ORDER
Dr. M. K. Sharma, J.
1. This appeal is directed against the common order dated 4th July, 1995 passed by the learned Single Judgein I.As. 6511, 6588/1985 and Suit No. 1627/ 1985, disposing of the aforesaid proceedings declining to modify the order dated 7-10-1986 passed in Suit No. 1627/1985 and maintaining the decree passed therein and further holding that the decree would be available for execution only against the Hind Cycles Ltd., the company.
2. Hind Cycles Ltd. was a company incorporated under the provisions of Indian Companies Act. With regard to the conduct of the business of the said company, the Central Government conducted an investigation as provided for under Section 15 of the Industries (Development and Regulation) Act, 1951 (hereinafter called the 'Act of 1951'). On completion of the investigation and having formed an opinion thereafter that it was being managed in a manner highly detrimental to public interest, issued a notification on 3rd January, 1974 in exercise of the powers conferred by clause (b) of subsection (1) of Section 18A of the said Act authorising a body of persons to take over the management of the whole of the said undertakings namely, M/s. Hind Cycles Ltd., Bombay. In the aforesaid notification dated 3rd January, 1974, it was stipulated that a body of persons authorised by the said notification would take over the management of M/s. Hind Cycles Ltd. and that the said Board of Management shall hold office for 5 years from the date of publication of the order in the Official Gazette and that the said Board shall comply with ail the directions issued from time to time by the Central Government. Subsequently by another notification dated 26-12-1978 the life of the order dated 3-1-1974 was extended up to 2nd January, 1981.
3. The appellant decree-holder entered into an agreement with the Company on 28-11-1975, whereby he ws appointed an agent of the Company for the sale of cycles and cycle parts manufactured by the Company in Iran. By virtue of the aforesaid appointment and according to the terms of the agreement, he was entitled to commission on such sales. The appellant carried on the business of sale of cycles and cycle parts manufactured by the Company in Iran during the period form 16-11-1975 to 16-11-1978. However, in spite of the stipulation made in the agreement, the appellant was not paid his commission on account of which he made a claim for payment of such commission with interest. On failure to pay such commission with interest, the appellant invoked the arbitration clause and the same was referred for adjudication to Shri V. D. Misra, Arbitrator who gave an award on 30-8-1985. The claim of the appellant was against both M/s. Hind Cycles Ltd. and also Union of India who were arrayed as parties in the proceedings before the Arbitrator.
4. In the meantime, a legislation called The Hind Cycles Ltd. and Sen Raileigh Ltd. (Nationalisation Act), 1980 (hereinafter called the 'Nationalisation Act') was enacted and published in 'The Gazette of India' on 27th December, 1980. The said Act provided for the acquisition of the undertakings of Hind Cycles Ltd. and Sen Raileigh Ltd. with a view to secure the proper management of such undertakings so as to subserve the interest of the general public by ensuring the continued manufacture, production and distribution of bicycles, their component parts and accessories which are essential to the needs of the economy of the country and for matters connected therewith or incidental thereto. The said Act came into force on the 15th day of October, 1980 and on from the appointed date, the undertakings of each of the aforesaid two companies namely, Hind Cycles Ltd. and Sen Raileigh Ltd. and all the rights, title and interest of each of the aforesaid two companies in relation to such undertakings stools transferred to and vested in the Central Government.
5. M/s. Hind Cycles Ltd. (Government Management) did not appear before the Arbitrator whereas, the Union of India contested the aforesaid arbitration proceedings. Accordingly the arbitration proceedings proceeded ex parte as against Hind Cycles Ltd. (Government Management).
6. On completion of the arbitration proceedings, the Arbitrator passed an award holding that M/s. Hind Cycles Ltd. should pay to the appellant Rs. 25,88,536/ - as against the claim contained in clause (i) and also Rs. 1,13,39,025/- in respect of the claim contained in clause (ii) of the claims. The learned Arbitrator, however, held that the appellant is not entitled to recover any amount in respect of clause (iii) and clause (iv) of the claims from M/s. Hind Cycles Ltd. or from the Union of India. The learned Arbitrator further held that the Union of India was not liable to pay any amount to the appellant in respect of the aforesaid claims. The aforesaid award was passed on 30-8-1985 and was a non-speaking award and no reason has been assigned for the decision arrived at by the Arbitrator.
7. The award passed by the Arbitrator was filed in the Court and the proceeding for making it a rule of the Court was registered as Civil Suit No. 1627/85. As stated above, Hind Cycles Ltd. did not contest the proceeding whereas, the appellant and the Union of India, the respondent herein filed their objections to the award. After hearing the parties, the Court by its order dated 7-10-1986 directed the award to be made a rule of the Court in so far as Hind Cycles Ltd. is concerned in view of its having preferred no objection. However, other objections were kept alive for consideration. Decree based on the aforesaid order dated 7-10-1986 is under execution. registered as Ex. 123/90. In the execution application, the Union of India is imp leaded as one of the judgment-debtors and execution of the decree is also sought for to be enforced against Union of India as well, which is contested by the said Union of India, arrayed as the respondent herein.
8. The learned single Judge before whom the aforesaid execution case as also the objections taken against the award came up for consideration formulated the following two questions for decision in the aforesaid proceedings.
(i) whether the Arbitrator ought to have given the award against the UOI and so a decree is liable to be passed against the Union of India as well?
(ii) whether the decree passed against Hind Cycles Ltd. (Government Management), is executable against the UOI?
9. After hearing the parties and on consideration of the provisions of the relevant laws and connected facts and circumstances of the case, the learned single Judge held that the Arbitrator did not err in exonerating Union of India and also in refusing to make the award against it. It was further held that the decree-holder could not seek enforcement of the decree against the Union of India, the decree having been passed only against the Company. In respect of the second question, the learned single Judge held that the objection of the decree holder in so far as it seeks the award being made a rule of the Court along with the claim being decreed against the Union of India as well was not maintainable and the said objection was rejected holding that the decree was not available for execution against the Union of India. Being aggrieved by the aforesaid decision of the learned single Judge, the present appeal has been preferred.
10. The learned Counsel appearing for the appellant submitted before us that by virtue of the provisions of Sections 18-A and 18-B of the Act of 1951, on taking over of the management/control of the two units and handing over the management to a body ofpersons appointed by the Central Government, the Central Government for all practical purposes took over the aforesaid two units for its own business and thus, the Central Government while running the business of the aforesaid two units acted not as an agent or representative of Hind Cycles Ltd. but, was acting under statutory rights. Consequently, the Central Government was entering into contract with third parties like the appellant not on behalf of Hind Cycles Ltd. but in its own name and, thereforee, the dues owned by the Company could be for all practical purposes a liability on the Central Government and, accordingly, the Union of India was responsible for repayment of the same.
11. It was further submitted that while the appellant entered into an Agency Agreement with the body of persons on 28th November, 1975, the said body of persons entering into the agreement with the appellant described itself as Hind Cycles Ltd. (Government of India Management) and, thereforee, the contract entered into by the appellant was for all practical purposes a contract entered into with the Union of India and not with Hind Cycles Ltd. According to the learned Counsel, the dues of the Company were also recoverable from the Union of India in spite of the restrictions put in by the provisions of the Nationalization Act.
12. We have also heard the learned Counsel appearing for the respondents/ Union of India, who had taken us through the provisions of the Nationalization Act, 1980 and submitted that in view of the various provisions of the said Act, the decree passed against the Hind Cycles Ltd. was not executable against the Union of India and that the Arbitrator was justified in not giving any award against the Union of India.
13. Under Section 18-A, a power has been vested on the Central Government to assume management or control of an industrial undertaking in certain cases. The Central Government being of the opinion that the two units of M/s. Hind Cycles Ltd. in respect of which an investigation was made under Section 15 was being managed in a manner highly detrimental to the public interest issued a notification authorising a body of persons to take over the management of the whole of the said undertakings. Accordingly, the CentralGovernment in the present case chose toexercise the powers vested on it under theprovisions of Sections 18-A and 18-B of theAct of 1951.
14. We have also gone through the provisions of Section 18-B which deals with the effect of the notified order issued under Section 18-A. A close reading of the said provisions would show that with the issuance of the notification under Section 18-A the Central Government assumes management or control of industrial undertaking. However, such exercise of power does not have the effect of making the industrial undertaking an establishment or any industry carried on by or under the authority of any department of the Central Government. Subsequently, however, with the enactment of the Nationalization Act, the undertakings of Hind Cycles Ltd., was acquired by the Central Government for ensuring continued manufacture, production and distribution of bicycles and their component parts and accessories which came into force on 15th October, 1980. With the taking over of the aforesaid two units of M/s. Hind Cycles Ltd., all properties belonging to the Company vested with the Central Government under Section 3. On such vesting of the properties, the same stood free and discharged from any trust, obligation, mortgage, charge, lien. All other encumbrances affecting them and any attachment, injunction decree or order of any Court restraining the use of such properties in any manner or appointing any receiver in respect of the whole or any part of such properties also stood withdrawn.
15. Sections 4 and 5 of the Nationalization Act are necessarily to be considered by us for answering the issues raised in the present case and accordingly required to be extracted :
4. (1) The undertakings of each company referred to in Section 3 shall be deemed to include all assets, rights, leaseholds, powers, authorities and privileges and all property, movable and immovable, including lands, buildings, workshops, stores, instruments, machinery and equipment, cash balances, cash on hand, cheques, demand drafts, reserve funds, investments, book debts and all other rights and interests in, or arising out of, such property as were immediately before the appointed day in the ownership, possession, power or control of such company, whether within or outside India, and all books of account, registers and all other documents of whatever nature relating thereto, and shall also be deemed to include the liabilities specified in sub-section (2) of Section 5.
(2) All properties as aforesaid which have vested in the Central Government under Section 3 shall, by force of such vesting, be freed and discharged from any trust, obligation, mortgage, charge, lien and all other encumbrances affecting them, and any attachment, injunction, decree or order of any Court restricting the use of such properties in any manner or appointing any receiver in respect of the whole or any part of such properties shall be deemed to have been withdrawn.
(3) Every mortgagee of any property which has vested under this Act in the Central Government and every person holding any charge, lien or other interest in, or in relation to, any such property shall give, within such time and in such manner as may be prescribed, an intimation to the Commissioner of such mortgage, charge, lien or other interest.
(4) For the removal of doubts, it is hereby declared that the mortgagee of any property referred to in sub-section (3) or any other person holding any charge, lien or other interest in, or in relation to, any such property shall be entitled to claim, in accordance with his rights and interests, payment of the mortgage money or other dues, in whole or in part, out of the amount specified, in relation to the company owing such property, in the First Schedule, and also out of the amounts determined under Section 8, but no such mortgage, charge, lien or other interest shall be enforceable against any property which has vested in the Central Government.
(5) Any license or other instrument granted to either of the two companies in relation to any undertaking which has vested in the Central Government under Section 3 at any time before the appointed day and in force immediately before the day shall continue to be in force on and after such day in accordance with its tenor in relation to and for the purposes of such undertaking, and, on and from the date of vesting of such undertaking under Section 6 in a Government company, such Government company shall be deemed to be substituted in such license or other instrument as if such license or other instrument had been granted to such Government company and such Government company shall held it for the remainder of the period for which the company to which it was granted would have held it under the terms thereof.
(6) If, on the appointed day, any suit, appeal or other proceeding of whatever nature in relation to any matter specified in sub-section (2) of Section 5, in respect of any undertaking of either of the two companies, instituted or preferred by or against either of the two companies, is pending, the same shall not abate, be discontinued or be, in any way, prejudicially affected by reason of the transfer of the undertakings of either of the two companies or of anything contained in this Act, but the suit, appeal or other proceeding may be continued, prosecuted or enforced by or against the Central Government or, where the undertakings of the two companies are directed, under Section 6, to vest in Government companies, by or against the concerned Government company.
5.(1) Every liability, other than the liability specified in sub-section (2), of each of two companies in respect of any period prior to the appointed day, shall be the liability of the concerned company and shall be enforceable against it and not against the Central Government, or, where the undertakings of the two companies ate directed, under Section 6, to vest in Government companies, against the concerned Government company.
(2) Any liability arising in respect of materials supplied to either of the two companies after the management of the undertakings of the company had been taken over by the Central Government shall, on and from the appointed day, be the liability of the Central Government or of the concerned Government company aforesaid and shall be discharged by that Government or Government company, as and when repayment for such supplies becomes due and payable.
(3) For the removal of doubts, it is hereby declared that--
(a) save as otherwise expressly provided in this Section or in any other provision of this Act, no liability, other than the liability specified in sub-section (2), either of the two companies in relation to its undertakings in respect of any period prior to the appointed day, shall be enforceable against the Central Government, or, where the undertakings of the two companies are directed, under Section 6, to vest in Government companies, against the concerned Government company;
(b) no award, decree or order of any Court, Tribunal or other authority in relation to the undertakings of either of the two companies, passed on or after the appointed day, in respect of any matter, claim or dispute, not being a matter, claim or dispute in relation to any matter referred to in sub-section (2) which arose before that day, shall be enforceable against the Central Government, or, where the undertakings of the two companies arc directed, under Section 6, to vest in Government companies against the concerned Government company;
(c) no liability incurred by either of the two companies before the appointed day, for the contravention of any provision of law for the time being in force, shall be enforceable against the Central Government, or, where the undertakings of the two companies are directed, under Section 6, to vest in Government companies, against the concerned Government company.
16. Under Section 25 of the Act, it was provided that the provisions of the present Act shall have effect notwithstanding anything inconsistent therewith in any other law for the time being in force or any instrument having effect by virtue of any law, other than this Act, or any decree or any order of Court, Tribunal or other authority.
17. Having set out the relevant provisions of the Nationalization Act. Let us examine the effect of the said provisions to the facts of the case in order to decide as to whether a liability incurred by the company or any dues of the Company incurred prior to the appointed day could be said to be the liabilities of the Central Government. It is true that under Section 3 of the Nationalization Act, all rights, title and interest of the Company in question vested with the Central Government on and from the appointed day, that is, 15-10-1980. All such vesting, however, as provided for under Section 4 of the Act was free and discharged from almost all types of encumbrances detailed particularly in the said provision. It is further specified in Section 5 of the Act that 'every liability other than the liabilities specified in sub-section (2) of each of the two companies in respect of any period prior tb the appointed day shall be the liability of the concerned Company (M/s. Hind Cycle Ltd.) and shall be enforceable against it and not against the Central Government.' Sub-section (3) of Section 5 of the Act makes the position more clear and leaves no room for any doubt with regard to the intention of legislature in this respect when clauses (a) and (b) thereto state that 'save as otherwise expressly provided in this Section of in any other provision of this Act, no liability other than the liability specified in sub-section (2) of the Company in respect of the period prior to the appointed day shall be liability of the Central Government and no decree, award or order of any Court, tribunal or other authority in respect of any claim arising prior to the appointed day and not being a claim preferred to in sub-section (2) would be enforceable against the Central Government.
18. An analyses of the aforesaid provisions leads to only one conclusion that if there be any liability or dues incurred by the company prior to the appointed day, that is, prior to 15th day of October, 1980 incurred by the company, the same would not be a liability of the Central Government and no award, decree or order could be passed by any court, tribunal or other authority liable for payment of such dues incurred by the said company or liability of the said company incurred prior to the appointed day. The validity of the provisions of the aforesaid Act is not in challenge in the present proceeding and, thereforee, we are not called upon in the present proceeding to examine whether the aforesaid provisions are ultra virus to the Constitution of India. We would, however, like to record here that the validity of the provisions of the aforesaid Nationalization Act was challenged before the Madhya Pradesh High Court. The aforesaid challenge to the constitutional validity of the Nationalization Act was answered by the Madhya Pradesh High Court in M. P. Nos. 750/1980 and 95/1981 holding the provisions of the Nationalization Act are intra virus of the Constitution and are protected under Article 31C of the Constitution. It is stated that as against the aforesaid decision of the Madhya Pradesh High Court a Special Leave Petition has been preferred in the Supreme Court of India, which is pending.
19. In view of the provisions of the Nationalization Act, dues of the Company or if there be any liability of the Company incurred by it prior to 15th October, 1980, would not be the liability of the Central Government and that no decree, award or order could be passed by any Court, tribunal or other authority in respect of the same making the Central Government liable to pay such dues itself or clear the said liability of M/s. Hind Cycles Ltd. The provisions being clear and unambiguous and the liabilities of the Company in respect of any transaction prior to the appointed date and not discharged or on before the specified date being the liabilities of the Company and not of the Central Government, we cannot hold that the liabilities of the Hind Cycles Ltd., company including the dues to be paid to the appellant by the Company could not become the liability and dues to be paid by the Central Government.
20. In view of the aforesaid reasons, we do not find any infirmity in the order passed by the learned single Judge which is in challenge in the present appeal and we, thereforee, uphold the same. In the result, this appeal has no merit and is accordingly dismissed.
21. Appeal dismissed.