MAHESH KUMAR SAHARIA versus STATE OF NAGALAND AND ORS.

Citation: [1997] SUPP. 4 S.C.R. 458 · Decided: 14-10-1997 · Supreme Court of India · Bench: A.S. ANAND · Disposal: Dismissed
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Judgment (excerpt)

A 
B 
c 
MAHESH KUMAR SAHARIA 
11. 
STA TE OF NAG ALAND AND ORS. 
OCTOBER 14, 1997 
[DR. A.S. ANAND AND K. VENKATASWAMI, JJ.] 
Industries (Development and Regulation) Act, 195/-Sections 20, 2 & 
Sch.-/ Item 36(1)-Nagaland Forest Products Ltd. (Acquisition of Shares) 
Act, 1982, Sec. 3-Acquisition of Shares of the Company by the State Govt. 
amounted to acquisition of ownership of the Company-Legislative 
Competence of State Legislature-Held, the vesting of management or control 
of the company was incidental to the· ownership and not a take-over of the 
management or control of the Company-Hence, it did not fall within the 
mischief of Sec. 20 of the Central Act which is concerned only with the 
D control and management of the undertaking and not with its ownership. 
E 
The appellant was a Managing Director of a plywood factory. To establish 
the company the appellant's father and the State Government entered into an 
agreement, by which the appellant's group and State Government subscribed 
equally, i.e. 50% of the equity shares.in the company. 
The State Govt. vide Ordinance I ofl981 (subsequently replaced by the 
Act) took over all the assets, books of account, registers etc. of th_~ company. 
Appellant challenged the Ordinance/Act before the High Court on various 
grounds including legislative competency of the State as the taking over of 
F the assets (Acquisition of Shares of the company) amounts to taking over the 
of management or control of the Company and this field was occupied by 
Parliament as contemplated by Section 20 of the Industries (Development and 
Regulation) Act, 1951. The High Com:t rejected the challenge. Hence, this 
appeal 
G 
Dismissing the appeal, the Court 
HELD : I.I. Merely because an industry is a declared industry under 
Entry 52 List-I, that by itself will not put an embargo on the State Legislature 
to pass legislation within its competence. It has also been found in many of 
the cases that mere incidental trenching does not warrant the striking down 
H of an impugned Act. On examination of the various provisions of the State 
458 
M.K. SAHARIAv. STATE 
459 
Act there arise no doubt that it is for acquisition of property in 'S' class A 
shares of the company and in" pith and substance it falls under Entry 42 of 
List-HI, and is not in conflict with Entries 52 or 7 of List-I. [461-H; 462-A) 
.1.2. In consequence of vesting of shares of the Company by virtue of 
Section 3 of the State Act, the Government exercises rights as a shareholder B 
and incidentally acquires the control and management of the Company. But 
that will not fall under the mischief of Section 20 of the Central Act because 
section 20 prohibits the State Government from taking over the management 
or control dehors ownership of the undertaking. The Central Act is concerned 
with the control and management of the undertaking and not with its 
ownership. Ifby acquiring ownership, incidentally management and control C 
of the company also vests with that, it will be incidental and such an exercise 
of legislative power is not prohibited under Section 20 of the Central Act. 
[464-H; 465-A) 
1.3. This Court's decision in lshwari Khetan case has been followed/ 
applied in a number of cases right up to the present date. Merely because a D 
particular aspect had not been expressly considered in that case will not take 
away the binding effect of that decision. Hence, the ruling of lshwari Khetan 
case does not require reconsideration. (469-A) 
lshwari Khetan Sugar Mills (P) Ltd. and Ors. v. State of Uttar Pradesh 
& Ors., [1980) 4 sec 136, followed: 
E 
Smt. Somavati & Ors. v. The State of Punjab&. Ors., (1963) 2 SCR 774; 
T. Govindaraja Mudaliar Etc .. Etc. v. The State a/Tamil Nadu & Ors., (1973) 
3 SCR 222; Orissa Cement Ltd v. State o/Orissa & Ors., (1991) Supp. I SCC 
430; Indian Aluminium Company Limited & Anr. v. Karnataka Electricity F 
Board & Ors., (1992) 3 SCC 580; Dalmia Industries Ltd. & Anr. v. State of 
U.P. & Anr., (1994) 4 SCC 583; Ajay Kumar Singh & Ors. v. State of Bihar & 
Ors., (1994) 4 SCC 401; Mahabir Sugar Mills Ltd. & Anr. v. State o/U.P. & 
Ors., (1996] 10 SCC 259 and Mohd. Ayub Khan v. Commissioner of Police, 
Madras and Anr., (1965) 2 SCR 884, referred to. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3423 of 1984. 
From the Judgment and Order dated 8.8.83 of the Assam High Court in _ 
C.R. No. 67of1982. 
G 
Sunil Gupta, Mrs. Anjali Verma and Nikhil M. Sakhardande for Mis. JB. H 
460 
SUPREME C
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