scheme may provide for financial assistance by way
of loans, advances or guarantees or relief's or concessions or sacrifices from the Central
Government, a State Government, any scheduled bank or other bank, a public financial
institution or State level institution or any institution or other authority (any Government bank,
institution or other authority required by a scheme to provide for such financial assistance being
hereafter in this section referred to as the person required by the scheme to provide financial
assistance) to the sick industrial company.

(2) Every scheme referred to in sub-section (1) shall be circulated to every person required by the
scheme to provide financial assistance for his consent within a period of sixty days from the date
of such circulation or within such further period, not exceeding sixty days, as may be allowed by
the Board, and if no consent is received within such period or further period, it shall be deemed
that consent has been given.



                                                                                                     13
(3) Where in respect of any scheme the consent referred to in sub-section (2) is given by every
person required by the scheme to provide financial assistance, the Board may, as soon as may be,
sanction the scheme and from the date of such sanction the scheme shall be binding on all
concerned.
(3A) On the sanction of the scheme under sub-section (3), the financial institutions and the banks
required to provide financial assistance shall designate by mutual agreement a financial
institution and a bank from amongst themselves which shall be responsible to disburse financial
assistance by way of loans or advances or guarantees or relief's or concessions or sacrifices
agreed to be provided or granted under the scheme on behalf of all financial institutions and
banks concerned.
(3B) The financial institution and the bank designated under sub-section (3A) shall forthwith
proceed to release the financial assistance to the sick industrial company in fulfillment of the
requirement in this regard.


(4) Where in respect of any scheme consent under sub-section (2) is not given by any person
required by the scheme to provide financial assistance, the Board may adopt such other
measures, including the winding-up of the sick industrial company, as it may deem fit.

Section 20

WINDING-UP OF SICK INDUSTRIAL COMPANY.

   (1) Where the Board, after making inquiry under section 16 and after consideration of all the
       relevant facts and circumstances and after giving an opportunity of being heard to all
       concerned parties, is of opinion that the sick industrial company is not likely to make its
       net worth exceed the accumulated losses within a reasonable time while meeting all its
       financial obligations and that the company as a result thereof is not likely to become
       viable in future and that it is just and equitable that the company should be wound up, it
       may record and forward its opinion to the concerned High Court.


       (2) The High Court shall, on the basis of the opinion of the Board, order winding-up of
       the sick industrial company and may proceed and cause to proceed with the winding-up



                                                                                                   14
       of the sick industrial company in accordance with the provisions of the Companies Act,
       1956 (1 of 1956).


       (3) For the purpose of winding-up of the sick industrial company, the High Court may
       appoint any officer of the operating agency, if the operating agency gives its
       consent, as the liquidator of the sick industrial company and the officer so appointed shall
       for the purpose of the winding-up of the sick industrial company be deemed to be, and
       have all the powers of, the official liquidator under the Companies Act, 1956 (1 of
       1956).


       (4) Notwithstanding anything contained in sub-section (2) or sub-section (3), the Board
       may cause to be sold the assets of the sick industrial company in such manner as it may
       deem fit and forward the sale proceeds to the High Court for orders for distribution in
       accordance with the provisions of section 529A, and other provisions of the Companies
       Act, 1956 (1 of 1956).

                                          Related Judgements

GUJARAT TRADE UNION MANCH v. GUJARAT STATE TEXTILE CORPORATION.
FERRO ALLOYS CORPORATION LTD. v. RAJHANS STEEL LTD.

2000-(099)-COMPCAS -0461 -GUJ

GUJARAT TRADE UNION MANCH v. GUJARAT STATE TEXTILE CORPORATION

Special Civil Application No. 6912 of 1996, decided on November 8, 1996

IN THE GUJARAT HIGH COURT Mukul Sinha for the petitioner.

Kirit N. Raval with Mrs. P. J. Davawala for respondent No. 1.

S. N. Shelat with Dhaval C. Dave for respondent No. 2.

B. R. Shah with D. S. Vasavada for respondent No. 3.




                                                                                                 15
JUDGMENT
The judgment of the court was delivered by

G. D. KAMAT C.J. - Rule. By consent of the advocates appearing for the parties, who waive
service of rule on behalf of the respective respondents, taken up for final hearing.
This petition is instituted by the Gujarat Trade Union Manch and by the Gujarat Mazdoor Sabha
against the Gujarat State Textile Corporation, State of Gujarat and Textile Labour Association,
claiming public interest and praying therein for an appropriate writ, direction and/or order for
quashing and setting aside a settlement-cum-award dated September 3, 1996, and all other
similar awards and consequential actions, being contrary to law, null and void. A prayer is also
made to declare that the State Government and/or the Textile Corporation has no power,
authority or jurisdiction to impose conditions in the impugned agreement dated August 31, 1996,
and the Industrial Court has had no jurisdiction to pass the award on the basis of such an
agreement. The thrust of the petition, therefore, is that the agreement as well as the award are
illegal,     unconstitutional       and       without       any      legal      effect       whatsoever.
By     a   draft   amendment       moved,    the    constitutional   validity   of Section    66, Section
78 (1)(A)(C), Section 95, Section 113, Section 115A read with item No. (7)(i) of Schedule III to
the Bombay Industrial Relations Act, 1946, is also challenged on the grounds that those
provisions are inconsistent with and repugnant to the provisions of section 25-0 of the Industrial
Disputes Act, 1947, and further being violative of articles 14, 21 and 254 of the Constitution of
India. The further prayer, therefore, is to restrain the respondents from enforcing and
implementing the agreement dated August 31, 1996, and the award dated September 3, 1996, and
from                    taking                 any                   action                  thereunder.
Tersely put, the case of the petitioners is that the first petitioner is a Manch, formed by several
Central trade unions, like, INTUC, AITUC, GITU, GSTC Officers' and Technicians' Union,
NTC Officers' and Technicians' Union, etc. It is averred that the object of the Manch is to
campaign against closing down of textile mills owned, managed and run by the Gujarat State
Textile Corporation (for short "GSTC"). It is claimed that petitioner No. 2 is a registered trade
union, having members both in the engineering as well as textile industries and is directly
interested         in        the          outcome         of         the        present         petition.
Gujarat State Textile Corporation is an "authority" under article 12 of the Constitution of India



                                                                                                       16
and, therefore, partakes of the character of Government, which, at present, runs several textile
mills taken over by the Government of Gujarat under the Textile Mills (Special Provisions) Act,
1985. It is the case of the petitioners that respondent No. 3 - Textile Labour Association is a
party to the agreement, entered into between GSTC and Textile Labour Association, which has
finally culminated in an award made by the Industrial Tribunal, Gujarat State at Ahmedabad, in
Submission Application (IC) 1 of 1996, dated September 3, 1996. A so-called voluntary
retirement scheme was notified by the first respondent-Corporation for the workers of the mills
owned, managed and controlled by it. This scheme is held out to be contrary to law and against
the provisions of the Industrial Disputes Act by the petitioners as being arbitrary, and what is
more, unreasonable. According to the petitioners, it adversely and pre-judicially affects
innumerable workmen, who are not in a position to protect their rights and that the respondent-
Corporation clearly intends to close down textile mills under the so-called voluntary retirement
scheme, which, in substance and reality, is nothing but compulsory termination of services of the
workmen by bypassing and not following the provisions of section 25-0 of the Industrial
Disputes Act and, hence, the same is illegal and unlawful. It is asserted that the petitioners, with
a view to protect and safeguard the rights of workmen, are, therefore, constrained to file the
present petition pro bono publico. It is otherwise set out that prior to 1985, several mills became
sick and they were thus closed down rendering thousands of workmen unemployed. With a view
to rehabilitate the textile units, the Government of Gujarat promulgated an Ordinance in the year
1985, to acquire all textile mills, which were lying closed. The Ordinance was subsequently
enacted as an Act, known as the Textile Mills (Special Provisions) Act, 1985, with two objects,
viz.
(i) To ensure maintenance of production of cloth; and

(ii) To protect the workmen employed in textile mills.

After taking over 15 textile mills, several textile mills were restarted by the first respondent-
Corporation, but as the affairs of those units were not properly managed, it resulted into heavy
loss. According to the petitioners, a reference was, therefore, made to the Board for Industrial
and Financial Reconstruction ("the BIFR", for short) and the BIFR ordered winding up of those
mills. It is claimed in the petition that there are about 17,000 workmen presently employed by
the first respondent-Corporation in various mills owned and managed by it and as and when the


                                                                                                 17
textile mills are to be closed, it would seriously prejudice the rights of those employees. It is in
these circumstances that the petitioners have challenged the vires of section 20 of the Sick
Industrial Companies (Special Provisions) Act, 1985, by filing a separate petition, being Special
Civil      Application          No.          6837     of      1996,        which         is     pending.


To make the challenges in this petition good, Mr. Sinha, learned counsel for the petitioners, has
raised                 the                      following                  contentions                 :


(1) The provisions of section 66, section 78 (1)(A)(C), section 95, section 113 and section
115 and item No. (7)(i) of Schedule III of the Bombay Industrial Relations Act, 1946, are ultra
vires section 25-0 of the Industrial Disputes Act, 1947, as also ultra vires articles 14, 21 and 254
of the Constitution of India;

(2) The settlement said to have been arrived at between the Textile Labour Association and the
Gujarat State Textile Corporation is illegal, unlawful, inequitable and prejudicial to the rights
and interests of the workmen;

(3) The award passed by the Industrial Court, Gujarat State, at Ahmedabad, on September 3,
1996, pursuant to the compromise arrived at between the Textile Labour Association and the
GSTC is illegal, unlawful and cannot be enforced;

(4) Neither respondent No. 1 nor respondent No. 2 has power, authority or jurisdiction to enter
into an agreement with respondent No. 3 by way of settlement or otherwise and thereby,
depriving the members of the petitioner-association of the rights available to them;
(5) Respondent No. 3 is not a representative union and it had no authority to enter into
compromise     or   settlement        with    respondent    No.   1   or   respondent     No.   2;   and
(6) The action of the respondents is mala fide and malicious. There was unholy haste on the part
of the respondents in entering into the agreement and getting the settlement converted into an
award. The terms and conditions of the so-called settlement and in particular clauses (2), (11)
and (12) are in the nature of unfair labour practice. No choice was left to the workmen and they
were forced to sign the settlement. There is coercion and threat. Resignations are not voluntary.
It is upon these contentions and grounds the action is said to be illegal and ultra vires.



                                                                                                      18
These petitions are vehemently opposed on behalf of respondent No. 1. Mr. Kirit Raval, for the
respondent-Corporation, while supporting the action, has urged that it is not possible to run the
textile units and, therefore, a reference was made to the BIFR and after careful consideration of
the facts and circumstances, a recommendation was made to close down the units and
accordingly, a fair action was taken. It was submitted by him that in reaching the decision to
settle the matter, the larger interest of workers was taken into consideration and that is how a
settlement was entered into between the workmen and the third respondent-Textile Labour
Association, which is otherwise valid and legal and which finally culminated in an award. He,
therefore,       canvassed        that     the      petition        is        liable    to         be     dismissed.


B. R. Shah, learned counsel appearing for respondent No. 3-association, also, supported the
impugned action and relying upon the affidavit of Mr. Joshi, Legal Incharge and Executive
Member of the Association, submitted that considering the overall circumstances, the action
taken is more beneficial to the workmen and there is no scope for questioning the scheme
envisaged, which culminated into an award. He urged that the agreement was voluntary, lawful
and           what           is          more,         equitable                to           the          workmen.


In opposing the petition, Mr. Shelat, learned additional advocate general, submitted that a stage
had come, where the Government was forced to prevent huge financial loss year by year.
According to him, the financial burden was unbearable as far as the State of Gujarat is concerned
and, therefore, the settlement has been fairly reached. He says that more than 90 per cent. of the
workmen agreed and that is how the package deal has been arrived at. He contended that there is
no "closure", as contemplated by the petitioners and the provisions of the Bombay Industrial
Relations Act or the Industrial Disputes Act have no application. In so far as the validity of the
Bombay Industrial Relations Act is concerned, Mr.Shelat submitted that, in the instant case, the
question does not arise and the court need not decide that question in the present petition.


The question indeed arises whether, in the facts and circumstances of this case, a case has been
made out by the petitioners so as to exercise the extraordinary jurisdiction of this court under
article 226 of the Constitution of India and that too, treating this petition as and by way of public
interest     litigation.   In     our    opinion,    there     is        no    justification       for   doing   so.



                                                                                                                  19
Qua the constitutional validity of sections 66 and 78(1)(A)(C) of the Bombay Industrial
Relations Act, it was contended that they are ultra vires article 254 of the Constitution of India.
According to learned counsel for the petitioners, the provisions are also repugnant to section 25-
0 of the Industrial Disputes Act, 1947, and for that matter, section 113 of the Bombay Industrial
Relations Act read with item (7)(i) of Schedule III is also ultra vires and unconstitutional
inasmuch as it confers a blanket and uncontrolled power on the part of the Government and the
Government is enabled to add or delete any entry in the said Schedule in respect of closure and
compensation. It was, therefore, pleaded that such a piece of excessive delegation of power to the
executive by the Legislature is unconstitutional. An argument was also advanced that the
Industrial Disputes Act is a special legislation governing the relationship between the employer
and the employee and such a relationship must be governed only under that Act and, therefore,
no action can be taken either under the Companies Act, the Bombay Industrial Relations Act, the
Sick Industrial Companies (Special Provisions) Act, or any other law. For this purpose, reliance
was placed on the decision of a learned single judge of the High Court at Bombay in the decision
of Bombay Metropolitan Transport Corporation Ltd. v. Employees of B. M. T. C. (CIDCO)
[1990] 69 Comp Cas 465.

In answer, counsel for the respondents submitted that, in the present case, the question of the
constitutional validity of any law does not arise nor is the court required to enter into larger
questions. It was strongly contended that the settlement had been arrived at between the
Corporation and the association, which was accepted by a majority of the workmen. The said
settlement was produced before the Industrial Court, which made an award on the basis of the
settlement and which cannot be now brushed aside. In the light of those facts, it is urged that
there is no scope to invoke the provisions of section 25-0 of the Industrial Disputes Act on the
ground that the action amounts to retrenchment. It was contended that whether or not section 25-
0 of the Industrial Disputes Act is a special or general legislation is not necessary to be decided
as it pales into a mere academic issue and, therefore, such a question does not arise and the
question of the court expressing any opinion on the same equally does not arise.


In any case, it was pointed out that the submission that section 25-0 of the Industrial Disputes



                                                                                                20
Act is a special legislation, whereas the Bombay Industrial Relations Act, the Companies Act,
the Sick Industrial Companies (Special Provisions) Act, 1985, are general legislations is ill-
founded. It was forcefully contended that the Industrial Disputes Act is a general law and other
statutes have been enacted with a view to meet particular types of situations and, hence, they are
special legislations. In so far as reference to the decision of the learned single judge of the
Bombay High Court in Bombay Metropolitan Transport Corporation Ltd. v. Employees of B. M.
T. C. (CIDCO) [1990] 69 Comp Cas 465 is concerned, it was pointed out that the decision
rendered is no longer good law as in appeal, a Division Bench of the same High Court has
reversed the same. The appellate decision is Bombay Metropolitan Transport Corporation Ltd. v.
Employees of Bombay Metropolitan Transport Corporation Ltd. (CIDCO) [1991] 71 Comp Cas
473 (Bom).

We see not only considerable force but merit in the argument of the respondents. In our opinion,
the package deal offered by the first respondent-Corporation was in consultation with the second
respondent-State Government and the same has been accepted by the majority of the workmen.
The voluntary settlement has been arrived at and signed by all parties. Therefore, an application
was made to the Industrial Court and the settlement has been made into an award of the court. In
view of that fact, in our judgment, the larger question regarding the constitutional validity of the
provision of the Bombay Industrial Relations Act does not arise in the present case and we need
not express our opinion thereon

Coming to the affidavit-in-reply filed on behalf of respondent No. 3, it is stated that the
Corporation has sustained financial loss, approximately Rs. 515 crores up to March, 1995, which
has now reached Rs. 610 crores in March, 1996. Mr. Shelat, learned additional Advocate-
General, stated that there is a recurring loss of Rs. 5 crores per month and the total loss to the
exchequer is to the extent of Rs. 611 crores. He also stated that the GSTC has become a sick
industrial company and, therefore, a reference was made to the BIFR in June, 1993. All efforts
were made for revival of sick industrial mills by the BIFR, but they did not meet with any
success. The BIFR was, therefore, left with no alternative but to recommend winding up of the
GSTC. The resultant effect naturally would be that all officers and employees are bound to be
discharged on closure of textile mills. Taking into consideration these facts and with a view to
protect and safeguard the interest of workers and the State economy, attempts were made and the


                                                                                                 21
third respondent-association was requested to arrive at an appropriate settlement so that the
workers get terminal benefits at the earliest. The Government also agreed to such a formula and
as a special measure, and in the light of the directive principles of State policy, a package deal
was brought into existence, under which various benefits are granted to the workmen. The
assertion of the third respondent that in case of ordinary closure in accordance with law, it was
doubtful whether employees would get such benefits, which they are now getting under the
settlement, which has become the award of the Industrial Court seems to be justified as there are
innumerable cases where workers do not get their terminal benefits for years and years and for
decades. A chart is annexed to the affidavit-in-reply, pointing out as to how the employees are
availing of benefits. It is also suggested and to some extent, justifiably, that those workmen were
not entitled to all such benefits. The State of Gujarat thought it fit to grant some additional
benefits    with    a         view    to      minimise   the      hardship    of        the   workmen.


It is otherwise common ground that out of about 14,000 workers more than 13,000 have accepted
the settlement and have shown their readiness and willingness to abide by the agreement. It is
also common ground that the majority of the workmen have already received compensation by
now and chosen their own path. The petitioners are not recognized unions and, admittedly, they
do not have the majority of workers with them and regard being had to the fact that the majority
of the workers having accepted the package deal pursuant to the settlement, which has become
an award, in our opinion, it is impermissible to allow the minority to challenge the same and that
too,        in          the          nature        of          public        interest         litigation.


By now it is clear having looked at the figures, which have been furnished along with the
affidavit-in-reply, that more than 90 per cent. of the workmen have agreed to such a settlement
and the settlement has been made an award by the Industrial Court. At the time of the hearing of
the petition, we were told across the Bar that out of total workers of 13,974, 13,150 workers have
already signed and accepted the settlement. Thus, it is clear that a thin minority of 824 workers
are against the settlement. In these circumstances, in our opinion, this is not a fit case where, in
exercise of extraordinary jurisdiction, any interference is called for and/or justified.


Mr. Sinha indeed contended that voluntary resignation said to have been given by the workmen,



                                                                                                      22
though by a majority of them, is not really "voluntary", as understood in law, for, according to
him, virtually it is a closure. He says that first the decision was taken to close down and wind up
the textile mills contrary to law. He also points out that there was undue haste on the part of the
authority in getting the BIFR proceedings culminating into a final order and thereafter, under
coercion, duress and compulsion, resignations were sought. These resignations cannot come in
the way of the petitioners unions in challenging the validity thereof, asserts Mr. Sinha. For that
matter, he also drew our attention to various clauses of the agreement. In that, he submitted that 2
per cent. of the benefits are sought to be deducted in favour of the third respondent-association,
which is illegal. He stated that the State Government and the Central Government had made
declarations from time to time that all sick units will be revived and no workmen would be made
unemployed and that the rehabilitation scheme is prepared only with that object in mind and,
therefore, it was clearly incumbent on the respondents to run the so-called sick undertakings. He,
therefore, says that the respondents cannot be permitted to close down the mills under the excuse
that the units were and are running in losses and that the BIFR had passed an order of winding up
the companies. Considering the facts and figures, we are, however, of the view that the action of
the respondent authorities cannot be termed either arbitrary or unreasonable. On the contrary, we
are satisfied that in spite of efforts made, the units could not be revived. It is common ground
that majority of the mills were already lying closed and the State Government was made to pay
idle wages to the workmen. The units could not be revived and the loss incurred by the
Corporation accumulated day-by-day, running into crores of rupees. When proceedings under the
Board for Industrial and Financial Reconstruction Act were initiated, the Board has taken the
view that there is no alternative but to wind up the units. Needless to say, the decision of the
Board is that of an expert body. Ordinarily, a decision of such a body is not interfered with
unless it is palpably wrong or is such that no reasonable man of ordinary prudence would reach
such a decision. On the facts and circumstances of this case, we are satisfied that the expert body
could not have reached any decision other than the one reached by them. Seen in this light, the
action taken does not seem to be unlawful or otherwise arbitrary and/or unreasonable.
Respondent No. 3-association is a representative union of the majority and the majority of the
workers have already accepted the proposal and settlement and have, that way, accepted the
compromise. We have also seen and satisfied ourselves that the terms and conditions
incorporated in the compromise are not adverse to the interests of the workmen. On an overall



                                                                                                 23
assessment of the situation, we also find that the agreement seems to be fair and what is more,
when the parties approached the Industrial Court, the court put its seal and the settlement became
an award of the Industrial Court. A clear inference, therefore, arises that the Industrial Court was
satisfied about the legality and validity of the settlement or the package deal. There is another
way of looking at the whole matter. We are told by Mr. Shelat that the State Government has to
disburse Rs. 5 crores per month and the large part of this amount has to be disbursed as and by
way of idle wages to workers because the mills are lying closed. In any case, therefore, in public
interest, the State Government cannot be made to suffer substantial sum of Rs. 5 crores per
month from the public exchequer. In our judgment, therefore, this is not a fit case, where
interference is required in the extraordinary jurisdiction under article 226 of the Constitution of
India                 in                  public                  interest                 litigation.


Though we are dismissing this petition, in our view, some directions are required to be given so
as to safeguard the interest of the workers, who have so far not taken the benefit of the
settlement-cum-award dated September 3, 1996, and who may yet choose to do so. Mr. Sinha,
learned counsel appearing for the petitioners, had himself asserted at the time of the arguments
that he will have no objection if workmen, on their own, opt for this package deal and his thrust
was that it should not be forced upon unwilling workers. We are sure that if workers do not want
to avail of the benefits of the award, they can surely seek redress in an appropriate forum, as
advised. The fact, however, remains that under clause (11) of the settlement and award, dated
August 31, 1996/September 3, 1996, it was made a condition that those workers who want to
resign to get the benefit under the award, must do so on or before September 12, 1996. Indeed
this petition was instituted prior to that date. We did not grant interim relief, making it clear that
at the time of final hearing, appropriate equitable relief could be considered even in the event the
petition is to be dismissed. It may be possible that some of the workers may yet opt for the
package deal. We have, therefore, no difficulty in directing respondent No. 1-Corporation to
accept resignations until December 10, 1996, and afford to such workers the benefit under the
award in the event they so choose and in no event, the benefit shall be denied to them if they
come forward with their applications on or before December 10, 1996. This position will also be
available to those who had applied but have so far not accepted the payment under the award.




                                                                                                   24
For the foregoing reasons and subject to the aforesaid directions, the petition is dismissed. Rule
is discharged with no order as to costs.

FERRO ALLOYS CORPORATION LTD. v. RAJHANS STEEL LTD.

2000-(099)-COMP CAS -0426 -PAT

IN THE PATNA HIGH COURT

JUDGMENT
G. S. CHAUBE J. - This company-petition under section 433 (e), section 434 (1)(a) and section
439 (1)(b) of the Companies Act, 1956 ("the Act") has been presented for winding up of Rajhans
Steel Ltd., a public limited company incorporated under the Act, having its registered office at
Joraphatak Road in the district and town of Dhanbad and factory or worksite at Mihijam in the
district of Santhal Parganas of this State, which has been arrayed in this petition as opposite party
No. 1 and shall hereinafter be referred to as such. The petitioner is Ferro Alloys Corporation Ltd.
a company incorporated under the said Act having its registered office at Sriram Bhawan Tumsar
in Maharashtra and regional office at Everest House, Jawaharlal Nehru Road in Calcutta, and
shall      be       referred      to       hereinafter       as      the       petitioner-company.


The case of the petitioner-company is that pursuant to two separate orders, one dated March 22,
1984, and another dated April 6, 1984, placed with it by opposite party No. 1 for supplying ferro
manganese and ferro silicon, the petitioner-company, which carries on business of
manufacturing, selling and/or otherwise dealing in ferro manganese, ferro silicon and other ferro
alloys, had supplied to the former at its worksite at Mihijam 12,090 M.T. ferro manganese and 8
M.T. ferro silicon on March 27, 1984, April 11, 1984 and April 17, 1984. While 7.020 M. T.
ferro manganese and 5 M.T. ferro silicon had been supplied on March 27, 1984, at the rate of Rs.
5,700 and Rs. 11,350 per M.T. respectively as per the agreement/supply order dated March 22,
1984, the remaining supplies of ferro manganese and ferro silicon on April 11, 1984 and April
17, 1984, were made at the rate of Rs. 7,050 and Rs. 12,750 per M.T. respectively as per the
letter of agreement/supply order dated April 6, 1984. In terms of the agreements/supply orders
including those respective packing charges, freight and payment of excise duty and Central sales



                                                                                                  25
tax, etc., the petitioner-company submitted to opposite party No. 1 six bills three for ferro
manganese and the remaining three for ferro silicon for a total sum of Rs. 1,87,503.27 against the
supplies made by it and received and consumed by opposite party No. 1 without any objection or
demur. It is not necessary to refer to all the terms of supply except the one that opposite party
No. 1 was to pay interest at the rate of 20 per cent. per annum for the overdue period if the bills
were       not   paid        within   30     days   of         the   despatch   of      the   materials.


It is the further case of the petitioner-company that against the said bills, 'Opposite party No. 1
made payment to it to the extent of Rs.80,885.28 on different dates and a sum of Rs. 1,06,617.99
on account of the price of the materials supplied remained, and is still, unpaid in spite of repeated
demands. The petitioner-company sent letter dated December 19, 1986, to opposite party No. 1
through its advocate demanding payment from the latter, of a sum of Rs. 1,95,805,03 which
included Rs. 77,081.95 by way of interst and Rs. 12,105.09 on account of additional Central
sales tax, besides the unpaid price of the materials supplied. When opposite party No. 1 did not
make any payment even in spite of the statutory notice, the petitioner-company filed a suit for
realisation of the same in the Calcutta High Court in its ordinary original civil jurisdiction, being
Suit No. 1073 of 1987. While the said suit was still pending in the Calcutta High Court, the
petitioner-company came to learn that besides that, the Board for Industrial and Financial
Reconstruction (BIFR) has directed liquidation of opposite party No. 1, in Company Petition No.
1 of 1985R filed by one Eastern Oxygen Acetylene Ltd., for winding up of opposite party No. 1,
this court had passed order on September 12, 1988, appointing the official liquidator for taking
possession of the latter's property. Hence, this company petition for winding up of opposite party
No. 1 was filed by the petitioner-company on September 29, 1992, because the latter is not in a
position                to             pay               its              outstanding             dues.


Notice of the company-petition having been served on it, opposite party No. 1 appeared and filed
a counter-affidavit by way of show cause. In the said counter affidavit without disputing the
allegation of the petitioner-company specifically respecting supplies of materials to it and unpaid
price therefor, opposite party No. 1 has questioned the competence of the petition on the ground
that the claim of the petitioner-company is "highly disputed" and time-barred; still awaiting
adjudication by the Calcutta High Court in the suit filed respecting the same. It has been further



                                                                                                      26
stated in the counter affidavit of opposite party No. 1 that the undertaking was established in the
most backward area of this State of Bihar to provide employment to the local people but due to
some financial constraints, presently it has become non-functioning. However, after having
failed in getting a favourable response from the Board for Industrial and Financial
Reconstruction, attempt is being made for its rehabilitation with the help of the State Bank of
India and preliminary discussions with the officers of the said bank have already taken place.
Therefore, it has been urged that the company petition for winding up of opposite party No. 1 be
dismissed.


At a subsequent stage, State Bank of India (opposite party No. 2 and to be referred to hereinafter
as the bank) and Bihar State Industrial Development Corporation (opposite party No. 3) having
major share in the company were added as parties to the petition on intervention petitions having
been filed. While opposite party No. 3 has not filed any show cause, one has been filed on behalf
of the bank questioning the maintainability of the petition on the grounds that the claim/debt of
the petitioner-company against opposite party No. 1 is barred by limitation and that the
petitioner-company having already instituted a regular suit on the original side of the Calcutta
High Court respecting the same debt and the suit still remaining pending, a parallel proceeding
by way of winding up of opposite party No. 1, i.e., the present proceeding is not permissible. The
bank has also stated in its show cause that it is a major and substantial creditor of opposite party
No. 1 inasmuch as it has advanced to the latter loans to the extent of Rs. 1,10,56,154.56 as on
January, 1996 on hypothecation of the entire stock and raw materials, etc., and creation of
equitable mortgage by deposit of title deeds, etc. As a matter of fact, it has also instituted a suit
against opposite party No.1 for realisation of its dues and the same is presently pending before
the Debt Recovery Tribunal at Patna. Therefore, it has been urged that opposite party No. 1
should not be sent to liquidation for realisation of the debt of the petitioner-company.


Therefore, it is necessary in the backdrop of the facts stated above to decide whether the present
company petition for winding up of opposite party No. 1 is maintainable and can be
granted. Section 439 contains provisions as to he applications for winding up. Clause (b) of sub-
section (1) thereof provides that an application to the court for winding up of a company shall be
by petition presented, subject to the provisions of this section, inter alia, by any creditor or



                                                                                                  27
creditors including any contingent or prospective creditor or creditors. Section 433 enumerates
he the circumstances in which a company may be wound up by the court. According to this
section, a company may be wound up by the court, among other things, (e) if the company is
unable to pay its debts. Section 434 states the circumstances under which a company shall be
deemed unable to pay its debts. According to sub-section (1) of section 434, a company shall be
deemed to be unable to pay its debts - "(a) if a creditor by assignment or otherwise, to whom the
company is indebted in a sum exceeding five hundred rupees then due, has served on the
company, by causing it to be delivered at its registered office, by registered post or otherwise, a
demand under his hand requiring the company to pay the sum so due and the company has for
three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable
satisfaction of the creditor;

(b) if execution or other process issued on a decree or order of any court in favour of a creditor of
the company is returned unsatisfied in whole or in part; or (c) if it is proved to the satisfaction of
the court that the company is unable to pay its debts, and, in determining whether a company is
unable to pay its debts, the court shall take into account, the contingent and prospective liabilities
of                                          the                                           company."


There is no dispute regarding the fact that the petitioner-company has supplied certain materials
to the opposite party-company as far back as in 1984, and submitted bills therefor to the extent of
Rs. 1,87,503.26 and after part payments made there against, a sum of Rs. 1,06,617.99 remained
still unpaid. When that amount was not paid within the stipulated period, a legal notice through
an advocate was served on opposite party No. 1 demanding payment of Rs. 1,95,805.03
including interest and additional Central sales tax, etc., because of failure by opposite party No. 1
to furnish Form No. C. That letter was sent on December 19, 1986. Therefore, the unpaid sum of
Rs. 1,95,805.03 becomes a debt within the meaning of section 434 (1)(a), read with section
439 (1)(e), and the petitioner-company being the creditor was entitled to present the petition for
winding-up in view of the provisions of clause (b) of sub-section (1) of section 439.


However, the law is by now well-settled that where a debt is bona fide disputed and substantial
questions are raised, a petition for winding up of a company on the allegation that the said



                                                                                                   28
company neglects or omits without reasonable cause to pay its debt, is not maintainable even if
the debt is otherwise admitted. In the present case, the claim/debt of the petitioner-company on
account of materials supplied by it is not denied by opposite party No. 1. There is only a vague
statement in the counter-affidavit filed by opposite party No. 1 that it is highly disputed. In other
words, opposite party No. 1 has not denied that it owed to the petitioner-company money on
account        of       the    supply         of     materials    to   it     by     the      latter.


However, it has been asserted that the debt or claim for non-payment of which the present
petition for winding-up has been filed, is barred by limitation. This is what opposite party No. 2,
namely, the State Bank of India, has also asserted in its show-cause petition on affidavit. It is
submitted on behalf of opposite parties Nos. 1 and 2 that being barred by limitation the debt
cannot be realised by filing a winding up petition because the money ceases to be a debt which
can       be        realised   by       the        intervention   of   a     court      of     law.


It is undisputed that supplies were made and bills submitted on March 27, 1984, April 11, 1984,
and April 17, 1984. Under article 14 of the Limitation Act, 1963, the period of limitation for
instituting a suit for price of goods sold and delivered, where no fixed period of credit is agreed
upon, is three years from the date of the delivery of the goods. Article 15 of the Limitation Act
prescribes the same period of limitation for instituting a suit for the price of the goods sold and
delivered to be paid for after the expiry of a fixed period of credit, but the limitation starts
running when the period of credit expires. The case of the petitioner-company is that a period of
30 days from the date of the billing had been fixed for making payment failing which the buyer,
namely, opposite party No. 1 was liable to pay interest at the rate of 20 per cent. per annum.
Therefore, taking into account the provision of article 15, the unpaid price could have been
realised by intervention of the court in a properly instituted suit by April 27, 1987, May 11,
1987, and May 17, 1987, respectively, the supplies made and bills on March 27, 1984, April 11,
1984, and April 17 1984, respectively. However, it has been contended by the petitioner-
company, and not denied by opposite party No. 1 that the latter had made part payment against
the said bills and the last such payment was made on July 17, 1985. Section 19 of the Limitation
Act provides that where payment on account of debt or of interest on a legacy is made before the
expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent



                                                                                                  29
duly authorised in this behalf, a fresh period of limitation shall be computed from the time when
the payment was made. Thus, section 19 provides a fresh period of limitation in case of part
payment of a debt to be reckoned from the date of such payment. As the last of the part payments
was made by opposite party No. 1 on July 17, 1985, well within the prescribed period of
limitation from the dates of the bills, a fresh lease of life was given to the debt of the petitioner-
company. If computed with effect from June 17, 1985, the period of three years prescribed under
article 15 expired on June 17, 1988. Any claim preferred beyond June 17, 1988, for realisation of
the debt by way of filing suit or otherwise stood barred. The present company petition was filed
on September 29, 1992, that is, more than four years after the debt had become time-barred.


It has been contended by learned counsel for opposite party No. 1 and the bank that since the
debt or claim of the petitioner-company was barred when the present company petition was filed,
it is not maintainable and the prayer for winding up of opposite party No. 1 is to be rejected.


In the case of Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Pvt. Ltd., AIR
1971 SC 2600; [1972] 42 Comp Cas 125 the apex court has held that if the debt is bona fide
disputed and the defence is a substantial one, the court will not wind up the company. The apex
court has held that the principles on which the court acts are first that the defence of the company
is in good faith and one of substance; secondly, the defence is likely to succeed in point of law;
and thirdly, the company adduces prima facie proof of the facts on which the defence depends. In
other words, if the company sought to be wound up is likely to succeed in its defence on the
point of law, like limitation, the winding up thereof, cannot be ordered. In the case of Poddar
Projects Ltd. v. Krishna Metal Industries Pvt. Ltd. [1996] 86 Comp Cas 360; AIR 1996 AP 305,
the debt of the petitioner-company for which winding up of the company had been sought, was
found barred by limitation. The Andhra Pradesh High Court held that the plea of the respondent
that the debt is barred by time under article 15 is a substantial defence and, accordingly, it cannot
be said that the defence is not bona fide. Hence, it was held that (page 366) ....... the petitioner
cannot seek the relief of winding up since there is a prima facie case in the plea of the respondent
that           the           debt            is          barred            by            limitation".


Mr. Pawan Kumar, learned counsel, appearing on behalf of the petitioner-company, however,



                                                                                                   30
contended that the claim of the said company is not barred by limitation because well before the
expiry of the period of limitation computed with effect from June 17, 1985, the petitioner-
company instituted a suit in the Calcutta High Court respecting the said debt. Therefore, the debt
on the basis of which the winding up of opposite party No. 1 is sought, shall be deemed to
subsist when the present petition was presented in this court in 1992. In my opinion, the
contention lacks merit. Simply because a suit for realisation of the debt of the petitioner-
company against opposite party No. 1 was instituted in the Calcutta High Court on its original
side, such institution of the suit and the pendency thereof in that court cannot ensure for the
benefit of the present winding up proceeding. The debt having become time-barred when this
petition was presented in this court, the same could not be legally recoverable through this court
by resorting to winding up proceedings because the same cannot legally be proved under section
520 of the Act. It would he have been altogether a different matter if the petitioner-company
approached this court for winding up of opposite party No. 1 after obtaining a decree from the
Calcutta High Court in Suit No. 1073 of 1987, and the decree remaining unsatisfied, as provided
in clause (b) of sub-section (1) of section 434. Therefore, since the debt of the petitioner-
company has become time-barred and cannot be legally proved in this court in course of the
present proceedings, winding up of opposite party No. 1 cannot be ordered due to non-payment
of                           the                            said                            debt.


The present winding up proceeding is not maintainable and, therefore, is impermissible on yet
another ground. Admittedly, respecting the same debt or the subject-matter, the petitioner-
company has instituted Suit No. 1073 of 1987, on the original side of the Calcutta High Court.
By order dated February 16, 1999, when this petition was taken up for hearing, counsel for the
opposite party-company had undertaken to inform this court about the outcome of the suit filed
by the petitioner-company in the Calcutta High Court on the next date to which the hearing was
adjourned. On the adjourned date, counsel for the opposite party having failed to furnish such
information, learned counsel for the petitioner-company under-took to inform this court about
the outcome of the suit filed in the Calcutta High Court on the next adjourned date. Therefore,
the hearing was adjourned to March 16, 1999. On that date nobody appeared on behalf of the
petitioner-company. In the absence of any information that the suit filed by the petitioner-
company in the Calcutta High Court was disposed of and, if so, in what manner, one is left with



                                                                                               31
no option but to assume that the suit is still pending there. Admittedly, during the pendency of
the suit in the Calcutta High Court for recovery of the debt against opposite party No. 1, the
present company-petition for winding up of opposite party No. 1 was filed. The settled law is
that parallel proceedings should not be allowed to continue because multiplicity of litigation is
not in the interest of the parties nor should public time be allowed to be Wasted over
meaningless litigations. (As per Ram Sumer Puri Mahant v. State of U.P., AIR 1985 SC 472 and
Jai Singh v. Union of India [1977] 1 SCC 1; 2 SCR 137). In the last mentioned case it has been
held by the apex court that the appellants cannot pursue two parallel remedies in respect of the
same               matter                at              the               same                time.


Learned counsel for the petitioner-company has also drawn my attention to an order of the Board
for Industrial and Financial Reconstruction in Rajhans Steel Ltd., In re (Case No. 164 of 1989)
under the provisions of the Sick Industrial Companies (Special Provisions;) Act, 1985. A copy of
the order is to be found at pages 22, 23, 24 and 25 of the brief. From the said order it appears that
an attempt to revive and rehabilitate opposite party No. 1 having failed, a bench of the Board for
Industrial and Financial Reconstruction observed that it was just and equitable that Rajhans
Steels Ltd. should be wound up. Therefore, it has been urged that in view of the provisions
of section 20 of the Sick Industrial Companies (Special Provisions) Act, opposite party No. 1 is
bound to be liquidated. When this fact was brought to my notice, there was an attempt to find out
if any such order had been received in the Registry of this Bench. The Registry having informed
that no such order had been ever received even though purporting to have been despatched on
August 7, 1990, the Registrar-General of the High Court at Patna was directed, vide order dated
February 16, 1999, to enquire into the matter and sent the record to this court immediately. A
reply was received in response to the communication that no such record was shown to have
been received in the Registry there. Consequently, on February 23, 1999, there was a fresh order
directing the Registry at Patna to make a thorough search in the office and trace out the record of
the Board for Industrial and Financial Reconstruction and transmit the same to this court at the
earliest. The record shows that on the request of the Registry at Patna, the Registrar of the Board
for Industrial and Financial Reconstruction has faxed a copy of the proceedings of the Board for
Industrial and Financial Reconstruction dated February 12, 1990, April 5, 1990, and July 18,
1990, and the same is available at flag F of the brief. However, even though a Bench of the



                                                                                                  32
Board for Industrial and Financial Reconstruction has recommended winding up of opposite
party No. 1, the said company (opposite party No. 1) cannot be ordered to be wound up at the
instance of the petitioner-company. Moreover, in para. 25 of the company-petition itself it has
been stated that against the order of the Board for Industrial and Financial Reconstruction two
appeals are pending before the Appellate Authority for Industrial and Financial Reconstruction
under section 25 of the Sick Industrial Companies (Special Provisions) Act. It is not known what
is the outcome of those appeals. For this reason also this court cannot act at present on the basis
of the recommendation of the Board for Industrial and Financial Reconstruction.
For the reasons stated above, the company-petition presented by the petitioner-company for
winding up of opposite party No. 1 fails and the same is hereby dismissed. In the circumstances
of       the        case,       there         is      no        order       as     to       costs.
The Registry is directed to ascertain from the Board for Industrial and Financial Reconstruction
and/or the Appellate Authority for Industrial and Financial Reconstruction whether any appeal
had been preferred to the latter against the order of the Board for Industrial and Financial
Reconstruction as stated in para. 25 of the company petition and, if so, whether those appeals are
disposed of and, if so, with what result. If the appeal or appeals were preferred and disposed of
upholding the recommendation of the Board for Industrial and Financial Reconstruction, the
Registry shall register a case for winding up of opposite party No. 1 on the basis of the
documents at flag F. It shall be open to the petitioner-company to prove its debt in course of the
liquidation proceeding pursuant to the recommendation of the Board for Industrial and Financial
Reconstruction, if it happens to obtain any decree respecting the same from the Calcutta High
Court In the suit filed by it and the decree still remaining unsatisfied.



DE REGULATION OF ESSENTITAL COMMODITIES


Regulation of Essential commodities became a important issue before the government of India
after the independence. It enacted Essential Commodities Act , to deal with the regulation of
essential commodities and provides a various mechanism for control of various authorities
under the Act to serve the needs of people.

1 SHORT TITLE AND EXTENT.


                                                                                                33
(1) This Act may be called the Essential Commodities Act, 1955.

(2) It extends to the whole of India [ 2 * * * 2 ]. Section 2

2 DEFINITIONS.

In this Act, unless the context otherwise requires, -

[ 3 (ia) "Code" means the Code of Criminal Procedure, 1973 (2of 1973); 3 ]
[ 4 5 (iia) "Collector" includes an Additional Collector andsuch other officer, not below the rank
of Sub-Divisional Officer, as may be authorised by the Collector to perform the functions and
exercise      the     powers        of    the      Collector    under     this   Act;     4     ]


(a) "essential commodity" means any of the following classes of commodities :-

(i) cattle fodder, including oilcakes and other concentrates,

(ii) coal, including coke and other derivatives,

(iii) component parts and accessories of automobiles;

(iv) cotton and woollen textiles;

[ 6 (iv-a) drugs;

Explanation                                                                                     :
In this sub-clause, "drug" has the meaning assigned to it in CI.(b) of Sec. 3 of the Drugs and
Cosmetics Act, 1940 (23 of 1940); 6 ]

(v) foodstuffs, including edible oilseeds and oils;

(vi) iron and steel, including manufactured products of iron and steel;

(vii) paper, including newsprint, paperboard and straw board;

(viii) petroleum and petroleum products;


                                                                                               34
(ix) raw cotton, whether ginned or unginned, and cotton seed;

(x) raw jute;

(xi) any other class of commodity which the Central Government may, by notified order, declare
to be an essential commodity for the purposes of this Act, being a commodity with respect to
which Parliament has power to make laws by virtue of entry 33 in List III in the Seventh
Schedule to the Constitution;
(b) "food-crops" include crops of sugarcane;
(c) "notified order" means an order notified in the Official
Gazette;
[ 7 (cc) "order" includes a direction issued thereunder; 7 ]
[ 8 (d) "State Government", in relation to a Union territory means the administrator thereof; 8 ]
[ 9 (e) "sugar" means, -
(i) any form of sugar containing more than ninety per cent
of sucrose, including sugar candy;
(ii) khandsari sugar or bura sugar or crushed sugar or any sugar in crystalline or powdered form;
or
(iii) sugar-in-process in vacuum pan sugar factory or raw sugar produced therein; 9 ]
[ 10 * * * 10 ]
[ 11 (f) Words and expressions used but not defined in this Act and defined in the Code shall
have the meanings respectively assigned to them in that Code. 11 ] Section 3
Sec.3 POWERS TO CONTROL PRODUCTION, SUPPLY, DISTRIBUTION, ETC.OF
ESSENTIAL COMMODITIES.

(1) If the Central Government is of opinion that it is necessary or expedient so to do for
maintaining or increasing supplies of any essential commodity or for securing their equitable
distribution and availability at fair prices, [ 12 or for securing any essential commodity for
the defence of India or the efficient conduct of military operations 12 ], it may, by order, provide
for regulating or prohibiting the production, supply and distribution thereof and trade and
commerce therein.




                                                                                                 35
(2) Without prejudice to the generality of the powers conferred by sub-section (1), an order made
thereunder may provide, -
(a) for regulating by licences, permits or otherwise the production or manufacture of any
essential commodity;
(b) for bringing under cultivation any waste or arable land, whether appurtenant to a building or
not, for the growing thereon of food-crops genrally or of specified food-crops, and for otherwise
maintaining or increasing the cultivation of food-crops genrally, or of specified foods-crops;
(c) for controlling the price at which any essential commodity may be bought or sold;
(d) for regulating by licences, permits or otherwise the storage, transport, distribution, disposal,
acquisition, use or consumption of, any essential commodity;
(e) for prohibiting the withholding from sale of any essential commodity ordinarily kept for sale;
(f) [ 13 for requiring any person holding in stock, or engaged in the production, or in the business
of buying or selling, of any essential commodity, -
(a) to sell the whole or a specified part of the quantity held in stock or produced or received by
him, or (b) in the case of any such commodity which is likely to be produced or received by
him, to sell the whole or a specified part of such commodity when produced or received by him,
to the Central Government or a State Government or to an officer or agent of such Government
or to a Corporation owned or controlled by such Government or to such other person or class of
persons and in such circumstances as may be specified in the other.
Explanation 1 :
An order made under this clause in relation to food grains, edible oilseeds or edible oils, may,
having regard to the estimated production, in the concerned area, of such food grains, edible
oilseeds and edible oils, fix the quantity to be sold by the producers in such area may also fix, or
provide for the fixation of, such quantity on a graded basis, having regard to the aggregate of the
area held by, or under the cultivation of the producers.
Explanation 2 :
For the purpose of this clause, "production" with its grammatical variations and cognate
expressions includes manufacture of edible oils and sugar; 13 ]
(g) for regulating or prohibiting any class of commercial or financial transactions relating to
foodstuffs or cotton textiles which, in the opinion of the authority making the order, are, or, if
unregulated, are likely to be, detrimental to the public interest;



                                                                                                     36
(h) for collecting any information or statistic with a view to regulating or prohibiting any of the
aforesaid matters;

(i) for requiring persons engaged in the production, supply or distribution of, or trade and
commerce in, any essential commodity to maintain and produce for inspection such books,
accounts and records relating to their business and to furnish such information relating thereto, as
may be specified in the order;
[ 14 (ii) for the grant or issue of licences, permits or other documents, the charging of fees
therefor, the deposit of such sum, if any, as may be specified in the order as security for the due
performance of the conditions of any such licence, permit or other documents, the forfeiture of
the sum so deposited or any part thereof for contravention of any such conditions, and the
adjudication of such forfeiture by such authority as may be specified in the order 14 ];
(j) [ 15 for any incidental and supplementary matters, including, in particular, the entry, search or
examination of premises, aircraft, vessels, vehicles or other conveyances and animals, and the
seizure by a person authorised to make such entry, search or examination, -

(i) of any articles in respect of which such person has reason to believe that a contravention of
the order has been, is being, or is about to be, committed and any packages, coverings or
receptacles in which such articles are found;

(ii) of any aircraft, vessel, vehicle or other conveyance or animal used in carrying such articles, if
such person has reason to believe that such aircraft, vessels, vehicle or other conveyance or
animal is liable to be forfeited under the provisions of this Act;
(iii) [ 16 of any books of accounts and documents which in the opinion of such person, may be
useful for, or relevant to, any proceeding under this Act and the person from whose custody such
books of accounts or documents are seized shall be entitled to make copies thereof or to take
extracts therefrom in the presence of an officer having the custody of such books of accounts or
documents. 16 ] 15 ]

(3) Where any person sells any essential commodity in compliance with an order made with
reference to Cl. (f) of sub-section (2), there shall be paid to him the price therefor as hereinafter
provided :-



                                                                                                    37
(a) where the price can, consistently with the controlled price, if any, fixed under this section, be
agreed upon, the agreed price;

(b) where no such agreement can be reached, the price calculated with reference to the controlled
price, if any;

(c) where neither Cl. (a) nor Cl. (b) applies, the price calculated at the market rate prevailing in
the locality at the date of sale.

[ 17 (3-A) (i) If the Central Government is of opinion that it is necessary so to do for controlling
the rise in prices or preventing the hoarding, of any foodstuff in any locality,it may, by
notification in the Official Gazette, direct that notwithstanding anything contained in sub-section
(3), the price at which the foodstuff shall be sold in the locality in compliance with an order
made with reference to Cl. (f) of sub-section (2) shall be regulated in accordance with the
provisions of this sub-section.

(ii) Any notification issued under this sub-section shall remain in force for such period not
exceeding three months as may be specified in the notification.
(iii) Where, after the issue of a notification under this sub-section, any person sells foodstuffs of
the kind specified therein and in the locality so specified, in compliance with an order made with
reference to Cl.(f) of sub-section (2), there shall be paid to the seller as the price therefor, -
(a) where the price can, consistently with the controlled price of the foodstuff, if any, fixed under
this section, be agreed upon, the agreed price ;

(b) where no such agreement can be reached, the price calculated with reference to the controlled
price, if any;
(c) where neither Cl.(a) nor Cl.(b) applies, the price calculated with reference to the average
market rate prevailing in the locality during the period of three months immediately preceding
the date of the notification.

(iv) For the purposes of sub-clause (c) of Cl.(iii), the average market rate prevailing in the
locality shall be determined by an officer authorised by the Central Government in this behalf,
with reference to the prevailing market rates for which published figures are available in


                                                                                                       38
respect of that locality or of a neighbouring locality; and the average market rate so determined
shall be final and shall not be called in question in any Court 17 ].


[ 18 (3-B) Where any person is required, by an order made with reference to Cl.(f) of sub-section
(2), to sell to the Central Government or a State Government or to an officer or agent of such
Government or to a Corporation owned or controlled by such Government, any grade or variety
of foodgrains, edible oilseeds or edible oils in relation to which no notification has been issued
under sub-section (3-A), or such notification having been issued, has ceased to be in force, there
shall be paid to the person concerned, notwithstanding anything to the contrary contained in
sub-section (3), an amount equal to the procurement price of such foodgrains, edible oilseeds or
edible oils, as the case may be, specified by the State Government, with the previous
approval of the Central Government having regard to, -
(a) the controlled price, if any, fixed under this section or by or under any other law for the time
being in force for such grade or variety of foodgrains, edible oilseeds or edible oils;
(b) the general crop prospects;

(c) the need for making such grade or variety of foodgrains, edible oilseeds or edible oils
available at reasonable prices to the consumers, particularly the vulnerable sections of the
consumers; and
(d) the recommendations, if any, of the Agricultural Prices     Commission with regard to the
price of the concerned grade or variety of foodgrains, edible oilseeds or edible oils. 18 ]
[ 19 (3-C) Where any producer is required by an order made with reference to Cl.(f) of sub-
section (2) to sell any kind of sugar (whether to the Central Government or a State
Government or to an officer or agent of such Government or any other person or class of
persons) and either no notification in respect of such sugar has been issued under sub-section (3-
A) or any such notification, having been issued, has ceased to remain in force by efflux of time,
then, notwithstanding anything contained in sub-section (3), there shall be paid to that producer
an amount therefor which shall be calculated with reference to such price of
sugar as the Central Government may, by order, determine,
having regard to, -




                                                                                                     39
(a) the minimum price, if any, fixed for sugarcane by the Central Government under this section;
(b) the manufacturing cost of sugar;

(c) the duty or tax, if any, paid or payable thereon; and

(d) the securing of a reasonable return on the capital employed in the business of manufacturing
sugar, and different prices may be determined, from time to time,for different areas or for
different factories or for different kinds of sugar.
Explanation :
For the purposes of this sub-section, "producer" means a person carrying on the business of
manufacturing sugar. 19 ]

4) If the Central Government is of opinion that it is necessary so to do for maintaining or
increasing the production and supply of an essential commodity, it may, by order, authorize any
person (hereinafter referred to as an authorized controller) to exercise, with respect to the
whole or any part of any such undertaking engaged in the production and supply of the
commodity as may be specified in the order such functions of control as may be provided
therein and so long as such order is in force with respect to any undertaking or part thereof, -
(a) the authorized controller shall exercise his functions in accordance with any instructions
given to him by the Central Government, so, however, that he shall not have any power to give
any direction inconsistent with the provisions of any enactment or any instrument determining
the functions of the persons in-charge of the management of the undertaking, except in so far as
may be specifically provided by the order; and (b) the undertaking or part shall be carried on in
accordance with any directions given by the authorized controller under the provisions of the
order, and any person having any functions of management in relation to the undertaking or part
shall comply with any such directions.
(5) An order made under this section shall, -
(a) in the case of an order of a general nature or affectinga class of persons, be notified in the
Official Gazette; and
(b) in the case of an order directed to a specified individual be served on such individual, -
(i) by delivering or tendering it to that individual, or
(ii) if it cannot be so delivered or tendered, by affixing it on the outer door or some other



                                                                                                     40
conspicuous part of the premises in which that individual lives, and a written report thereof shall
be prepared and witnessed by two persons living in the neighbourhood.


(6) Every order made under this section by the Central Government or by any officer or authority
of the Central Government shall be laid before both Houses of Parliament, as soon as may be,
after it is made.
Section:4: IMPOSITION OF DUTIES ON STATE GOVERNMENTS, ETC.

An order made under Sec. 3 may confer powers and impose duties upon the Central Government
or the State Government or officers and authorities of the Central Government or State
Government, and may contain directions to any State Government or to officers and authorities
thereof as to the exercise of any such powers or the discharge of any such duties.
Section 5 DELEGATION OF POWERS.

The Central Government may, by notified order, direct that [ 20 the power tomake orders or
issue notification under Sec. 3 20 ] shall, in relation to such matters and subject to
such conditions, if any, as may be specified in the direction, be exercisable also by, -
(a) such officer or authority subordinate to the Central Government, or

(b) such State Government or such officer or authority subordinate to State Government; as may
be specified in the direction.

Section 6 EFFECT OF ORDERS INCONSISTENT WITH OTHER ENACTMENTS.
Any other made under Sec. 3 shall have effect notwithstanding anything inconsistent therewith
contained in any enactment other than this Act or any instrument having effect by virtue of any
enactment other than this Act.

Section 6-C 6-C APPEAL.

(1) Any person aggrieved by an order of confiscation under Sec. 6-A may, within one month
from the date of the communication to him of such order, appeal to [ 41 the State
Government concerned and the State Government 41 ] shall, after giving an opportunity to the
appellant to be heard, pass such order as it may think fit. confirming, modifying or annulling the


                                                                                                 41
order appealed against.
(2) Where an order under Sec. 6-A is modified or annulled by [ 40 the State Government 40 ], or
where in a prosecution instituted for the contravention of the order in respect of which an order
of confiscation has been made under Sec. 6-A, the person concerned is acquitted, and in either
case it is not possible for any reason to [ 41 return the essential commodity seized 41 ], [ 42 such
person shall, except as provided by sub-section (3) of Sec. 6-A, be paid 42 ] the price therefor [
43 as if the essential commodity. 43 ] had been sold to the Government with reasonable interest
calculated from the day of the seizure of [ 44 the essential commodity 44 ]
[ 45 and such price shall be determined -
(i) in the case of foodgrains, edible oilseeds or edible oils, in accordance with the provisions of
sub-section (3-B) of Sec. 3;
(ii) in the case of sugar, in accordance with the provisions of sub-section (3-C) of Sec. 3; and
(iii) in the case of any other essential commodity, in accordance with the provisions of sub-
section (3) of Sec. 3 45 ].

Section 7-A :7-A POWER OF CENTRAL GOVERNMENT TO RECOVER CERTAIN
AMOUNTS AS ARREARS OF LAND REVENUE.

(1) Where any person, liable to, -
(a) pay any amount in pursuance of any order made under Sec.3, or
(b) deposit any amount to the credit of any account or fund constituted by or in pursuance of any
order made under that section. makes any default in paying or depositing the whole or any
part of such amount, the amount in respect of which such default has been made shall whether
such order was made before or after the commencement of the Essential Commodities
(Amendment) Act, 1984, and whether the liability of such person to pay or deposit such amount
arose before or after such commencement be recoverable by Government together with simple
interest due thereon computed at the rate [ 54 fifteen per cent. 54 ] per annum from the date of
such default to the date of recovery of such amount, as an arrears of land revenue [ 55 or as a
public demand 55 ].


(2) The amount recovered under sub-section (1) shall be dealt with in accordance with the order
under which the liability to pay or deposit such amount arose.


                                                                                                      42
(3) Notwithstanding anything contained in any other law for the time being in force or any
contract to the contrary, no Court, Tribunal or other authority shall grant anyinjunction or make
any order prohibiting or restraining any Government from recovering any amount as an arrear of
land revenue [ 56 or as a public demand 56 ] in pursuance of the provisions of sub-section (1).


(4) If any order, in pursuance of which any amount has been recovered by Government as an
arrear of land revenue [ 57 or as a public demand 57 ] under sub-section (1) is declared by a
competent Court, after giving to the Government a reasonable opportunity of being heard, to be
invalid, the Government shall refund the amount so recovered by it to the person
from whom it was recovered, together with simple interestdue thereon, computed at the rate of [
58 fifteen per cent. 58 ] per annum, from the date of recovery of such amount to the
date on which such refund is made.
Explanation :
For the purposes of this section, "Government" means the Government by which the concerned
order under Sec. 3 was made or where such order was made by an officer or authority
subordinate to any Government, that Government. 53 ] Section 10

Sec:10 OFFENCES BY COMPANIES.

(1) If the person contravening an order made under Sec. 3 is a company, every person who, at the
time the contravention was committed, was in charge of, and was responsible to, the company
for the conduct of the business of the company as well as the company, shall be deemed to be
guilty of the contravention and shall be liable to be proceeded against and punished accordingly
:
Provided that nothing contained in this sub-section shall render any such person liable to any
punishment if he proves that the contravention took place without his knowledge or
that he exercised all due diligence to prevent such contravention.

(2) Notwithstanding anything contained in sub-section (1),where an offence under this Act has
been committed by a company and it is proved that the offence has been committed
with the consent or connivance of, or is attributable to any neglect on the part of, any Director,
Manager, Secretary or other officer of the company, such director, manager,



                                                                                                     43
secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to
be proceeded against and punished accordingly.


Explanation :
For the purposes of this section,

a) "company" means any body corporate, and includes a firm or other association of individuals;
and (b) "director" in relation to a firm means a partner in the
firm. Section 10-C
10-C PRESUMPTION OF CULPABLE MENTAL STATE.

(1) In any prosecution for any offence under this Act which requires a culpable mental state on
the part of the accused, the Court shall presume the existence of such mental state
but it shall be a defence for the accused to prove the fact that he had no such mental state with
respect to the act charged as an offence in that prosecution.
Explanation :
In this section, "culpable mental state" includes intention, motive, knowledge of a fact and the
belief in, or reason to believe, a fact.
(2) For the purposes of this section, a fact is said to the proved only when the Court believes it to
exist beyond reasonable doubt and not merely when its existence isestablished by a reponderance
of probability. 67 ] Section 11
11 Cognizance of offences.
No Court shall take cognizance of any offence punishable under this Act except on a report in
writing of the facts constituting such offence made by a person who is a public servant as defined
in Sec. 21 of the Indian Penal Code (45 of 1860) [ 68 or any person aggrieved or any recognised
consumer association, whether such person is a member of that association or not 68 ].
[ 69 Explanation :
For the purposes of this section and Sec. 12-AA. 70
"recognised consumer association" means a voluntary consumer association registered under the
Companies Act, 1956(1 of 1956) or any other law for the time being in force. 69 ]




                                                                                                      44
Sec: 26. BAR OF JURISDICTION.
No order passed or proposal made under this Act shall be appeasable except as provided therein
and no civil court shall have jurisdiction in respect of any matter Which the Appellate Authority
or the Board is empowered by, or under, this Act to determine and no injunction shall be granted
by any court or other authority in respect of any action taken or to be taken in pursuance of any
power conferred by or under this Act.



                                        Industrial Policy

Main features

objectives of the Industrial Policy of the Government are –

  to maintain a sustained growth in productivity;

  to enhance gainful employment;

  to achieve optimal utilisation of human resources;

  to attain international competitiveness and

  to transform India into a major partner and player in the global arena.

Policy focus is on –

  Deregulating Indian industry;

  Allowing the industry freedom and flexibility in responding to market forces and

  Providing a policy regime that facilitates and fosters growth of Indian industry.

Policy measures

Some of the important policy measures announced and procedural simplifications undertaken to
pursue the above objectives are as under:


                                                                                               45
i) Liberalisation of Industrial Licensing Policy

The list of items requiring compulsory licensing is reviewed on an ongoing basis. At present,
only six industries are under compulsory licensing mainly on account of environmental, safety
and strategic considerations. Similarly, there are only three industries reserved for the public
sector. The lists of industries reserved for the public sector and of items under compulsory
licensing are at Appendix III and IV respectively.

ii) Introduction of Industrial Entrepreneurs’ Memorandum(IEM)

Industries not requiring compulsory licensing are to file an Industrial Entrepreneurs’
Memorandum (IEM) to the Secretariat for Industrial Assistance (SIA). No industrial approval is
required for such exempted industries. Amendments are also allowed to IEM proposals filed
after 1.7.1998.

iii) Liberalisation of the Locational Policy

A significantly amended locational policy in tune with the liberlised licensing policy is in place.
No industrial approval is required from the Government for locations not falling within 25 kms
of the periphery of cities having a population of more than one million except for those industries
where industrial licensing is compulsory. Non-polluting industries such as electronics, computer
software and printing can be located within 25 kms of the periphery of cities with more than one
million population. Permission to other industries is granted in such locations only if they are
located in an industrial area so designated prior to 25.7.91. Zoning and land use regulations as
well as environmental legislations have to be followed.

iv) Policy for Small Scale Industries

Reservation of items of manufacture exclusively for the small scale sector forms an important
focus of the industrial policy as a measure of protecting this sector. Since 24th December 1999,
industrial undertakings with an investment upto rupees one crore are within the small scale and
ancillary sector. A differential investment limit has been adopted since 9th October 2001 for 41




                                                                                                   46
reserved items where the investment limit upto rupees five crore is prescribed for qualifying as a
small scale unit. The investment limit for tiny units is Rs. 25 lakhs.

749 items are reserved for manufacture in the small scale sector. All undertakings other than the
small scale industrial undertakings engaged in the manufacture of items reserved for manufacture
in the small scale sector are required to obtain an industrial licence and undertake an export
obligation of 50% of the annual production. This condition of licensing is, however, not
applicable to those undertakings operating under 100% Export Oriented Undertakings Scheme,
the Export Processing Zone (EPZ) or the Special Economic Zone Schemes (SEZs).

V) Non-Resident Indians Scheme

The general policy and facilities for Foreign Direct Investment as available to foreign
investors/company are fully applicable to NRIs as well. In addition, Government has extended
some concessions specially for NRIs and overseas corporate bodies having more than 60% stake
by the NRIs. These inter-alia includes (i) NRI/OCB investment in the real estate and housing
sectors upto 100% and (ii) NRI/OCB investment in domestic airlines sector upto 100%.

  NRI/OCBs are also allowed to invest upto 100% equity on non-repatriation basis in all
activities except for a small negative list. Apart from this, NRI/OCBs are also allowed to invest
on repatriation/non-repatriation under the portfolio investment scheme.

vi) Electronic Hardware Technology Park (EHTP)/Software Technology Park (STP)
scheme

For building up strong electronics industry and with a view to enhancing export, two schemes
viz. Electronic Hardware Technology Park (EHTP) and Software Technology Park (STP) are in
operation. Under EHTP/STP scheme, the inputs are allowed to be procured free of duties.

The Directors of STPs have powers to approved fresh STP/EHTP proposals and also grand post-
approval amendment in repsect of EHTP/STP projects as have been given to the Development
Commissioners of Export Processing Zones in the case of Export Oriented Units. All other
application for setting up projects under these schemes, are considered by the Inter-Ministerial



                                                                                                 47
Standing Committee (IMSC) Chaired by Secretary (Information Technology). The IMSC is
serviced by the SIA.

vii) Policy for Foreign Direct Investment (FDI)

Promotion of foreign direct investment forms an integral part of India’s economic policies. The
role of foreign direct investment in accelerating economic growth is by way of infusion of
capital, technology and modern management practices. The Department has put in place a liberal
and transparent foreign investment regime where most activities are opened to foreign
investment on automatic route without any limit on the extent of foreign ownership. Some of the
recent initiatives taken to further liberalise the FDI regime, inter alia, include opening up of
sectors such as Insurance (upto 26%); development of integrated townships (upto 100%);
defence industry (upto 26%); tea plantation (utp 100% subject to divestment of 26% within five
years to FDI); Encenhancement of FDI limits in private sector banking, allowing FDI up to
100% under the automatic route for most manufacturing activities in SEZs; opening up B2B e-
commerce; Internet Service Providers (ISPs) without Gateways; electronic mail and voice mail
to 100% foreign investment subject to 26% divestment condition; etc.

The Department has also strengthened investment facilitation measures through Foreign
Investment Implementation Authority (FIIA).

INDUSTRIAL LICENSING

Industrial Licensing Policy

2.1 Industrial Licenses are regulated under the Industries (Development & Regulation) Act,
1951. With progressive liberalization and deregulation of the economy the requirement of
industrial licensing have been substantially reduced. At present industrial licence for
manufacturing is required only for the following:

i. Industries retained under compulsory licensing,
ii. Manufacture of items reserved for small scale sector by non-SSI units; and
iii. When the proposed location attracts locational restriction

Industrial Licensing Policy

2.2 The following industries require compulsory industrial license under I (D&R) Act /
appropriate authority:


                                                                                                   48
i. Distillation and brewing of alcoholic drinks.
ii. Cigars and cigarettes of tobacco and manufactured tobacco substitutes;
iii. Electronic Aerospace and defence equipment: all types;
iv. Industrial explosives, including detonating fuses, safety fuses, gun powder, nitrocellulose and
matches;
v. Hazardous chemicals;
a. Hydrocyanic acid and its derivatives
b. Phosgene and its derivatives
c. Isocyanates and di-isocyanates of hydrocarbon, not elsewhere specified (example: Methyl
Isocyanate).
Small-Scale Sector
2.3 An industrial undertaking is defined as a small-scale unit if the capital investment in plant
and machinery does not exceed Rs 10 million.
Small-scale units can get registered with the Directorate of Industries/District Industries Centre
of the State Government. Such units can manufacture any item, and are also free from locational
restrictions.
The Government has reserved certain items for exclusive manufacture in the small-scale sector.
Manufacture of items reserved for small-scale secto
2.4 Non small-scale units can manufacture items reserved for the small-scale sector only after
obtaining an industrial license. In such cases, the non-small scale unit is required to undertake an
obligation to export 50 per cent of the production of SSI reserved items.r
i) In the case of Electronics, Computer software and Printing and any other industry, which may
be notified in future as “non polluting industry”.
The location of industrial units is subject to applicable local zoning and land use regulations and
environmental regulations.

11. LICENSING OF NEW INDUSTRIAL UNDERTAKINGS.

(1) No person or authority other than the Central Government, shall, after the commencement of
this Act, establish any new industrial undertaking, except under and in accordance with a licence
issued in that behalf by the Central Government :

Provided that a Government other than the Central Government may, with the previous
permission of the Central Government, establish a new industrial undertaking.

(2) A licence or permission under sub-section (1) may contain such conditions including, in
particular, conditions as to the location of the undertaking and the minimum standards in respect
of size to be provided therein as the Central Government may deem fit to impose in accordance
with the rules, if any, made under section 30.
11B. POWER OF CENTRAL GOVERNMENT TO SPECIFY THE REQUIREMENTS
WHICH SHALL BE COMPLIED WITH BY THE SMALL SCALE INDUSTRIAL
UNDERTAKINGS.

(1) The Central Government may, with a view to ascertaining which ancillary and small scale
industrial undertakings need supportive measures, exemptions or other favourable treatment
under this Act to enable them to maintain their viability and strength so as to be effective in :-



                                                                                                     49
(a) promoting in a harmonious manner the industrial economy of the country and easing the
problem of unemployment, and

(b) securing that the ownership and control of the material resources of the community are so
distributed as best to subserve the common goods,

specify, having regard to the factors mentioned in sub-section (2), by notified order, the
requirements which shall be complied with by an industrial undertaking to enable it to be
regarded, for the purposes of this Act, as an ancillary, or a small scale industrial undertaking and
different requirements may be so specified for different purposes or with respect to industrial
undertakings engaged in the manufacture or production of different articles :

Provided that no industrial undertaking shall be regarded as an ancillary industrial undertaking
unless it is, or is proposed to be, engaged in :-

(i) the manufacture of parts, components, sub-assemblies, tooling or intermediates; or

(ii) rendering of services, or supplying or rendering, not more than fifty per cent of its production
or its total services, as the case may be, to other units for production of other articles.

(2) The factors referred to in sub-section (1) are the following, namely :-

(a) the investment by the industrial undertaking in :-

(i) plant and machinery, or

(ii) land, buildings, plant and machinery;

(b) the nature of ownership of the industrial undertaking;

(c) the smallness of the number of workers employed in the industrial undertaking;

(d) the nature, cost and quality of the product of the industrial undertaking;

(e) foreign exchange, if any, required for the import of any plant or machinery by the industrial
undertaking; and

(f) such other relevant factors as may be prescribed.

(3) A copy of every notified order proposed to be made under sub-section (1) shall be laid in
draft before each House of Parliament, while it is in session, for a total period of thirty days
which may be comprised in one session or in two or more successive sessions, and if, before the
expiry of the session immediately following the session or the successive sessions aforesaid, both
Houses agree in disapproving the issue of the proposed notified order or both Houses agree in
making any modification in the proposed notified order, the notified order shall not be made or,



                                                                                                   50
as the case may be, shall be made only in such modified form as may be agreed upon by both the
Houses.

(4) Notwithstanding anything contained in sub-section (1), an industrial undertaking which,
according to the law for the time being in force, fell, immediately before the commencement of
the Industries (Development and Regulation) Amendment Ordinance, 1984, under the definition
of an ancillary, or small scale industrial undertaking, shall, after such commencement, continue
to be regarded as an ancillary or small scale industrial undertaking for the purposes of this Act
until the definition aforesaid is altered or superseded by any notified order made under sub-
section (1).

11A. LICENCE FOR PRODUCING OR MANUFACTURING NEW ARTICLES.

The owner of an industrial undertaking not being the Central Government which is registered
under section 10 or in respect of which a licence or permission has been issued under section 11
shall not produce or manufacture any new article unless -

(a) in the case of an industrial undertaking registered under section 10, he has obtained a licence
for producing or manufacturing such new article; and

(b) in the case of an industrial undertaking in respect of which a licence or permission has been
issued under section 11, he has had the existing licence or permission amended in the prescribed
manner.


12. REVOCATION AND AMENDMENT OF LICENCES IN CERTAIN CASES.

(1) If the Central Government is satisfied, either on a reference made to it in this behalf or
otherwise, that any person or authority, to whom or to which, a licence has been issued under
section 11, has, without reasonable cause, failed to establish or to take effective steps to establish
the new industrial undertaking in respect of which the licence has been issued within the time
specified therefor or within such extended time as the Central Government may think fit to grant
in any case, it may revoke the licence.

(2) Subject to any rules that may be made in this behalf, the Central Government may also vary
or amend any licence issued under section 11 :

Provided that no such power shall be exercised after effective steps have been taken to establish
the new industrial undertaking in accordance with the licence issued
in this behalf.

(3) The provisions of this section shall apply in relation to a licence issued under section 11A or
where a licence has been amended under that section to the amendment thereof, as they apply in
relation to a licence issued under section 11.
13. FURTHER PROVISION FOR LICENSING OF INDUSTRIAL UNDERTAKINGS IN
SPECIAL CASES.



                                                                                                   51
(1) No owner of an industrial undertaking, other than the Central Government, shall -

(a) in the case of an industrial undertaking required to be registered under section 10, but which
has not been registered within the time fixed for the purpose under that section, carry on the
business of that undertaking after the expiry of such period, or

(b) in the case of an industrial undertaking the registration in respect of which has been revoked
under section 10A carry on the business of the undertaking after the revocation, or

(c) in the case of an industrial undertaking to which the provisions of this Act did not originally
apply but became applicable after the commencement of this Act for any reason, carry on the
business of the undertaking after the expiry of three months from the date on which the
provisions of this Act became so applicable, or

(d) effect any substantial expansion of an industrial undertaking which has been registered or in
respect of which a licence or permission has been issued, or

(e) change the location of the whole or any part of an industrial undertaking which has been
registered, except under, and in accordance with, a licence issued in that behalf by the Central
Government, and in the case of a State Government, except under and in accordance with the
previous permission of the Central Government.

(2) The provisions of sub-section (2) of section 11 and of section 12 shall apply, so far as may
be, in relation to the issue of licences or permissions to any industrial undertaking referred to in
this section as they apply in relation to the issue of licences or permissions to a new industrial
undertaking.

Explanation : For the purposes of this section, "substantial expansion" means the expansion of an
existing industrial undertaking which substantially increases the productive capacity of the
undertaking, or which is of such a nature as to amount virtually to a new industrial undertaking,
but does not include any such expansion as is normal to the undertaking having regard to its
nature and the circumstances relating to such expansion

14. PROCEDURE FOR THE GRANT OF LICENCE OR PERMISSION.

Before granting any licence or permission under section 11, section 11A, section 13 or section
29B, the Central Government may require such officer or authority as it may appoint for the
purpose, to make a full and complete investigation in respect of applications received in this
behalf and report to it the result of such investigation and in making any such investigation, the
officer or authority shall follow such procedure as may be prescribed.

15. POWER TO CAUSE INVESTIGATION TO BE MADE INTO SCHEDULED
INDUSTRIES OR INDUSTRIAL UNDERTAKINGS.

Where the Central Government is of the opinion that -



                                                                                                   52
(a) in respect of any scheduled industry or industrial undertaking or undertakings -

(i) there has been, or is likely to be, a substantial fall in the volume of production in respect of
any article or class of articles relatable to that industry or manufactured or produced in the
industrial undertaking or undertakings, as the case may be; for which, having regard to the
economic conditions prevailing, there is no justification; or

(ii) there has been, or is likely to be, a marked deterioration in the quality of any article or class
of articles relatable to that industry or manufactured or produced in the industrial undertaking or
undertakings, as the case may be, which could have been or can be avoided; or

(iii) there has been or is likely to be a rise in the price of any article or class of articles relatable
to that industry or manufactured or produced in the industrial undertaking or undertakings, as the
case may be, for which there is no justification; or

(iv) it is necessary to take any such action as is provided in this Chapter for the purpose of
conserving any resources of national importance which are utilised in the industry or the
industrial undertaking or undertakings, as the case may be; or

(b) any industrial undertaking is being managed in a manner highly detrimental to the scheduled
industry concerned or to public interest;

The Central Government may make or cause to be made a full and complete investigation into
the circumstances of the case by such person or body of persons as it may appoint for the
purpose.


16. POWERS OF CENTRAL GOVERNMENT ON COMPLETION OF
INVESTIGATION UNDER SECTION 15.

(1) If after making or causing to be made any such investigation as is referred to in section 15 the
Central Government is satisfied that action under this section is desirable, it may issue such
directions to the industrial undertaking or undertakings concerned as may be appropriate in the
circumstances for all or any of the following purposes, namely :-

(a) regulating the production of any article or class of articles by the industrial undertaking or
undertakings and fixing the standards of production;

(b) requiring the industrial undertaking or undertakings to take such steps as the Central
Government may consider necessary to stimulate the development of the industry to which the
undertaking or undertakings relates or relate;

(c) prohibiting the industrial undertaking or undertakings from resorting to any act or practice
which might reduce its or their production, capacity or economic value;




                                                                                                       53
(d) controlling the prices, or regulating the distribution, of any article or class of articles which
have been the subject-matter of investigation.

(2) Where a case relating to any industry or industrial undertaking or undertakings is under
investigation, the Central Government may issue at any time any direction of the nature referred
to in sub-section (1) to the industrial undertaking or undertakings concerned, and any such
direction shall have effect until it is varied or revoked by the Central Government.

29B.         POWER             TO          EXEMPT              IN         SPECIAL             CASES.

(1) If the Central Government is of opinion, having regard to the smallness of the number of
workers employed or to the amount invested in any industrial undertaking or to the desirability
of encouraging small undertakings generally or to the stage of development of any scheduled
industry, that it would not be in public interest to apply all or any of the provisions of this Act
thereto, it may, by notification in the Official Gazette, exempt, subject to such conditions as it
may think fit to impose, any industrial undertaking or class of industrial undertakings or any
scheduled industry or class of scheduled industries as it may specify in the notification from the
operation of all or any of the provisions of this Act or of any rule or order made there under.

(2) Where any notification under sub-section (1) granting any exemption is cancelled, no owner
of any industrial undertaking to which the provisions of section 10, section 11, section 11A or
clause (d) of sub-section (1) of section 13 would have applied, if the notification under sub-
section (1) had not been issued, shall carry on the business of the undertaking after the expiry of
such period as may be specified in the notification canceling the exemption except under and in
accordance with a licence issued in this behalf by the Central Government and, in the case of a
State Government,         except    under and in           accordance     with    the previous
permission                of                the               Central                Government.

(2A) In particular, and without prejudice to the generality of the provisions of sub-section (1),
the Central Government may, if it is satisfied, after considering the recommendations made to it
by the Advisory Committee constituted under sub-section (2B), that it is necessary so to do for
the development and expansion of ancillary, or small scale industrial undertakings by notified
order, direct that any article or class or articles specified in the First Schedule shall, on and from
such date as may be specified in the notified order (hereafter in this section referred to as the
"date of reservation") be reserved for exclusive production by the ancillary, or small scale
industrial undertakings (hereafter in this section referred to as "reserved article").

(2B) The Central Government shall, with a view to determining the nature of any article or class
of articles that may be reserved for production by the ancillary, or small scale industrial
undertakings, constitute an Advisory Committee consisting of such persons as have, in the
opinion of that Government, the necessary expertise to give advice on the matter.

(2C) The Advisory Committee shall, after considering the following matters, communicate its
recommendations      to       the         Central       Government,         namely      :-

(a) the nature of any article or class of articles which may be produced economically by the



                                                                                                        54
ancillary,            or              small           scale            industrial         undertakings;

(b) the level of employment likely to be generated by the production of such article or class of
articles    by     the    ancillary,     or    small     scale     industrial    undertakings;

(c)   the     possibility   of   encouraging        and   diffusing    entrepreneurship   in   industry;

(d) the prevention of concentration of economic power to the common detriment; and

(e)    such      other      matters      as   the     Advisory        Committee     may    think     fit.

(2D) The production of any reserved article or class of reserved articles by any industrial
undertaking (not being an ancillary, or small scale industrial undertaking) which, on the date of
reservation, is engaged in, or has taken effective steps for, the production of any reserved article
or class of reserved articles, shall, after the commencement of the Industries (Development and
Regulation) Amendment Act 1984, or, as the case may be, the date of reservation, whichever is
later, be subject to such conditions as the Central Government may, by notified order, specify.

(2E) While specifying any condition under sub-section (2D), the Central Government may take
into consideration the level of production of any reserved article or class of reserved articles,
achieved immediately before the date of reservation, by the industrial undertaking referred to in
sub-section     (2D),     and     such     other    factors     as     may      be     relevant.

(2F) Every person or authority, not being the Central Government, who, or which, is registered
under section 10 or to whom, or to which, a licence has been issued or permission has been
granted under section 11 for the production of any article or class of articles which has, or have,
been subsequently reserved for the ancillary, or small scale industrial undertakings, shall
produce, such registration certificate, licence or permission, as the case may be, within such
period as the Central Government may, by notified order, specify in this behalf, and the Central
Government may enter therein all or any of the conditions specified by it under sub-section (2D),
including the productive capacity of the industrial undertakings and other prescribed particulars.

(2G) The owner of every industrial undertaking (not being an ancillary, or small scale industrial
undertaking) which, immediately before the commencement of the Industries (Development and
Regulation) Amendment Act, 1984, or the date of reservation, whichever is later :-

(a) was engaged in the production of any article or class of articles, which has, or have been
reserved   for    the   ancillary,   or   small      scale    industrial   undertakings,    or

(b) had before such commencement or before the date of such reservation, as the case may be,
taken effective steps for commencing the production of such reserved article or class of reserved
articles,

without being registered under section 10 or in respect of which a licence or permission has not
been issued under section 11, shall refrain from the production of such reserved article or class of
reserved articles, on and from the date of expiry of three months from such commencement or



                                                                                                      55
from       the       date      of       such       reservation,       whichever        is      later.

(2H) Every notified order made under sub-section (2A) shall be laid, as soon as may be after it is
made, before each House of Parliament, while it is in session, for a total period of thirty days,
which may be comprised in one session or in two or more successive sessions, and if, before the
expiry of the session immediately following the session or the successive sessions aforesaid, both
Houses agree in making any modification in the notified order or both Houses agree that the
notified order should not be made, the notified order shall thereafter have effect only in such
modified form or be of no effect as the case may be; so, however, that any such modification or
annulment shall be without prejudice to the validity of anything previously done under that
notified        order.

(3) The provisions of this Act shall apply, so far as may be, in relation to the issue of a licence or
permission to any industrial undertaking referred to in sub-section (2) as they apply in relation to
the issue of a licence or permission to a new industrial undertaking.

Sum UP:

   i.      the regulation of Sick industries are covered under the Sick Industries legislation, the
           provisions of the act which are dealing with, power of the board, windup of SICA
           companies, constitution of BIFR board, are dealt in detail.
   ii.     Essential commodities act, which is mainly dealt with the controlling the people who
           are responsible under the act to dealt with offences under the essential commodities
           act,
   iii.    The industrial and licensing policy has created for emergence of IDR act to deal about
           the industrial licensing.
   iv.     The provision of the IDR act, dealing with powers and procedure to issue the
           industrial license are also covered elaborately in this part.




                                                                                                   56