# DOYPACK SYSTEMS PVT. LTD. ETC v. UNION OF INDIA & ORS., ETC

- **Citation:** [1988] 2 S.C.R. 962
- **Court:** Supreme Court of India
- **Decided:** 1988-02-12
- **Case number:** Transferred Cases Nos. 13 and 14 of 1987
- **Bench:** Sabyasachi Mukharji, G.L. Oza
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/doypack-systems-pvt-ltd-etc-v-union-of-india-ors-etc-9887
- **Pages:** 44

## Headnote

Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 198~Whether under section 3 thereof equity
shares in Swadeshi Polytex Limited and Swadeshi Mining and
Manufacturing Company vest in the Central Govt. and whether the
C immovable properties have also vested in the Govt. under the said
section.
What fell for consideration in all these matters, viz., (i) SLPs.
(civil) Nos. 4826 and 7045of1987, (ii) SLP (civil) No. 5240of1987, (iii)
C.M.Ps. Nos. 12029-31/87 (in CAs Nos. 577-79 of 1987), (iv) C.M.Ps.
D
Nos. 16635 and 16918/87 (in S.L.P. (c) No. 4826/87) and (v) Transferred Cases Nos. 13 and 14 of 1987 (with CMPs. Nos. 16887-89 and
17018/87), was a common question of law-whether equity shares in
two companies, i.e. 10,00,000 shares in Swadeshi Polytex Ltd. and
17, 18,344 shares in Swadeshi Mining and Manufacturing Company
Ltd., held by the Swadeshi Cotton Mills, vested iu the Central GovernE
ment under section 3 of the Swadeshi Cotton Mills Company Ltd.
(Acquisition and Transfer of Undertakings) Act, 1986. The other subsidiary question was whether the immovable properties, namely,
bungalow No. l a,nd Administrative Block, Civil Lines, Kanpur, had
also vested in the government.
'r
F
There were six original proceedings initiated by various parties
<
which gave rise to these civil appeals, special leave petitions and transferred cases before this Court. These were:
~-
On 18th February, 1987, a suit was filed before the Delhi High
Court by one Naresh Kumar Barti against Dr. Raja Ram Jaipuria,
G
Swadeshi Polytex and others, for an injunction restraining the company
from holding the 17th annual general meeting on the ground that 34%
shares in the Swadeshi Polytex vested in the National Textile Corpora·
tion (N. T.C.) in view of sections 3 and 4 of the Act. In the suit, an
application was also filed praying that in the event of the annual general
meeting of the company being allowed to be held, an independent
H
Chairman should be appointed to conduct the meeting. The High Court
962
•
.....
DOYPACK SYSTEMS v. U.0.1.
963
-( refused to pass any order (in view of an order already passed by the
A
Allahabad High Court). Against this order of the Delhi High Court, two
special leave petitions were filed in this Court one by Doypack Systems
Pvt. Ltd. (defendant No. 10 in the Delhi Suit), which came to registered
"t
as Civil Appeal No. 577 of 1987 after the grant of special leave, and the
other, by Naresh Kumar Barti, the plaintiff in the Delhi Suit, which
came to be registered as Civil Appeal No. 578 of 1987 aftt:r the grant
of special leave.
B
On 24th February, 1987, one Bari Prasad Aggarwal filed a suit in
-
the court of the Third Additional Civil Judge, Kanpur praying inter alia
..
that Shri Raja Ram Jaipnria should not preside over the l7th annual
I'- general meeting of the company. The application for an interim injuncc
~tion filed in the suit was dismissed. In the appeal preferred by the
plaintiff before the Allahabad High Court, an order was passed by the
High Court on 2nd March, 1987, appointing Shri M.P. Wadhawan as
the Chairman of the said annual general meeting. Against this order
dated 2nd March, 1987, passed by the Allahabad High Court M Is.
D
,.-~
Doypack System Pvt. Ltd., preferred a special leave petition in this
Court, which after the grant of leave, was registered as Civil Appeal
No. 577 of 1987. The three special leave petitions were heard together as
Civil Appeals Nos. 577, 578 and 579 of 1987 and disposed of by this
Court by a common order on 6th March, 1987, appointing Shri Jaswant
'f
Singh as the Chairman of the said annual general meeting.
E
-
On 26th February, 1987, another suit-Suit No. 506 of 1987-was
filed in the Delhi High Court by Mukesh Bhasin for a declaration that
•
Swadeshi Cotton and Swadeshi Mining had no right in respect of 34% of
the share-holdings in Swadeshi Polytex and that the said shares were
)
vested in the N.T.C. by virtue of the said Act. By order dated 9th
March, 198

## Text

_Characters 0–39,553 of 116,463. This is a partial read: ask again with offset=39553 for what follows._

A
DOYPACK SYSTEMS PVT. LTD. ETC.
v.
UNION OF INDIA & ORS., ETC.
FEBRUARY 12, 1988
B
[SABYASACHI MUKHARJI AND G.L. OZA, JJ.]
Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 198~Whether under section 3 thereof equity
shares in Swadeshi Polytex Limited and Swadeshi Mining and
Manufacturing Company vest in the Central Govt. and whether the
C immovable properties have also vested in the Govt. under the said
section.
What fell for consideration in all these matters, viz., (i) SLPs.
(civil) Nos. 4826 and 7045of1987, (ii) SLP (civil) No. 5240of1987, (iii)
C.M.Ps. Nos. 12029-31/87 (in CAs Nos. 577-79 of 1987), (iv) C.M.Ps.
D
Nos. 16635 and 16918/87 (in S.L.P. (c) No. 4826/87) and (v) Transferred Cases Nos. 13 and 14 of 1987 (with CMPs. Nos. 16887-89 and
17018/87), was a common question of law-whether equity shares in
two companies, i.e. 10,00,000 shares in Swadeshi Polytex Ltd. and
17, 18,344 shares in Swadeshi Mining and Manufacturing Company
Ltd., held by the Swadeshi Cotton Mills, vested iu the Central GovernE
ment under section 3 of the Swadeshi Cotton Mills Company Ltd.
(Acquisition and Transfer of Undertakings) Act, 1986. The other subsidiary question was whether the immovable properties, namely,
bungalow No. l a,nd Administrative Block, Civil Lines, Kanpur, had
also vested in the government.
'r
F
There were six original proceedings initiated by various parties
<
which gave rise to these civil appeals, special leave petitions and transferred cases before this Court. These were:
~-
On 18th February, 1987, a suit was filed before the Delhi High
Court by one Naresh Kumar Barti against Dr. Raja Ram Jaipuria,
G
Swadeshi Polytex and others, for an injunction restraining the company
from holding the 17th annual general meeting on the ground that 34%
shares in the Swadeshi Polytex vested in the National Textile Corpora·
tion (N. T.C.) in view of sections 3 and 4 of the Act. In the suit, an
application was also filed praying that in the event of the annual general
meeting of the company being allowed to be held, an independent
H
Chairman should be appointed to conduct the meeting. The High Court
962
•
.....
DOYPACK SYSTEMS v. U.0.1.
963
-( refused to pass any order (in view of an order already passed by the
A
Allahabad High Court). Against this order of the Delhi High Court, two
special leave petitions were filed in this Court one by Doypack Systems
Pvt. Ltd. (defendant No. 10 in the Delhi Suit), which came to registered
"t
as Civil Appeal No. 577 of 1987 after the grant of special leave, and the
other, by Naresh Kumar Barti, the plaintiff in the Delhi Suit, which
came to be registered as Civil Appeal No. 578 of 1987 aftt:r the grant
of special leave.
B
On 24th February, 1987, one Bari Prasad Aggarwal filed a suit in
-
the court of the Third Additional Civil Judge, Kanpur praying inter alia
..
that Shri Raja Ram Jaipnria should not preside over the l7th annual
I'- general meeting of the company. The application for an interim injuncc
~tion filed in the suit was dismissed. In the appeal preferred by the
plaintiff before the Allahabad High Court, an order was passed by the
High Court on 2nd March, 1987, appointing Shri M.P. Wadhawan as
the Chairman of the said annual general meeting. Against this order
dated 2nd March, 1987, passed by the Allahabad High Court M Is.
D
,.-~
Doypack System Pvt. Ltd., preferred a special leave petition in this
Court, which after the grant of leave, was registered as Civil Appeal
No. 577 of 1987. The three special leave petitions were heard together as
Civil Appeals Nos. 577, 578 and 579 of 1987 and disposed of by this
Court by a common order on 6th March, 1987, appointing Shri Jaswant
'f
Singh as the Chairman of the said annual general meeting.
E
-
On 26th February, 1987, another suit-Suit No. 506 of 1987-was
filed in the Delhi High Court by Mukesh Bhasin for a declaration that
•
Swadeshi Cotton and Swadeshi Mining had no right in respect of 34% of
the share-holdings in Swadeshi Polytex and that the said shares were
)
vested in the N.T.C. by virtue of the said Act. By order dated 9th
March, 1987, the High Court disposed of that application aud granted
F
.,_~injunction restraining defendants Nos. 3 and 4 in that suit from exercising any right whatsoever attached to the 34% shares of defendant No. 2
held by them and particularly any voting right in the annual general
meeting scheduled to be held on the 9th March, 1987, till the decision of
'
the suit. This order was brought to the notice of this Court by C.M.P.
forming part of the Civil Appeals Nos. 577-579 of 1987. On 9th March,
G
'f
1987, on that C.M.P. this Court passed an order directing that NTC,
Swadeshi Cotton and Swadeshi Mining, all shall be entitled to vote at
"
the .annual general meeting and the question as to who were the rightful
voters would be decided by the Chairman of the meeting, etc. This was
the Transferred Case No. 14of1987.
H
A
B
964
SUPREME COURT REPORTS
[1988) 2 S.C.R.
One Mukesh Jasmani, a shareholder in Swadeshi Polytex filed a
writ petition in the Allahabad High Court. The High Court by its order
dt. 7th March, 1987, dismissed that writ petition, observing that
Swadeshi Cotton and Swadeshi Mining would be entitled to vote at the
l 7th annual general meeting in respect of their shares which, according
to N.T.C., had vested in them. Against this order, Doypack Systems
preferred the Special Leave Petition (civil) No. 3I.12of1987. This Court
passed orders on this petition, directing that the meeting would be held
under the chairmanship of Shri Jaswant Singh notwithstanding any
order made by any Court. This Court also vacated the operative portion
of the directions contained in the order dated 7th March, 1987 of the
Allahabad High Court.
'r
+
c
On 6th April, 1987, M/s. Swadeshi Mining and Manufacturing·~
Company filed a civil writ petition-Writ Petition No. 2214 of 1987-in
the Allahabad High Court (Lucknow Bench) for stay of the operation of
the letters dated 24/30 March, 1987, addressed by NTC to Swadeshi
D
Mining and Manufacturing Company and Swadeshi Cotton Mills Company Limited, calling for an Extraordinary General Meeting of the
Shareholders for removal of the Directors of Swadeshi Mining and
Manufacturing Company Ltd. The High Court passed an order on the
6th April, 1987, staying the operation of the said letters. Against that
order, M/s. Doypack Systems Pvt. Ltd. filed Special Leave Petition
E
No. 4826 of 1987 and NTC also filed a Special Leave Petition No. 5240
of 1987 in this Court. By an order dated 5th May, 1987, this Court
directed that Suit No. 506 of 1987 in the Delhi High Court and the Writ
Petition No. 2214 of {987 in the Allahabad High Court be transferred to
this Court, which were registered in this Court as Transferred cases
Nos. 14 and 13of1987 respectively.
F
NTC filed a civil suit in the District Court Kanpur seeking decla·
.
ration of its title in respect of the shrubbery property in Kanpur. The ,..J"
court refused any interlocutory injunction in the suit against which an
appeal was preferred before the High Court of Allahabad and the same
was dismissed. Consequently, NTC filed a Special Leave Petition
G
No. 7045 of 1987 in this Court.
Disposing of the matters, the Court,
HELD: Swadeshi Mining and Manufacturing Co. Ltd. and
Others submitted that the shares in question did not vest in the Central
H Government. [976B)
-
..
-
y
DOYPACK SYS1EMS v. U.0.I.
965
By the Act- Swadeshi Cotton Mills Company Ltd. (Acquisition A
and Transfer of Undertakings) Act, 1986-<m the appointed day "every
textile undertaking" and the "right, title and interest of the company in
relation to every textile mill of such textile undertakings" were transferred to and vested in the Central Governm~nt and such textile undertakings would be deemed to include "all assets". In the context of this
provision, the reliance on the decision of this Court· in Balkrishnan B
Gupta and Others v. Swadeshi Polytex Ltd. and Others, (1985] 2
S.C.R. 854, was not appropriate. (9780-E]
It appears from the written statement filed by NTC on 8th
February, 1987, in the suit filed by one G.G. Bakshi in Ghaziabad
Court, it was claimed that NTC was entitled to take over company's C
shares and investments. On 24/30th March, 1987, NTC issued notice
to the petitioners l and 2 stating that they were entitled to shares. It
was urged by Shri Nariman, counsel for Swadeshi Mining and Manufacturing Co. J.,td. & Ors., that this belated assertion indicated that the
shares were not intended to be taken over. The Court was unable to
accept this suggestion or to draw that inference. It did not logically
D
follow. [979G-H; 980A]
Before dealing with the main question, the Court considered an
application made by Shri Nariman for the production of certain documents. The petitioner in Transferred Case No. 13 of 1987 had sought
production of the documents. It was contended inter alia that the
production of those documents was necessary to establish that the
shares were never intended to be taken over and these were never
considered as part of the textile undertaking, and that the documents
were definitely relevant as they would throw light on the merits of the
case. The production of the documents was resisted by the AttorneyGeneral on behalf of the Union of India on the ground that the documents were not relevant and in any event most of them were privileged
being part of the documents leading to the tendering of the advice by the
Cabinet to the President, as contemplated by Article 74(2) of the
Constitution. [989B, C; 990A]
E
F
Having considered the facts and circumstances of the case as well
G
as the decisions of this Court in a number of cases, the Court was of the
opinion that the documents in question were not relevant, and also that
the Cabinet papers are protected from disclosure not by reason of their
contents but becanse of the class to which they belong; the Cabinet
papers also include papers brought int11 existence for the purpose of
preparing submission to the Cabinet, and it is the duty of this Court to
H
A
B
c
966
SUPREME COURT REPORTS
I 19881 2 S.C.R.
prevent disclosure where Article 74(2) is applicable. The Court was
unable to accept the prayer of the petitioner to direct disclosures and
production of the documents sought for. [993F-G; 994H]
Coming to the main question involved, reading the provisions of·
section 3(1), section 4(1) and section 2(k) of the Act, each throwing light
on the other, it follows that-( a) under the first limb of section 3(1) of
the Act, every textile undertaking; (b) under the second limb of section
3(2), every right, title and interest of the company iu relation to every
such undertaking, is transferred and vested, (c) the deeming provision
of section 4(1) amplifies and enlarges both the limbs of the vesting
section, being section 3(1), (d) the definition of the section is read into
these provisions, to give a wider meaning and scope to the vesting
provision and to what is transferred or vested. [997G-H; 998A]
Sections 7 and 8 of the Act relied upon by the petitioners, being
provisions for payment of amounts and for the issue of shares by NTC
respectively, will have no bearing on the scope of the vesting provision.
D
As to what properties have vested cannot proceed on the hypothesis that
there is a clear numerical or mathematical link between the quantum of
compensation and the items of property vested. This correlation with
regard to snch legislation is not available. [9988]
Section 8 refers to the payments of the amounts by Union of India
E
to the company. It has no bearing either on the vesting section or on
section 7 except that the figure of Rs.24 crores 32 lakhs was introduced
into section 7. [998C-D I
F
G
In this case, a nationalisation statute is concerned. Even with
other independent management statutes, in respect of textile undertakings a series of decisions have upheld the view that the shares vest in
the Government. See National Textile Corporation Ltd. v. Sitaram
Mills, [1986] Sopp. S.C.C. 117, Minerva Mills v. Union of India, [1986]
4 S.C.C. 222, Goverdhan Das Narasingh Das Daga v. Union of India,
[1986] 4 S.C.C. 276, Vidharba Mills Berar Ltd. v. Union of India,
[1986] 4 S.C.C. 248 and Fine Knitting Co. Ltd. v. Union of India,
[ 1986] 4 S.C.C. 276. The above provide the informed basis on which the
Court makesconstrnctionofsections3 and 4ofthe Act. [998G-H; 999A-B]
The expressions "and all other rights and interest in or arising out
of such property, as were immediately before the appointed day, in the
ownership, possession, power or control of the company in relation to
H the said undertakings'', appearing in sub-section (1) of section 4 of the
-
-
•
y
DOYPACK SYSTEMS v. U.0.1.
967
'(
Act indicates that the shares which have been purchased out of the funds
A
of the textile undertakings and which have been held for the benefit of
~
the said textile undertakings, would come within the scope of section 4
-
of the Act and thus would also vest in the Central Government under
section 3. The origin of these shares and their connection with the textile
undertakings had been fully corroborated. The textile-business was the
only business of the Swadeshi Cotton Mills. There was·inter-<:onnection
tand inter-relation between all the six undertakings. Investments
in Swadeshi Polytex Limited from the funds of Kanpur undertaking
were always made. Investments in Swadeshi Mining and Manufacturing Company Ltd. were always made from the funds of the
Kanpur undertaking. Assets/investments held and used for the benefit
B
of the textile business of SCM were carried on in its textile under-
. f' takings. [999B-E]
c
t
The words in the statute must Prima facie be given their ordinary
meaning. Where the grammatical construction is clear and manifest
and without doubt, that construction ought to pre':ail unless there are
some strong and obvious reasons to the contrary. Nothing was shown to D
warrant that literal construction should not be given effect to. See
Chandavarkar S.R. Rao v. Asha Lata, [1986] 4 S.C.C. 447 at 476,
approving 44 Halsbury's Laws of England, 4th ed. paragraph 856, p.
552, Nokes v. Doncaster Amalgamated Colliery Ltd., [1940] Appeal
Cases 1014 at 1022. It must be emphasised that interpretation must be
in consonance with the Directive Principles of the State Policy in ArtiE
des 39(b) and (c) of the Constitution. [999E-G]
The object of interpretation of a statute is to discover the intention
of the Parliament as expressed in the Act. The dominant purpose in
constructing a statute is to ascertain the intention of the legislature as
expressed in the statute, considering it as a whole and in its context. F
· ,
That intention and, therefore the meaning of the statute are particu-
\,,..larly to be sought in the words used in the statute itself, which must, if
they are plain and unambiguous, be applied as they stand. In the present case, the words used represented the real intention of the Parliament as the Court found not only from the clear words used but also
from the very purpose of the vesting of the shares. If the fact is borne in G
mind that these shares were acquired from out of the investments made
y
by these two companies and furthermore that the assets of the company
as such minus the shares were negative and further the Act in question
was passed to give effect to the principles enunciated in clauses (b) and
( c) of Article 39 of the Constitution, no doubt was left that the shares
vested in the Central Government by operation of sections 3 and 4 of the
H
968
SUPREME COURT REPORTS
[1988] 2 S.C.R.
A
Act. See in this connection, the observations of Halsbury's Laws of
England, 4th Edition, Volume 44, paragraph 856, p. 522 and the cases
noted therein. [999G-H; lOOOA-C I
There is no exact correlation between the figure of capitJ!I reserve
B
and the figure of investments. That could not be. These could never be
equal. The submission of the petitioners failed to take into account the
fact the undertakings, other than the Kanpur undertaking, also had
capital reserve, even though there was no obligation that these were
excluded assets in respect of other undertakings and there were no
figures of investments therein. I I OOOD-E]
C
Contemporanea Expositio is a well~ttled principle or doctrine
which applies only to the construction of ambiguous language in old
1
statutes. Reliance might be placed in this connection on Maxwell, 13th · \
.
Ed. page 269. It is not applicable to modern statutes. Reference may be
made to G.P. Singh, Principles of Statutory Interpretation, 3rd Ed.
D pages 238,239. The leading case on Contemporanea expositio is Comppell College Belfast v. Commissioner of Valuation for Northern lreland,_Ll96~] 1 W.L.R. 912, in which House of Lords made it clear that
'r,
the doctrine is to be applied only to the construction of ambiguous
language in the very old statutes. L_ord Watson said in Clyde Navigation
Trustees v .-Laird, [ 1983 I f A.C. 658 that Contemporanea expositio
could have no application to a modern Act. The Court, therefore, reE jected the attempt of the petitioners to lead the Court to this forbidden
Y
track by referring to various extraneous matters. Furthermore, those
-
external aids sought before the Court did not support the petitioners'
,._.
approach to this question at all. [IOOOF-H; 1001AI
Sections 3 and 4 of the Act evolve a legislative policy and set out
F
the parameters within which it has to be implemented: The Court could
not find that there was any special intention to exclude the shares in this
~ _,.-'
case, as seen fnm the existence of at least four other Acquisition Acts ~
which used identical ·phraseology in sections 3 and 4 and the other •
sections as well-Aluminium Corporation of India Ltd. (Acquisition
and Transfer of Aluminium Undertakings) Act, 1984, Amritsar Oil
G
Works (Acquisition and Transfer of Undertakings) Act, 1982,
°'
Britannia Engineering Company (Mohmeh Unit) and the ·.Arthur
Butler and Company (Muzaffarpore) Ltd. (Acquisition and Transfer
y
of Undertakings) Act, 1978, and the Ganesh Flour Mills Company Limited (Acquisition and Transfer of Undertakings) Act,
H
1984. [1001E-F]
-
r
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DOYPACK SYSTEMS v. U.O.l.
969
It appeared to the Court that the expression "forming part or' A
'i appearing in section 27 could not be so read with section 4(1) as would
have the effect of restricting or cutting down the scope and ambit of the
vesting provisions in section 3(1). The expression "pertaining to" did
not mean "forming part or'. Even assuming that the expression "pertaining to" appearing in the first limb of section 4(1) means "forming B
part or', it would mean that only such assets as had a direct nexus with
the textile mills, would fall under the first limb of section 4(1). The
t shares in question would still vest in the Central Government under the
second limb of section 4(1) of the Act since the shares were bought out
of the income of the textile mills and were held by the company in
relation to such mills. The shares would also fall in the second limb of
section 3( 1) being right and title of the company in relation to the textile C
mills. [I002C-E)
r
On the construction of sections 3 and 4, the Court came to the
conclusion that the shares vested in the Central Government even if
'
sections 3 and 4 were read in conjunction with sections 7 and 8 of the
Act on the well--1iettled principles. The expression 'in relation to' has D
been interpreted to be words of the widest amplitude. See National
Textile Corporation Ltd. and Ors. v. Sitaram Mills Ltd. (supra). Section 4 appears to be an expanding section. It introduces a deeming
provision, which is intended to enlarge the meaning of a particular
word or include matters which otherwise may or may not fall within the
main provisions. It is well~ttled that the word 'includes' is an incluE
sive definition and expands the meaning. [I002F-G]
To leave a company, the net wealth of which was negative at the
time of take-over of the management, with the shares held by it as
investment in the other company, was, in the Court's opinion, not only
to defeat the principles of Articles 39(b) and (c) of the Constitution, but F
it would permit the company to reap the fruits of its mismanagement.
\,l That would be an absurd situation. It had to be borne in mind th11t the
T"net wealth of the company at the time of take-over was negative; hence
sections 3 and 4 could be meaningfully read if all the assets including the
shares were considered to be taken over by the acquisition. That was
y
the only irresistible conclusion that followed from the construction of G
the documents and the history of the Act, which expressly recites that it
was to ensure the principles enunciated in clauses (b) and (c) of Article
Y
39 of the Constitution. The Act must be so read that it further ensures
such meaning and secures the ownership and control of the material
resources to the community to subserve the common good to see that the H
operatioo o(lhe ecooomicsysttm doeS not reUt in btjuslice. [1003F-H; too4AJ
A
970
SUPREME COURT REPORTS
11988) 2 S.C.R.
The shares vested in the _Central Government. Accordingly, the
shares in question were vested in the N. T.C. and it had right over the
said 34 per cent of the share-holdings. [10048)
The 10,00,000 shares in the Swadeshi Polytex Ltd. and 17, 18,344
in the Swadeshi Mining and Manufacturing Company Ltd. held hy the
B
Swadeshi Cotton Mills vested in the Central Government under sections
3and4oftheAct. [1004B-C)
In view of the amplitude of the language used, the immovable
properties, namely, the Bnngalow No. l and the Administrative Block,
Civil Lines, Kanpur, also vested in the NTC. II004C-D)
-+
c
In that view of the matter, in Transferred Case No. 13 of 1987, the ~--
Writ Petition No. 2214 of 1987 was dismissed. All interim orders were· "' ·
vacated. This would dispose of the various other SLPs and CMPs connected with the Lucknow writ petition, being SLP (Civil) No. 4826 of
1987 filed by Doypack Systems Pvt. Ltd., SLP (Civil) No. 5240 of 1987
D filed by NTC. CMPs 16918 and 16919 of 1987 in SLP No. 4826 of 1987
would stand disposed of in the above light. II004D-F)
In the Transferred Case No. 14 of 1987 (in Suit No. 506 of 1987),
the Court held that to lakhs and l 7 lakhs equity shares and the
Swadeshi House at Kanpur and all the rights, title and interest attached
E therewith, related to the textile undertaking of defendant No. 3
and they vested in NTC with effect from lst April, 1985, and defendants Nos. 3 and 4 were restrained by a decree of permanent injunction from dealing with them in any manner whatsoever. Defendant
No. 2 was restrained by permanent injunction from recognising
defendants Nos. 3 and 4 as owners of the aforesaid shares and the
f
Swadeshi House. II004F-G)
Defendant No. 2 was directed to enter the name of defendant-~
No. l, namely, NTC in its register of members and to treat the said
defendant No. l as its share-holder instead of defendants Nos. 3 and 4
in respect of the shares of defendant No. 2 held by them. In view of the
G provisions of law under section 108 of the Companies Act, as there was
transmission of shares by operation of law, rectification was not
necessary. [I004H; I005A-B)
Civil Appeals Nos. 577 to 579 of 1987 were disposed of in the
above terms and it was directed that the l 7th annual general meeting be
H held in accordance with law after giving proper notice under the
y
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DOYPACK SYSTEMS v. U.0.1.
971
Chairmanship ofShri Jaswant Singh. [1005C]
CMPs Nos. 12760 of 1987 in Civil Appeal No. 577 of 1987 would
stand disposed of in terms of the orders in the Transferred Case No. 14
of 1987 and it was directed that the Chairman should act in accordance
with the aforesaid decision and NTC should be considered to be entitled
to vote. CMP 16887of1987was rejected. [10050]
CMP 16888 of 1987 was an application by Doypack Systems Ltd.
to be impleaded as a party-respondent in the Transferred Case No. 13
of 1987. Doypack Systems was permitted to argue and was heard as a
party. No further order was necessary. I 1 DOSE]
A
B
~ CMPs Nos. 16889 and 17018 of 1987 were allowed. CMP No.
C
f
18268 of 1987 was disposed of with the direction that no further documents needed to be inspected. In view of the orders, the other CMPs
were no longer necessary to be disposed of. I IOOSFJ
Irrespective of any order passed by any court, the 17th annual
D
general meeting should be held in accordance with law, to be presided
over by Shri Jaswant Singh, recognising NTC as the rightful owner of
the disputed shares. [1005GJ
Balkrishan Gupta & Ors. v. Swadeshi Polytex Ltd. and Ors.,
'f
[1985] 2 SCR 854; Swadeshi Cotton Mills v. Union of India, [1981] 2
E
SCR 533; National Textile Corporation v. Sita Ram Mills, I 1986] Suppl.
SCC l17; Minerva Mills. v. Union of India, [1986] 4 SCC 222; Goverdhan Das Narasingh Das Daga v. Union of India, [1986] 2 SCC 249;
Vidharba Mills Berar Ltd. v. Union of India, [ 1986] 4 SCC 248;
;.
Kumari Sunita Ramachandra v. StatF of Maharashtra and another,
[ 1986] l SCR 697 at 704, c toe; Doctor (Mrs.) Sushma Sharma v. State
F
· "-1. of Rajasthan, [1985] 3 SCR 243 at 263; Fine Knitting Co. Ltd. v. Union
>of India, [1986] 4 SCC 276; State of West Bengal v. Union of India,
[1964] 1SCR371at379, 380, 381and382; The Central Bank of India
. v. Their Workmen, [1960] l SCR 200 at 217; Babaji Kondaji Garad v.
Nasik Merchants Co_()perative Bank Ltd., Nasik and Others, [1984] 2
y
SCC 50, Paragraphs 14 and 15; Sanjeev Coke Manufacturing Company G
v. Bharat Coking Coal Ltd. & another, [1983] l SCR 1000 at 1029;
Y K.P. Verghese v. The Income.Jax Officer, Emakulam and another,
[1982] 1 SCR 629; Chem Taong Shang & Another, etc. etc. v: Commander S.D. Baijal & Ors., J.T. 1988 l S.C. 202; Auckland Jute Co.
Ltd.
v. Tulsi Chandra Goswami, [1949] F.C.R. 201 at 244; RM
AR.AR.R.M.AR. Umayhal Achi v. Lakshmi Achi and Others, [1945]
H
972
SUPREME COURT REPORTS
[1988] 2 S.C.R.
A F.C.R. 1; Black_Clawson International Ltd. v. Papierwerke Waldhof y
Achaffenburg A.G., [1975] A.C. 591 at 613; S.P. Gupta v. Union of
ff ndia and others, I 1982 I 2 S. C.R. 365 at 594; State of U. P. v, Raj
Narain, [1975] 3 SCR 333; The Elphinstone Spinning and Weaving
Mills Company Ltd. v. Union of India and others, writ petition No.
B 2401of1983; State of Bihar v. Kripalu Shankar, A.I.R. 1987 SC 1554 at
1559; Bachittar Singh v. State of Punjab, 11962) Suppl. 3 SCR 713; Air 1
Canada and others v. Secretary of Stal~ and another, [1983] 1 All E.R. l"
161 at 180; State Wakf Board v. Abdul Aziz, A.I.R. 1968 Madras 79,
1_
81; Nitai Charan Bagchi v. Suresh Chandra Paul, 66 C.W.N. 767;
Shyam Lal v. M. Shyamlal A.l.R. 1933 All. 649, 76 Corpus Juris
Secundum 621; R.C. Cooper v. Union of India, [1970] 3 SCR 530 at
C 567, 568, 635; Khajamian Wakf Estates, etc. v. State of Madras &: _i.,_
another, (1971] 2 SCR 790, at 796 B-E; Harakchand Ratanchand \
Banthiaandothers, etc. v. Unionoflndiaandothers, [1970] 1SCR479
at 496 P & G; Chandavarkar S.R. Rao v. Asha Lata, [1986] 4 SCC 447,
476; 44Halsbury's Laws of England 4th Ed. paragraph 856 at page 552;
Nokes v. Doncqster Amalgamated Colliery Limited, (1940] Appeal°
D Cases 1014, 1022; Campbell College Belfastv. CommissionerofValua-
,_,
tion for Northern Ireland, (1964] 1 W.L.R. 912; Clyde Navigation
Trustees v. Laird, [1933] 8 A.C. 658; The Corporation of the City of
Nagpur v. Its Employees, [1960] 2 SCR 942; Vasudev Ramchandra
She/at v. Pranlal Javanand Thakar and others, [1975] 1 SCR 534,
Palmer's Company Law 24th Ed. (1987) Page 608; Mahadeo Lal y
E Agarwala and another v. The New Darjeeling Union Tea Co. Ltd. and
others, A.I.R. 1952 Cal. 58 and Unity Company Pvt. Ltd. v. Diamond
Sugar Mills and others A.I.R. 1971 Cal. 18.
CIVIL APPELLAIB JURISDICTION: Special Leave Petition
-\
F
(Civil) No. 4826 of 1987 etc.
,,i 1·/
From the Judgment and Order dated 6.4.1987 of the Allahab~
High Court in C.M.A. No. 4555 (W) of 1987 in W.P. No. 2214of 1987. ·
K. Parasaran, Attorney General, Milon K. Banerjee, Solicitor
G
General, F.S. Nariman, Dr. Y.S. Chitale, H.L. Anand, K.K.
Y
Venugopal, A.K. Ganguli, S.N. Kacker, Anil B. Diwan, A.K.
Sharma, Harish N. Salve, K.J. John, S. Swamp, T.V.S.N. Chari, y
Vrinda Grover, Miss A. Subhashini, A. Sobba Rao, R.B. Mehrotra,
B.B. Sawhney, N.K. Sharma, P.V. Kapur, P.P. Malhotra, Miss
Annoradha Dutt, P. Parmeshwaran, Navin Prakash and Naresh K.
H Sharma for the appearing parties.
-
DOYPACK SYSTEMS v. U.0.1. I MUKHARJI, J.J
973
1
The Judgment of the Court was delivered by
A
-1
SABY ASA CHI MUKHARJI, J. What falls for consideration in
all these matters is a common question of law, namely, whether equity
shares in the two companies i.e. 10,00,000 shares in Swadeshi Polytex
Limited and 17, 18,344 shares in Swadeshi Mining and Manufacturing
Company Limited, held by the Swadeshi Cotton Mills, vest in the
B
t
Central Government under Section 3 of the Swadeshi Cotton Mills
Company Limited (Acquisition and Transfer of Undertakings) Act,
~1
1986 (hereinafter referred to as 'the Act'). The other subsidiary ques-
-
tion is whether the immovable properties, namely, the bungalow No. 1
and the Administrative Block, Civil Lines, Kanpur have also vested in
the Government. The question as to one more property known as c
,.. Shrubbery property whether it has been taken over or not is still to be
argued and is not covered by this judgment.
In order to appreciate the question in these matters it has to be
borne in mind that there were six original proceedings initiated by
various parties which gave rise to these civil appeals, special leave
D
.
-,
petitions and the transferred cases to this Court. These six original
proceedings are as follows:
(1) On 18th of February, 1987 Suit No. 418 of 1987 was filed
'r
before the Delhi High Court by one N aresh Kumar Parti against Dr.
Raja Ram Jaipuria, Swadeshi Polytex and others, praying for an order
E
of injunction restraining the company from holding the 17th annual
-
general meeting on the ground that 34% shares in Swadeshi Polytex
have vested i'n National Textile Corporation (briefly referred to as
~
NTC) in view of sections 3 and 4 of the said Act. In this suit an
application for grant of interim in junction was also filed praying that in
the event the annual general meeting of the company is allowed to be
F
.,
held, an independent Chairman should be appointed to conduct the
~-
meeting. Notice in respect of the said application was served upon the
respondents on 20th of February, 1987. On 4th March, 1987 the Delhi
High Court refused to pass any order in view of the order already
passed by the Allahabad High Court mentioned hereinafter. Against
y
this order of the Delhi High Court, two special leave petitions were G
filed in this Court one by Doypack Systems Pvt. Ltd., which was
y
defendant No. 10 in the Delhi suit. (Consequent upon grant of leave,
the special leave petitiorr came to be registered as Civil Appeal No.
-
577 of 1987). The other special leave petition was filed by the plaintiff
in the Delhi suit, Naresh Kumar Parti. (Consequent upon grant of
leave, the special leave peti!ion came to be registered as Civil Appeal
H
974
SUPREME COURT REPORTS
I 1988] 2 S.C.R.
No. 578 of 1987). On 24th of February, 1987 one Hari Prasad AggarA
wal, filed a suit being Case No. 183 of 1987. in the Court of Third
Additional Civil Judge, Kanpur praying, inter alia, that Shri Raja Ram
Jaipuria should not preside over the 17th annual general meeting of
the Company. On 27th of February, 1987, the application for interim
B
c
D
injunction filed in the said suit was dismissed by the learned trial
Judge. In appeal which is not yet numbered preferred by the plaintiff
before the Allahabad High Court an order was passed by the Court on
2nd March, 1987 appointing Shri M.P. Wadhawan as the Chairman of
the said annual general meeting. The consenting parties to the said
proceedings before the Allahabad High Court were Shri Raja Ram
Jaipuria and Swadeshi Polytex Limited. Against this order of 2nd
March, 1987 passed by the Allahabad High Court M/s. Doypack
Systems Private Limited preferred a special leave petition in this
Court. Leave was granted and as mentioned hereinbefore it was re·
gistered as Civil Appeal No. 577 of 1987. The three special leave
petitions were heard together as Civil Appeals Nos. 577, 578 and 579
of 1987 and were disposed of by a common order on 6th March, 1987
by this Court appointing Shri Jaswant Singh as the Chairman of the
said annual general meeting.
On 26th of February, 1987 another suit being Suit No. 506 of
1987, was filed in the Delhi High Court by one Mukesh Bhasin praying, inter alia, for a declaration that Swadeshi Cotton and Swadeshi
E
Mining had no right in respect of 34% of the shareholdings in Swadeshi
Polytex and that the said shares were vested in NTC by virtue of the
said Act. By an order dated 9th March, 1987 the Delhi High Court
disposed of that application. The learned Judge in that case was prima
facie satisfied that the plaintiff in that case was entitled to an injunc·
tion claimed by him in the meeting to be presided over by Shri Jaswant
p
Singh. He granted injunction restraining the defendants Nos.3 and 4 in
that suit from exercising any right whatsoever attached to 34% shares
of defendant No. 2 held by them and particularly any voting rights in
the annual general meeting which was scheduled to be held on 9th of
March, 1987 till decision of that suit. This order was brought to the
notice of this Court by CMP forming part of Civil Appeal Nos. 577-79
G
of 1987. On 9th of March, 1987 on that CMP this Court passed an order
directing that NTC, Swadeshi Cotton and Swadeshi Mining, all shall
be entitled to vote at the annual general meeting and the question as to
who were the rightful voters would be decided by the Chairman of the
meeting. It was further directed that the Chairman would keep these
votes separately. This is the Transferred Case No. 14 of 1987 herein.
H
On 7th of March, 1987 one Mukesh Jasnani a shareholder .in Swadeshi
r-
-
y
y
DOYPACK SYSTEMS v. U.0.1. I MUKHARJI, J.]
975
1
Polytex filed a writ petition in the Allahabad High Court (Lucknow
Bench). The High Court by its order dated 7th of March, 1987 dismissed that writ petition. The High Court in the said order observed that
Swadeshi Cotton and Swadeshi Mining would be entitled to vote at the
17th annual general meeting in respect of their shares which, according
_.,
to NTC had vested in,them. Against this order dated 7th March, 1987,
Doypack Systems preferred a special leave petition being SLP (Civil)
No. 3112 of 1987. On 9th March, 1987 this Court passed orders in this
t
special leave petition directing that the meeting would be held under
the Chairmanship of Shri Jaswant Singh notwithstanding any order
made by any court, including the order dated 3rd March, 1987 passed
A
B
by the Division Bench of the Allahabad High Court. This Court also
vacated the operative portion of the directions contained in the order
C
t-dated 7th March, 1987 passed by the Allahabad High Court.
- .
.
On 6th of April, 1987 M/s. Swadeshi Mining and Manufacturing
Company filed a civil writ petition No. 2214 of 1987 in the Allahabad
High Court (Lucknow Bench) praying, inter alia, for stay of the operaD
tion of the letters dated 24/30th March, 1987 addressed by NTC to
Swadeshi Mining and Manufacturing and Swadeshi Cotton Mills Company Limited, calling for an Extraordinary General Meeting Of the
shareholders for removal of the Directors of Swadeshi Mining and
Manufacturing Company Limited. The Division Bench of the High
Court (Lucknow Bench) passed an order on 6th of April, 1987, staying
E
-
l'
the operation of the said letters addressed by NTC to the companies.
Against that order, M/s. Doypack Systems Pvt. Ltd. filed a Special
Leave Petition No. 4826 of 1987. NTC also filed a special leave petition against the said order, being SLP No. 524-0 of 1987 in this Court.
i
Both these petitions were heard by this Court on 5th May, 1987. By an
order passed on 5th May, 1987 this Court directed that Suit No. 506 of
1987 filed in the Delhi High Court and Writ Petition No. 2214 of 1987
F
•
pending in the Allahabad High Court (Lucknow Bench) be transferred
"~to this Court, (subsequently, registered as Transferred Cases Nos. 14
and 13 of 1987.respectively). Consequent upon leave granted by this
Court by the order dated 2 lst of January, 1987 NTC filed a civil suit in
the District Court at Kanpur seeking a declaration of its title in respect G
r
of Shrubbery property in Kanpur. The learned Trial Judge refused any
interlocutory injunction in the said suit against which an appeal was
y
preferred before the High Court of Allahabad which was also declined
and, consequently, NTC filed Special Leave Petition No. 7045 of 1987
in this Court. This application is still pending and is awaiting disposal.
In this background these matters will have to be disposed of.
H
A
976
SUPREME COURT REPORTS
11988) 2 S.C.R.
Swadeshi Mining and Manufacturing Co. Ltd. and others submit- f"
led that these shares did not vest in the Central Government. The
main thrust of Shri Nariman's contention, who appeared on their
rbehalf, was that section 3 of the Act provided that every textile undertaking and right, title and interest of the company, i.e. Swadeshi
Cotton Mills Company Limited vested in the Central Government.
B
The "textile undertakings" mentioned in section 3 included all assets
,
'pertaining' to the textile undertaking as per section 4 of the Act. It is i
•
common ground that whether a particular asset is part of the textile
undertaking' and vests under section 3 or not, has to be considered in
-1the context of the Act with reference to the language used in section 4
•
of the Act. Shri N ariman submitted that there are different modes by
C
which Parliament can resort to nationalisation. These modes, according to him, are:
~
-
(a) acquisition of 100% shares of the Company;
(b) all assets under the ownership, possession or control of the
D
company being vested in the Government;
(c) only those assets in the ownership, possession or control of
the company in relation to the undertakings which are taken over
or "all propperties pertaining to the undertaking" vest in the
Government. According to him, the expressions "pertaining to"
E
or ''in relation to" are expressions of limitation and restriction, 'f
in the absence of which each and every asset of the company
would have vested in the Government. The background and se-
.._
quence of events leading to the enactment of this Act through
which Shri Nariman took us in detail and it is useless to set them
.,
up in extenso, he submitted that the shares in question were all
,
F
along being considered and treated as not comprising part of the
textile undertaking.
~/
He referred to the order dated 13th of April, 1978 issued by the
Central Government under section 18AA of the Industries (Development and Regulation) Act, 1951 (hereinafter referred to as 'the IDR
G Act'). This order did no_t purport to take over those shares held in the
"
two companies by the Swadeshi Cotton Mills Company Limited. He
also drew our attention to Volume III pages 53 and 54 of the present Y
volumes before us, which is the reply of the Minister of Law, Justice
and Company Affairs. It was clarified to the Parliament that the shares
were distinct from the undertakings of the company whose manageH ment was taken over. On 27th of March, 1979 in answer to a question
DOYPACK SYSTEMS v. U.0.1.