Judgment:
A. Pasayat, J.
1. The non-recommendation of a statutory body, specified authority under Section 72A of the Income-tax Act, 1961 (in short the 'Act'), and the Central Government's decision based on it, refusing certain benefits flowing from the aforesaid statutory provision, are challenged in this writ application. A minor challenge to the vires of a particular provision in the guidelines dated February 23, 1981, issued by the Central Government on the ground of unreasonableness has been made. We shall advert to the statutory provisions which have a relevance, but a brief resume of the factual position is necessary to be given.
2. There was a limited company named Kalinga Tubes Limited which was engaged in the manufacture of steel tubes, pipes and poles which was not financially sound and viable, and its total accumulated loss as on December 31, 1978 was more than Rs. 6 crores. The petitioner's business activities, inter alia, included manufacture of ferro alloys. With the object of reviving the business of an undertaking which is financially not viable and to bring it back to health, Section 72A of the Act was enacted. The section was inserted by the Finance (No. 2) Act, 1977, with effect from April 1, 1978. At the time of its insertion, it comprised sub Sections (1) and (2) only. Subsequently, Sub-section (3) was inserted by the Finance Act, 1978, making it operative from April 1, 1978. The object of introduction of the said section, as appears from the Finance Minister's introductory speech during presentation of the Budget, was to the effect that sickness amongst industrial undertakings is a matter of grave national concern ; closure of any sizable manufacturing unit in any industry entails social costs in terms of loss of production and employment, and also waste of valuable capital assets ; experience had shown that taking over of such units by the Government is not always the most satisfactory or the most economical solution ; the more effective course suggested was to facilitate the amalgamation of sick industrial units with sound ones by providing incentives and removing impediments in the way of such amalgamation. The Notes on Clauses to the Finance Bill, 1977, Memorandum explaining the provisions of the said Bill and the reply to the debate in Parliament on the Bill on June 23, 1977, clearly show that the object of the enactment is to save the Government from social costs in terms of loss of production and employment and to relieve the Government of the uneconomical burden of taking over and running sick industrial units. After insertion of Sub-section (3), the section at the relevant time and now reads as follows :
'72A. Provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in certain cases of amalgamation.--(1) Where there has been an amalgamation of a company owning an industrial undertaking or a ship with another company and the Central Government, on the recommendation of the specified authority, is satisfied that the following conditions are fulfilled, namely :--
(a) the amalgamating company was not, immediately before such amalgamation, financially viable by reason of its liabilities, losses and other relevant factors,
(b) the amalgamation was in the public interest ; and
(c) such other conditions as the Central Government may, by notification in the Official Gazette, specify, to ensure that the benefit under this section is restricted to amalgamations which would facilitate the rehabilitation or revival of the business of the amalgamating company,
then, the Central Government may make a declaration to that effect, and, thereupon, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and the other provisions of this Act, relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly.
(2) Notwithstanding anything contained in Sub-section (1), the accumulated loss shall not be set off or carried forward and the unabsorbed depreciation shall not be allowed in the assessment of the amalgamated company unless the following conditions are fulfilled, namely :--
(i) during the previous year relevant to the assessment year for which such set off or allowance is claimed, the business of the amalgamating company is carried on by the amalgamated company without any modification or reorganisation or with such modification or reorganisation as may be approved by the Central Government to enable the amalgamated company to carry on such business more economically or more efficiently ;
(ii) the amalgamated company furnishes, along with its return of income for the said assessment year, a certificate from the specified authority to the effect that adequate steps have been taken by that company for the rehabilitation or revival of the business of the amalgamating company.
(3) Where a company owning an industrial undertaking or a ship proposes to amalgamate with any other company and such other company submits the proposed scheme of amalgamation to the specified authority and that authority is satisfied, after examining the scheme and taking into account all relevant facts, that the conditions referred to in Sub-section (1), would be fulfilled if such amalgamation is effected in accordance with such scheme or, as the case may be, in accordance with such scheme as modified in such manner as that authority may specify, it shall intimate such other company that, after the amalgamation is effected in accordance with such scheme or, as the case may be, such scheme as so modified, it would make unless there is any material change in the relevant facts) a recommendation to the Central Government under Sub-section (1).
Explanation.--In this section,--
(a) 'accumulated loss' means so much of the loss of the amalgamating company under the head 'Profits and gains of business or profession' (not being a loss sustained in a speculation business) which the amalgamating company would have been entitled to carry forward and set off under the provisions of Section 72 if the amalgamation had not been effected ;
(b) 'specified authority' means such authority as the Central Government may, by notification in the Official Gazette, specify for the purposes of this section ;
(c) 'unabsorbed depreciation' means so much of the allowance for depreciation of the amalgamating company which remains to be allowed and which would have been allowed to the amalgamating company under the provisions of this Act if the amalgamation had not been effected.'
3. The specified authority under the section as notified by the Central Government by Notification S. O. No. 710(E), dated October 11, 1977, consisted of a Committee of four Secretaries to the Government, namely, the Secretary, Department of Industrial Development ; the Secretary, Department of Company Affairs ; the Secretary, Ministry of Labour ; and the Secretary, Department of Economic Affairs and the Chairman of the Central Board of Direct Taxes. The Government of India, in pursuance of the provisions of Section 72A, have also laid down certain guidelines which were issued initially on February 2, 1978. Subsequently, another set of guidelines were issued on February 23, 1981. The guidelines, inter alia, included the criteria which were to be fulfilled before the Government would grant approval of amalgamation of the units. 'Amalgamation' has been defined in the Act. Originally, it was introduced by the Finance (No. 2) Act, 1967, with effect from April 1, 1967, as Section 2(1A). Subsequently, it has been renumbered as Section 2(1B) with effect from April 1, 1989, by the Direct Tax Laws (Amendment) Act, 1987. We shall deal in detail with the incentives which are provided initially to sound undertakings, at the appropriate stage. To continue the recital of the factual position, on July 1, 1978, with a view to take advantage of the incentives available under Section 72A of the Act, the petitioner, a financially sound concern, acquired 65,384 equity shares out of the total paid up 1,00,000 number of equity shares of Kalinga Tubes Limited and thereby the said company became a subsidiary of the petitioner. The petitioner and Kalinga Tubes Limited took necessary steps to amalgamate the two companies with effect from January 1, 1979, which was considered to be the appointed day for amalgamation. Hereinafter, the petitioner for the sake of better understanding, shall also be described as 'IMFA' or the 'amalgamated company', whereas Kalinga Tubes Limited shall be described as 'Kalinga' or the 'amalgamating company'. On June 30, 1979, the petitioner acquired further 18,764 equity shares of the amalgamating company. On August 8, 1979, the petitioner submitted an application purported to be one under Section 72A(3) of the Act to the specified authority indicating the features of the scheme of the proposed amalgamation for approval as well as for recommendation to the Central Government under Section 72A(1), and to make the same effective from January 1, 1979, the date specified in the scheme as the date on which the amalgamation, if approved, was to take effect A screening committee was appointed by the specified authority to make an indepth analysis of the scheme of amalgamation as submitted by the petitioner. There were several exchanges of queries and replies and meetings. On July 17, 1980, the petitioner's application was rejected by the specified authority. Against such rejection the petitioner submitted a representation to the Ministry of Finance. On May 30, 1981, after exchange of correspondence and reconsideration of the petitioner's representation, the specified authority agreed to reconsider the application dated August 8, 1979. On December 3, 1981, further details were submitted by the petitioner with the specified authority. In between, Company Act Cases Nos. 12 and 13 of 1981 were filed before this court with a prayer to allow amalgamation under the provisions of the Companies Act, 1956. By an order dated December 11, 1981, the prayer for amalgamation was allowed and the amalgamation was directed to be effective from January 1, 1979. The Central Government also accorded sanction for amalgamation under the provisions of the Monopolies and Restrictive Trade Practices Act, 1969 (in short the 'MRTP Act'). On December 31, 1981, the specified authority passed an order to the effect that it was agreeable to recommend the case of the petitioner to the Central Government after amalgamation as effected in terms of the scheme approved by the High Court. On January 15, 1982, the petitioner applied to the specified authority for recommendation to the Central Government in order to enable the Central Government to make the declaration under Section 72A(1). Thereafter, again a series of correspondence was exchanged. On April 21, 1982, the specified authority raised, an objection indicating that the scheme approved by it under Section 72A(3) and the subsequent scheme submitted on January 15, 1982, were different and it, therefore, required the petitioner to explain the discrepancy. It was specifically indicated therein that the provision of funds for implementation of the revival scheme estimated at Rs. 253 lakhs fell short of even the estimated tax benefit. It was indicated that this was contrary to the scheme approved earlier by the specified authority according to which the petitioner was to fully plough back the tax benefit and in addition invest Rs. 330 lakhs for implementation of the revival scheme. The petitioner submitted its reply on May 25, 1982, denying the allegations of any variation between the approved scheme and the one submitted on January 15, 1982. On August 26, 1982, the specified authority granted an opportunity of hearing to the petitioner to make submissions justifying its claim. Thereafter, alleging long inaction, the petitioner filed a writ application bearing OJC No. 2325 of 1982 which was disposed of with certain directions on January 5, 1983. On January 24, 1983, the petitioner intimated to the specified authority that, in view of the situation as detailed in its letter, it was not practicable to continue production of steel tubes in the amalgamating company and it intended to diversify to a completely unconnected product for which it had technology as well as a letter of intent from the Government and for which there was a good market potentiality. With reference to clause 7 of the revised guidelines issued in February, 1981, it was indicated that such diversification was within the approved framework of amalgamation. Thereafter, the petitioner wrote several letters to the specified authority to expedite the recommendation to the Central Government so that the necessary declaration entitling it to certain benefits under Section 72A can be extended. On May 6/7, 1983, the specified authority refused to recommend the case of the petitioner on the ground that the petitioner did not satisfy the conditions enumerated in Clause (b) of Sub-section (1) of Section 72A. The order in question is annexure 25 to writ application. The reasons that led to the refusal of the recommendation were indicated to be as follows :
(i) The amalgamated company had indicated that there was no scope to revive the undertaking of the amalgamating company on the ' basis of production of steel tubes, which it had been licensed to manufacture, and which it had been manufacturing so far. Production of the item had, accordingly, been discontinued, and the undertaking had been closed down. There was no proposal to restart the undertaking.
(ii) The amalgamated company proposed to implement a letter of intent for setting up a factory in Dhenkanal district of Orissa for manufacture of High Carbon Ferro Chrome/Charge Chrome. It was proposed to utilise the infrastructure of the undertaking of the amalgamating company and its staff, after necessary restraining (sic). Implementation of this letter of intent for manufacture of a completely unconnected item, and at another location would not result in the revival of the undertaking of the amalgamating company.
4. Assailing the non-recommendation, the petitioner filed OJC No. 1412 of 1983 before this court. The writ application was disposed of with the observation that the recommendation of the specified authority was not binding on the Central Government, which, in any event, was to apply its own mind to the question of the desirability of making a declaration or otherwise and, therefore, the writ application was premature ; nevertheless, the Central Government was directed to pass final orders in the matter within two months from the date of receipt of the order. The decision has been reported in Indian Metals and Ferro Alloys Ltd. v. Specified Authority : [1984]149ITR418(Orissa) . On June 11, 1984, an opportunity was granted by the Central Government to the petitioner to put forth its case and the date for compliance was fixed as June 16, 1984. The petitioner submitted its reply on June 13, 1984. By the impugned order dated July 4, 1984 (annexure 1 to the writ application), the Central Government refused to make a declaration on the ground that the conditions laid down in Section 72A(1) were not fulfilled.
5. The main plank of the petitioner's argument is that the orders of the specified authority as well as the Central Government suffer from non-consideration of the relevant materials which were before them. It is also urged that the financial involvements of the petitioner have been toned down, and an erroneous impression has been gathered that the investment of the petitioner was far below the agreed quantum. It is also urged that subsequent events which have no role to play while considering the question of recommendation under Section 72A(3) and/or declaration under Section 72A(1) have formed the basis for rejection of the petitioner's claim. The specified authority as well as the Central Government has kept out of consideration the relevant materials that amalgamation was approved by this court in Company Act proceedings, and by the authority appointed under the MRTP Act. In those proceedings, it was accepted that the amalgamation was in public interest, and any finding given by the statutory authority and/or the Central Government to the contrary is illegal. The only objection raised by the specified authority till 1982 as is evident from its letter dated April 21, 1982, annexed as annexure 15 to the writ application, was lesser provision of funds for implementation of the revival scheme and not diversification or modification of the scheme. The initial objection was explained in detail to the specified authority ; but, unfortunately, abandoning the said alleged discrepancy, on entirely new grounds, there has been non-recommendation and/or non-declaration. On behalf of the opposite parties, viz., the specified authority, the Central Board of Direct Taxes and the Union of India and a functionary under the Act, it has been urged that the entire approach of the petitioner from the very beginning has been mala fide and it did not intend revival for the amalgamating company, but wanted to make a profit without any sincere attempt at revival which is the sole object underlying Section 72A. It was also submitted that, in order to fathom whether public interest was the real intention, subsequent events were available to be considered and there is nothing illicit in the action of the specified authority or the Central Government in taking the same into consideration while disposing of the petitioner's case.
6. As is apparent from the order refusing declaration, the following formed the basis for refusal :
(a) The scheme approved by the specified authority was not implemented by the amalgamated company.
(b) The amalgamated company proposed diversification to a new product for which the amalgamating company did not have a licence. The guidelines for revival and rehabilitation of the business of the amalgamating company were not fulfilled ; the guidelines for the revival of the business of the amalgamating company lay down that the rehabilitation should normally be without any modification of the business and as per the existing product line and industrial licence held by the amalgamating company or with such diversification as will not require a new industrial licence ; diversification to unconnected fields could be considered only in special cases where the specified authority is satisfied that there is no reasonable scope for revival of the undertaking with its present product line and that such diversification will be necessary ; provided that the amalgamating company has already obtained an industrial licence for the production of such new items, or where an industrial licence is not required for the manufacture of such items.
(c) At the time of application under Section 72A(3), the amalgamated company estimated that the tax benefit and the amalgamated company's contribution to be utilised for the scheme in the years 1979 to 1981 would be Rs. 5.83 crores and new types of steel tubes would be produced by the amalgamating company. However, when the application under Section 72A(1) was finally considered, the actual expenditure both out of the tax benefit as well as the amalgamated company's contribution till the end of 1982 was only Rs. 1.53 crores.
(d) The amalgamating company was not revived but on the contrary, its business was closed down and it was proposed to manufacture high carbon ferro chrome at a different location. Therefore, observance of the guidelines, stressing on public interest which is the sine qua non for the declaration was offended.
7. The petitioner's stand in essence is that the decision is based on irrelevant materials like closure of production from January, 1983 : diversification at another location ; consideration of matters which may be relevant for action contemplated under Section 72A(2); and consideration of irrelevant materials to conclude absence of public interest. The stand of the opposite parties is that the amalgamation did not facilitate the rehabilitation or revival of the business of the amalgamating company. The petitioner's intentions were not honourable from the beginning and it wanted to make a windfall gain by the amalgamation, which is evident from the fact that the tube-mills unit was closed down permanently with effect from 1983, and diversification on a licence held by the amalgamated company was brought into force, which shows apparent non-adherence to the guidelines relating to public policy laid down by the Legislature. Additionally, it is urged that, while considering a case for recommendation, the fact-situation as on the date of the order is relevant.
8. On a consideration of the rival submissions, in our view, the only point that emerges for adjudication is whether consideration of the fact-situation as on the date of passing the order is relevant or events, proximal to the date of amalgamation, are of relevance. A look at Section 72A makes it clear that the purpose for which the section was introduced was to offer some incentives to a financially viable and sound company which, in order to take certain statutory benefits like carry forward of losses and set off, invests in an enterprise which is financially deficient. As explained by the Supreme Court in CIT v. Mahindra and Mahindra Ltd, : [1983]144ITR225(SC) , there are three statutory conditions which are to be fulfilled before entitlement to the benefits prescribed therein are to be available to the amalgamated company, namely--(i) the amalgamating company was, immediately before such amalgamation, financially non-viable by reason of its liabilities, losses and other relevant factors ; (ii) the amalgamation is in the public interest ; and (iii) such other conditions as the Central Government may, by notification in the Official Gazette, specify, to ensure that the benefit under this section is restricted to amalgamation which would facilitate the rehabilitation or revival of the business of the amalgamating company. The expression 'financial non-viability' has not been defined in the Act ; but the Finance Minister's speech, the Notes on Clauses of the Bill and the Memorandum explaining the provisions of Section 72A of the Act make it clear that the financial non-viability of an undertaking has been equated with the 'sickness' of such undertaking and, obviously, in the context of its revival by a sound undertaking, the sickness must be of a temporary character and must not be a basic or permanent sickness. An undertaking which is basically or potentially non-viable will ordinarily be incapable of revival and would face closure. Put differently, the financial non-viability to which reference is made in the section must refer to sickness brought about by temporary adverse financial circumstances that have destabilised the unit to operate on its own. Section 72A(1)(a) is a pointer in this regard. It states that financial viability of the amalgamating company has to be judged by reference to its liabilities, losses and other relevant factors. Normally, financial viability comprises three vital elements, namely, profitability, liquidity and solvency. If an undertaking is basically non-viable, then, such a sick unit has necessarily to face a closure. An undertaking, on the other hand, may be basically viable but not financially viable. The undertaking, in spite of its basic viability on account of various dependent or independent factors, may not be in a position to generate necessary financial resources to continue the business on an economical level. This lack of finance may be acting as a detriment. The Central Government and the specified authority, therefore, are required by Section 72A to gauge whether the amalgamating company, immediately before its amalgamation, has resources to continue its business activities or has a likelihood of obtaining it from other avenues to continue its business. Where it would be advantageous for both the amalgamating and the amalgamated companies to combine their activities and rationalise them for better and more efficient utilisation of their existing facilities, then, in the normal course, the scheme of amalgamation should be sanctioned. A similar view was expressed by the Delhi High Court in Atlas Cycle Industries Ltd. v. Union of India : [1983]141ITR168(Delhi) . While sanctioning the scheme of amalgamation, the most dominant factor which has to be considered is public interest. 'Public interest' is also not statutorily defined. 'Public interest' means something in which the public has a vital interest in either a pecuniary or a personal sense. It can mean a purely inquisitive interest as well as a material interest (see Re A. C. S., 7 Criminal Reports (Canada) New Series 42). A matter of public or general interest does not mean that which is interesting as gratifying curiosity or a love for information or amusement ; but that in which a class of the community have a pecuniary interest, or some interest by which their legal rights or liabilities are affected. (Per Campbell C. J., R. v. Bedfordshire 24 LJQB 84 ; (per Williams I. )., Joynt v. Cycle Trade Publishing Co. [1904] 2 KB 292 Thomas v. Bradbury, Agnew and Co. Ltd, [1906] 2 KB 627). Relating, to an activity, in order to assume the colour of public interest, it must be such that the community or the society benefits from it, and that a larger section of people is benefited from such enterprise. As observed by Willis J., in Liverpool Corn Trade Association Ltd, v. London and North Western Railway Co. [1891] 1 QB 120, it is, undoubtedly, a most difficult enquiry whether one is for public good or not. It, generally, means those interests which concern the public at large. Where 'public' refers to community as an aggregate, it may not be in an organised capacity, but includes the members of the community. As observed by the Supreme Court in State of Bihar v. Sir Kameshwar Singh, AIR 1952 SC 252, the expression 'public interest' is not capable of a precise definition and has not a rigid meaning. The meaning of the expression has to be taken from' the colour of the statute in which it occurs; its concept varies with the time and state of society and its needs. The point, however, to be determined in each case is whether the said interest would be in the general interest of the community as distinguished from the private interest of an individual. In other words, same would be useful to the public. It is not necessary that such a measure would be for the benefit of the whole community but it must be for a considerable number. Certain guidelines have been indicated for application of Section 72A to show what generally would constitute 'public interest'. They are, inter alia, size of the sick industrial unit; formulation of a satisfactory programme for the rehabilitation or revival of the business of the sick industrial unit taking into account protection of the interests of the workers employed by the amalgamating company ; registration under the Monopolies and Restrictive Trade Practices Act; the industrial policy in general and in particular the category of industry to which the sick industry belongs ; the basic viability of the sick unit ; need of tax benefit for revival of the sick unit ; the scope for revival of the amalgamating industrial undertaking by effective use of the resources generated through tax benefit under Section 72A as supplemented by other resources that may be required ; quick and effective revival of the amalgamating company ; nature of the products manufactured by the sick unit ; employment given by the sick unit ; location of the sick unit ; consequences of closure of the sick unit on the industrial ancillary unit having employment and identification of real cause of non-viability.
9. In our considered opinion, while making a recommendation under Section 72A(3), facts proximal to the date of amalgamation should normally form the basis of recommendation or non-recommendation, as the case may be. This appears to be the intention of the Legislature. The specified authority, on examination of the scheme and taking into account all relevant facts, in the background of the conditions referred to in subsection (1) to be fulfilled, if satisfied that the amalgamation is effected in accordance with the scheme or subject to such modification as specified by it, has to make a recommendation to the Central Government under Sub-section (1). In the present case, undisputedly, there was no change in the scheme as approved, so far as the continuance of the tube manufacture activity was concerned till 1982. If at all there has been any departure from the scheme, that is an event during 1982 or thereabout. Section 72A(3) postulates a situation where a proposed scheme of amalgamation is submitted to the specified authority. Therefore, the events which are subsequent to the amalgamation cannot generally be the basis for non-recommendation. The legislative intent seems to provide an opportunity for obtaining an 'advance ruling' in regard to amalgamation. It is true that no hard and fast rule can be laid down. But where there is adherence to the scheme for a fairly long time, refusal to recommend should not be directed merely because there has been some change thereafter. An innovative argument was advanced by Shri S. N. Rotho, appearing for the Central Board of Direct Taxes, that any application under Section 72A(3) has necessarily to be filed before amalgamation is actually effected, and if it has not been so done, there is no scope for any recommendation under Section 72A(3) and, therefore, consequentially, there could not have been any declaration under Section 72A(1). We do not find any substance in this argument. Section 72A(3) and Section 72A(1) operate in entirely different, though connected, fields. Section 72A(1) operates where there has been an amalgamation. Section 72A(3) deals with a proposal to amalgamate. Although a formal recommendation to the Central Government under Section 72A(1) of the Act will be made by the specified authority only after the amalgamation has been effected, applications for approval of the scheme may be made before the actual amalgamation, as provided in Sub-section (3). This is also evident from Clause 11 of the guidelines dated February 23, 1981. In any event, in the instant case, the refusal has not been made on the ground that the scheme was submitted after amalgamation and, therefore, recommendation was not practicable. The approval of the scheme by the specified authority is a process which is parallel to the process of amalgamation and has to be conveyed in two stages, one in the form of an intimation to the amalgamated company and the other in the form of a recommendation to the Central Government after the scheme is effected. In certain cases, the recommendation under Section 72A(3) may be made on an examination of the scheme before the actual date of amalgamation. The recommendation referred to in Section 72A(1) is different from the recommendation made under Section 72A(3) in the sense that, before a declaration under Section 72A(1) is made, a recommendation by the specified authority is mandatory. If there is a departure from the scheme, the Legislature takes care of such a situation. Section 72A(2) is a pointer in this regard. The said sub-section begins with a non obstante clause and provides a bar on set off or carry forward of accumulated losses and unabsorbed depreciation in the assessment of the amalgamated company, unless, in the relevant assessment year, the business of the amalgamating company is carried on by the amalgamated company without any modification or reorganisation or with such modification or reorganisation as is approved by the Central Government to enable the amalgamated company to carry on such business more economically and efficiently and the amalgamated company furnishes, along with its return of income for the assessment year in question, a certificate from the specified authority to the effect that adequate steps have been taken by the company for rehabilitation or revival of the business of the amalgamating company. If there is a breach of any of these two conditions, the benefit of set off and carry forward of loss and unabsorbed depreciation are not allowed. This is where events subsequent to the approval of the scheme and/or recommendation and/or declaration, by the specified authority and/or the Central Government, as the case may be, have a vital role. This aspect does not appear to have been considered in its proper perspective by the specified authority and the Central Government. They have proceeded on the basis that departure, if any, from the scheme at a subsequent time could be the basis for refusal of the recommendation or declaration. We do not think that this approach is correct and tenable in law. It may be possible to take such a stand if the departure is at a point of time of immediate proximity. Where, however, there is continued observance of the scheme for a fairly long time, it should not be of any consequence while considering the recommendation and/or declaration. There has to be evaluation of this aspect by the concerned authorities. It is also the stand of the petitioner that the only change in the scheme pointed out by the specified authority is to the effect that the provision of funds for implementation of the revival scheme fell short of even the estimated tax benefit, as is evident from the letter dated April 21, 1982 (annexure 15 to the writ application). The tentative view expressed was disputed by the petitioner by letter dated May 25, 1982, indicating that the contribution actually made by it amounted to Rs. 564 lakhs, which is substantially higher than the sum of Rs. 385 lakhs expected as tax benefits. It was also indicated that funds to the extent of Rs. 128 lakhs made available to the amalgamating company during 1978 for clearing their past liabilities in addition to further funds of Rs. 436 lakhs spent by the petitioner during 1979 to 1981 mainly for liquidation of past liabilities had not been taken into account. According to the petitioner, in terms of Clause 8 of the guidelines dated February 23, 1981, repayment of loans and liabilities which had become due for payment by the date of amalgamation but had been defaulted including statutory dues was referable to the revival and rehabilitation scheme since the monetary resources required for the said purpose was indicated to be included in the scheme. This aspect does not appear to have been considered by the specified authority or the Central Government, as appears from a perusal of the impugned orders. It is not known to what extent the non-consideration of this aspect which, according to us is relevant, has influenced the ultimate conclusions. Law is fairly well-settled that where relevant material is excluded from consideration or irrelevant material is taken into consideration, the conclusion is not tenable because it is not known to what extent the non-consideration or the consideration, as the case may be, has affected the ultimate conclusion.
10. It may be noticed here that the specified authority, in its order of non-recommendation, indicated two reasons for non-recommendation, i.e., (i) the amalgamated company has indicated that there is no scope to revive the undertaking of the amalgamating company on the basis of production of steel tubes which it has been licensed to manufacture and which it had been manufacturing ; production of the item has, accordingly, been discontinued, the undertaking has been closed down and there is no proposal to restart the undertaking, and (ii) the amalgamated company proposed to implement a letter of intent for setting up a factory at another location for manufacture of a completely unconnected item which will not result in the revival of the undertaking of the amalgamating company. On the basis of the order passed by this court in OJC No. 1412 of 1983, dated May 7, 1984, the Central Government required the petitioner to put forth its case as to the fulfilment of the pre-conditions prescribed under Section 72A(1) and the representation was to reach the concerned authority on or before June 16, 1984. The petitioner submitted its reply on April 13, 1984. With reference to the reply of the petitioner, the impugned order (annexure-1) was passed by the Central Government. While passing the order, the Central Government also appears to have considered that the amalgamated company's contribution was not in conformity with the scheme. As indicated above, the petitioner had disputed the position. The order of non-recommendation (annexure-25) has not dealt with this aspect, and it appears also to be the case with the Central Government. The Central Government did not require the petitioner to make any representation in this regard, as appears from its letter dated June 11, 1984, and wanted the petitioner to submit its case with reference to the order of non-recommendation of the specified authority dated May 6/7, 1983. Thus, the petitioner had no opportunity to place its case before the Central Government so far as the question of inadequate contribution is concerned. Utilisation of the allegation as the basis of non-declaration violates the principles of natural justice. Our laws of procedure are grounded on the principles of natural justice which require that men should not be condemned unheard, that decisions should not be reached behind their backs, and that, in proceedings that affect their lives and property, they should not be precluded from participating in them (see Charan Lal Sahu v. Union of India, : AIR1990SC1480 ).
11. Natural justice is an inseparable ingredient of fairness and reasonableness. Non-observance of natural justice is itself prejudice (see S.L. Kapoor v. Jagmohan, : [1981]1SCR746 , and Charan Lal's case, : AIR1990SC1480 ). The contentions raised in the reply by the petitioner have been disposed of with the observation that the letter of the petitioner did not set out new facts other than those considered by the specified authority. The contentions and submissions of the petitioner have not been elaborately dealt with by the Central Government. This also adds to the vulnerability of the order passed by the Central Government. In the fitness of 'things, therefore, the matter should be re-examined, by the Central Government keeping in view our observations made above. Since we are remitting the matter to the Central Government for reconsideration of the matter, we do not think it necessary to decide the issue raised, viz., that the industrial licence of both the amalgamating company and the amalgamated company and not the amalgamating company alone should be taken into consideration and, for that purpose, Clause 7 of the guidelines is without any basis. Accordingly, annexure 1 is quashed. Since the matter has travelled through the corridors of this court four times, mid more than a decade has passed since amalgamation, an expeditious disposal of the same, preferably by March 31, 1991, would be in the interest of all concerned.
12. The writ application is disposed of. No costs.
R.C. Patnaik, J.
13. I agree.