INDORE TEXTILES LTD. AND ANR. versus UNION OF INDIA AND ANR.

Citation: [1998] 2 S.C.R. 1 · Decided: 02-03-1998 · Supreme Court of India · Bench: M.M. PUNCHHI · Disposal: Dismissed

Judgment (excerpt)

·-
-~ 
INDORE TEXTILES LTD. AND ANR. 
A 
v. 
UNION OF INDIA AND ANR. 
MARCH 2, 1998 
[M.M. PUNCHHI, CJ!., K.T. THOMAS AND.B.N. KJRPAL, JJ.] 
B 
Indore Textiles Ltd (Upkram ka.Arjan Aur Antaran) Adhiniyam, 1986: 
.Acquisitio~ .of Undertaking by Act-Preamble indicating that acquisition of 
undertaking by State Government. was ·to secure proper managemnt of 
Company-Management already taken over by Central Government by Order C 
passed under IDR Act-Validity of Act challenged-Held-Preamble, and Act 
indicate that Act not only to. secure proper Management of Undertaking but 
also to ensure that production of cloth, which is in ihe interest of the country, 
should continue-Validity of the Act upheld 
Industries (pevelopment & Regulation) Act, 1951 : Sections 18 Mand D 
· 20 : Government's power to take over the Management of an Undertaking-
After commencement of !DR ACT, State Government cannot take over 
management of any undertaking under any law in force-Acquisition under 
Adhiniyam of 1986 results in take over of management of company-Held-
Section 20 does not preclude State Jegislature from exercising legislative E . 
power-The impugned Adhiniyam was enacted in exercise of that legislative 
power-Takeover of management only incidental to acquisition of undertaking 
under Adhiniyam-Not prohibited by Section 20. 
·Appellant was a public limited company. The Central Government vide 
Order dated 17.8.77 passed under Section 18 AA(l)(b) of the IDR Act, took F 
°''.er the management of the Mill after it had been closed for sometime. The 
said Order was chai'lenged as being unjustified, by way of a writ petition in 
the High Court which dismissed the petition. Hence this .appeal; 
The initial Order under Section 18AA was subsequently.extended till G 
ll~h February 1986. 
One day before the extended period was lo 'come to an end, the Governor 
promulgated an Ordinance ~hich was subsequently replaced by the Impugned 
Act, by which the company was acquired by the State Government and its 
management vested with the State Government 
1 
H 
2 
SUPREME COURT REPORTS 
[1998] 2 S.C.R. 
A 
Hence, during the pendency of the Appeal, the petitioner also filed a 
writ petition before this Court challenging the validity of the Act. It was 
contended, inter a/ia, that the object of the Act, as reflected in the Preamble 
--< 
was to secure the proper management of the company. Since the management 
of the Company had already been taken over by the Central Government 
under the IDR Act, the impugned Act could not have been passed by the State 
B Gov~rnment It was also contended that the Union alone and not the State was 
competent to legislate the Act; that since the IDR Act gives power to Central 
Government to take over the management of an und\!rtaking and Section 20 
of IDR Act provides that after its commencement no State Government shall 
have the power to take over management of an undertaking under any law 
C in force, the Impugned Act for acquisition by which the management is taken 
over by the State Government is barred by Section 20 of IDR Act, and that 
since the management of the Central and State governments overlapped, the 
Act was invalid. 
Dismissing the writ petition and the Appeal, this Court 
D 
HELD: 1.1. The validity of the Adhiniyam is upheld. The preamble of 
the Act does not show that it was passed only to secure proper management 
of the company. The reading of the preamble and of the Act as a whole makes 
it clear that the legislation was undertaken with a view to secure the proper 
management of the same and, to ensure that the Mill which had been closed 
E at the time the Notification under Section 18 AA of the IDR Act was issued 
should continue its activity of production of cloth which was in the interest 
of the country. As a result of the acquisition the Management of the 
Undertaking would obviously vest with the State Government. [6-C-D] 
1.2. Though in the Writ Petition the principal challenge to the Act · 
F was that the State legislature was not competent to promulgate the Act 
inasmuch as the appropriate entry was 52 of List 1 of the Seventh Schedule, 
,._ - · 
this contention was not raised at the time of arguments presumably because 
such contention in similar enactments had been rejected by this Court. 
[5-D] 
G 
lshwari Khetan Sugar Mills (P.) Ltd. & Ors. v. St. of U.P. & Ors., (1980] 
4 SCC 136 and Mahesh Kumar Saharia v. St. of Nagaland & Ors., (1997] 
8 sec 176, referred to. 
1.3. The question 

Excerpt shown. Read the full judgment & AI analysis in Lexace.