NATIONAL TEXTILE CORPORATION LTD. & ORS. versus SITARAM MILLS LTD. & ORS. ETC.

Citation: [1986] 2 S.C.R. 187 · Decided: 04-04-1986 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Appeal(s) allowed

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Judgment (excerpt)

J.. 
187 
NATIONAL TEXTILE CORPORATION LTD. & ORS. 
V• 
SITARAM MILLS LTD. & ORS. ETC. 
APRIL 4, 1986 
[R.S. PATHAK, A.P. SEN AND D.P. MADON, JJ.] 
Textile Undertakings (Taking over of Management) Act, 
1983, sub-section 2 of section 3 -
Meaning of the words 
"assets in relation to the textile undertaking" - Whether the 
surplus lands appurtenant to the mill are separable as 
belonging to the "Real Estate Business" carried on by the sick 
11 and, therefore, do not fall within section 3(2). 
The only question involved in the appeal was whether the 
so-called Real Estate Division of the Company's textile 
undertaking Shree Sitaram Mills was a separate and distinct 
business and therefore the surplus lands did form part of the 
"assets in relation to the textile undertaking" within the 
meaning of sub-section (2) of section 3 of the Textile 
Undertakings (Taking Over of Management) Act, 1983. In dealing 
with the question, the Court referred to the history of the 
y matter. The mill was established in 1875 undeor the management 
of Messrs Shapurji Broacha Mills Limited on a very large tract 
of land. The only real estate that it required in the later 
19th 
century 
cgmprised 
of 
1 , 05, 008 
square yards 
which 
undoubtedly was an asset of the textile undertaking although 
l 
the actual mill precincts were spread over 50, 749 square 
yards. Early in the 20th Century, it changed hands a few times 
and ultimately it was taken over by the Tantias in 1955 as a 
grey unit. As revealed from the Company's balance-sheets, 
~ince more than 7 years before the taking over the networth of 
the Company had been in the negative. In the early 70s, the 
Tantias due to spiral rise in land values in the Metropolitan 
City of Greater Bombay devised a plan to dispose of vacant 
lands appurtenant to the textile mill. Till the date of taking 
over, the Board of Directors were engaged in disposing of the 
Company's surplus lands for purposes of raising finance for 
---,. the textile business. In the early 1978-79, the networth of 
the Company was minus Rs. 2.80 crores, in 1979-80 minus 3.54 
crores, in 1980-81 minus Rs. 3.91 crores, in 1981-82 minus 
6.56 crores and in 1982-83 ~ 
8.67 crores. Further, asa 
result of the general strike called on January 18, 1982 the 
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183 
SUPREME COURT REPORTS 
[1986] 2 S.C.R. 
company further suffered financially along with other textile~ 
mills in Bombay. The mill not only had the deficit for so cany 
years in the negative but the losses had been increasing at an 
·alarming rate. The liabilities which stood at Rs. 3.08 c~ores 
by the end of March 31, 1980 rose to Rs. 4. 70 crores at the 
end of March, 1981 and to Rs. 8.67 crores by the end of March, 
1933. All this showed that the mill stood in need of increas-~. 
ing ·-.financial 
assistance 
from 
commercial 
banks 
and· 
governmental and public financial institutions on concessional 
rates for its resuscitation. 
After the textile strike had been called off, it be~ 
im;ierative to consider the overall economic situation of all 
the textile mills in Greater Bombay and also to consider as to-t-" 
what was. the future outlook of such mills, particularly of 
those which were not in a position to recommence work due to 
financial' constraints. 
On December 3, 1981, the Central 
Goverrui.ant appointed an Investigation Committee under section 
15(a)(i) of the Industries (Development and Regulation) Act, 
1951 to find out the caus.e for the fall in production of the 
Company's textile undertaking. The Investigation Committee 
submitted its report in February 11,. 1983. In the meanwhile, 
the State Government of Maharashtra by an order dated March 
· 25, 1982 declared the company's textile undertaking tb be a 
relief undertkaing. At a meeting called by the Reserve Bank on 
·October 29, 1982, the textile mills affected by the strike/ 
were'classified into three categories on a general consensus,-
na:nely, Category I: Units which were viable before the strike 
and continued to be as such; Category II: Units which were 
"· , 
viable before the strike but-whose viability might have been 
'· marginally affected by it; and Category III: Units which were 
bad/sick and whose position had further deteriorated becauset"' 
of the ·strike. In November 1982, the respondents' textile 
Ulldertaking was placed in Category III. 
. 
,, 
_The Government of India accepted this categorisation. It 
was realised that none of the 13 mills fa

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