Holding

The Sick Textile Undertakings (Nationalisation) Act, 1974 is constitutionally valid and Kothandran Spg. Mills qualifies as a sick textile undertaking, so the writ petition is dismissed.

Summary

Kothandran Spg. Mills Pvt. Ltd. was taken over by the National Textile Corporation under the Sick Textile Undertakings (Taking Over of Management) Act, 1972, and later the Sick Textile Undertakings (Nationalisation) Act, 1974 came into force. The petitioners filed a writ petition under Article 32 challenging the constitutional validity of the 1974 Act and seeking restoration of the mill, contending that the mill had ceased to be a textile undertaking by 1969 and therefore fell outside the Act's scope. The Court examined whether the mill qualified as a "sick textile undertaking" under Section 2(j) and noted that it was listed in the First Schedule and its management had indeed been taken over, satisfying the definition. It further held that the 1974 Act, having been placed in the Ninth Schedule by the 39th Amendment, enjoys protection under Article 31‑B, and relied on precedents such as Minerva Mills, Waman Rao and Panipat Woollen to uphold its validity. Consequently, the petition was dismissed and each party was ordered to bear its own costs.

Issues considered

Whether the Sick Textile Undertakings (Nationalisation) Act, 1974 is constitutionally valid despite its inclusion in the Ninth Schedule and protection under Article 31‑B.
Whether Kothandran Spg. Mills Pvt. Ltd. falls within the definition of a "sick textile undertaking" under Section 2(j) of the Act.
Whether the petitioners can obtain relief under Article 32 of the Constitution against the nationalisation of their mill.

Legislation cited

Constitution of Indias. Article 31-B, s. Article 32
Industries (Development and Regulation) Act, 1951
Sick Textile Undertakings (Nationalisation) Act, 1974s. 2(j), s. 3
Sick Textile Undertakings (Taking Over of Management) Act, 1972

Subjects

Ninth ScheduleArticle 31-BNationalisationSick Textile UndertakingsConstitutional validityProperty rightsWrit petitionIndustrial takeover

Judgment

KOTHANDRAN SPG. MILLS PVT. LTD. & ANR.
A
v.
UNION OF INDIA & ORS.

MARCH 28, 1989

[R.S. PATHAK, CJ, E.S. VENKATARAMIAH, B

•
' RANGANATH MISRA, M.N. VENKATACHALIAH AND
N.D. OJHA, JJ.]

Sick Textile Undertakings (Nationalisation) Act, 1974.

Sections 2(j), 3 and First Schedule-Entry 96---Applicability of-
' Sick Textile Undertaking'-Legislative determination of the petitioner C
Mills.

Constitution of India: 1950: Article 31-B and Ninth Schedule-
Sick Textile Undertakings (Nationalisation) Act, 1974-Constitutional
validity of. D

Petitioner No. l, Kothandran Spg. Mills Pvt. Ltd., was taken over
under the provisions of the Sick Textile Undertakings (Taking Over of
Management) Act, 1972 and possession of the mill was taken by the
National Textile Corporation, respondent No. 2. Subsequently, the Sick
Textile Undertakings (Nationalisation) Act, 1974 came into force. E

The petitioners tiled a writ petition under Article 32 of the Con-
stitution challenging the vires of the Sick Textile Undertakings
(Nationalisation) Act, 1974 and that the mills be restored to them. It
was also submitted that the establishment had been closed down, and
the Textile Undertaking had completely disappeared by 1969 and there- F
fore the aforesaid Act did not apply to it.

Dismissing the writ petition,

HELD: I. The Sick Textile Undertakings (Nationalisation) Act,
1974 has been put into the 9th Schedule of the Constitution by the 39th G
Amendment and, therefore, has come under the umbrella of protection
provided under Article 31-B of the Constitution. II30C-D I

Minerva Mills Ltd. & Ors. v. Union of India & Ors., 11986] 4
S.C.C. 222; Waman Rao v. Union of India, 11981] 2 S.C.R. l; Panipat
Woollen and General Mills Company Ltd. & Anr. v. Union of India & H
127
128 SUPREME COURT REPORTS [1989] 2 S.C.R.

A Ors., [1986] 4 S.C.C. 368, applied. +
2. The First Schedule to the Act against Entry 96 shows the
Petitioner's Mills. There is a legislative determination that petitioner
company came within the definition of 'sick textile undertaking' as
provided in Section 2(j) of the Act. The petitioners have not alleged any
B
ma la fides against Parliament and rightly. I1308-C]

ORIGINAL JURISDICTION: Writ Petition No. 162 of 1977. •'

(Under Article 32 of the Constitution of India.) •

C Jitendra Sharma for the Petitioners.

T.V.S.N. Chari for the Respondents.

The Judgment of the Court was delivered by
D
RAN GANATH MISRA, J. This application under Art. 32 of the
Constitution is by two petitioners-petitioner no. 1, a private company
and the other a Director thereof. The petitioners have challenged the
vires of the Sick Textile Undertakings (Nationalisation) Act, 1974 (57
of 1974) and have asked for a direction to the respondents to restore -+·
the Mills to the petitioners in the same condition as it was on 31.10.1971
E when it was initially taken over.

Petitioners have alleged that the spinning mills previously
belonged to one S.R. Narasimhachari and three others. Mahalingam
Chettiar, husband of the second petitioner, purchased the said Mills in
1965. He was not at all aq uainted with the working of spinning mills
F and soon found that the affairs of the Mills were far from satisfactory
and realised that he had acquired a non-viable asset. In December
1967, Mahalingam issued notice of closure to be effective from
3.1.1968, but as a fact by a subsequent notice dated December 22,
1967, the Mill was closed down with immediate effect. According to
the petitioners the Mill had ceased to be a "textile undertaking" by
G January 1968; the workmen by numerous claim petitions in the Labour
Court of Madurai pressed for their various demands, they took posses-
sion of the Mills and even obstructed Mahalingam's entry into the
premises. At one stage during that period Mahalingam had applied for
• a loan of Rs.10 lakhs from the Government of India with the hope of
restarting the Mills after replacement of the machinery but that did not
H
work out. The establishment had thus closed down and according to
KOTHANDRAN SPG. MILLS v.U.0.1. (MISRA, J.] 129

+ the petitioners the textile undertaking had completely disappeared by A
1969, and the Act did not apply to it. Again, the 1974 Act was ultra
vires the Constitution.

The Sick Textile Undertakings (Taking Over of Management)
Ordinance 9 of 1972 became operative from 31.10.1972. Item 41 of the
~

, First Schedule to the Ordinance mentioned petitioner no. 1 as one of
the textile undertakings whose management was to be taken over and
possession was, therefore, taken by respondent no. 2 in terms of the
provisions of s. 4(1) thereof. The Ordinance was replaced by Act 72 of
B

1972 which received Presidential assent on 23.12.1972 but was deemed
to be in force from 31.10.1972. The petitioners had challenged the
validity of the Act by filing a writ petition before the High Court of
Madras but during the pendency of the writ petition the Sick Textile c
·+-- Undertaking (Nationalisation) Ordinance, 12 of 1974, came into force
from 1.4.1974, and petitioner no. 1 featured as Item 96 in the Schedule
to the Ordinance. The pending writ petition, therefore, became
infructuous and the petitioners filed a fresh writ petition challenging
the validity of the Ordinance of 1974. The Ordinance was duly D
replaced by the Nationalisation Act 57 of 1974. During the pendency
of the writ petition Emergency was proclaimed and the writ petition
was permitted to be withdrawn in I'ecember 1976, with liberty to

-+ approach the Court again. That is how the present application has
been filed.
E
Section 2(j) defines a 'sick textile undertaking' to mean:
=>(

"a textile undertaking, specified in the First Schedule, the
management of which has, before the appointed day, been
,I\ taken over by the Central Government under the Indus-
_J tries (Development and Regulation) Act, 1951, or as the F
case may be, vested in the Central Government under the
Sick Textile Undertakings (Taking Over of Management)
Act, 1972."

It is not disputed that management of petitioner no. 1 had been taken
;._, over under the 1972 Act and petitioner no. 1, therefore, came within G
the definition.

Section 3 provides:

"3(1) On the appointed day, every sick textile undertaking
and the right, title and interest of the owner in relation to H
130 SUPREME COURT REPORTS [1989] 2 S.C.R.

A every such sick textile undertaking shall stand transferred
to, and shall vest absolutely in, the Central Government.

(2) Every sick textile undertaking which stands vested in
the Central Government by virtue of sub-section (1) shall,
immediately after it has so vested, stand transferred to, and
B
vested in, the National Textile Corporation."

The First Schedule to the Act against Entry 96 shows the petitioner's
Mills. There is a legislative determination that petitioner no. 1 came
within the definition of 'sick textile undertaking' as provided in s. 2(j)
of the Act. The petitioners have not alleged any mala-fides against
C Parliament and in our opinion rightly. It is relevant to notice at this
stage that the Central Act 57 of 1974 has been put into the 9th
Schedule of the Constitution by the 39th Amendment and, therefore,
has come under the umbrella of protection provided under Art. 31-B
of the Constitution. In the case of Minerva Mills Ltd. & Ors. v. Union
of India & Ors., [1986] 4 SCC 222 challenge was raised against the
D vires of this Act. The Court dealt with the effect of the inclusion of the
Act in the 9th Schedule by referring to the ratio in Waman Rao v.
Union of India, [1981] 2 SCR 1 and upheld its vires. Similar was the
view of the Court in the case of Panipat Woollen and General Mills
Company Ltd. & Anr. v. Union of India & Ors., [1986] 4 SCC 368.
E There is no force in the two contentions raised on behalf of the
petitioners and the writ petition is, therefore, dismissed. We direct the
parties to bear their own costs of the proceedings.

T.N.A. Petition dismissed.