Usha Mehra, J.
(1) Inalsa Limited, the petitioner herein is Limited Company incorporated under the Companies Act. It has five existing Small Scale Undertakings manufacturing different products. First small scale industrial undertaking was set up at 8/9 Kirti Nagar Industrial Aica, New Delhi, in 1973-74 for manufacturing plastic blow moulded items. Other existing undertakings of the First i)clilioner arc manufacturing items reserved under Schedule I for the small scale sector. These industrial undertakings besides manufacturing different items are in fact situated at different locations namely at G.T.Karnal Road Industrial Area, Kirti Nagar Industrial Area, Rajinder Nagar Industrial Area, Mohan Nagar Ghaziabad etc.
(2) On 7th 0ctober,1988 respondents 3 and 4 issued a certificate certifying that first petitioner has separate industrial undertaking registered as Small Scale Industrial Unit (In short Ssi Units). On 25th March,1989 respondent No.2 issued a circular purporting to club investments in all Ssi units set up by a common proprietor/partner/Director and if such investment exceed Rs.35 lakhs then all such units would be liable for deregistration. First petitioner made two separate applications - one on 4th 0ctobcr,1990 for permanent registration of a separate small scale undertaking for electric motors and parts thereof; second on 8th 0ctober,1990 for provisional registration for cycle frames, forks, handles etc. It had also made an application on 22nd February,1990 for reassessment of capacity of iron and steel for hand pumps etc.
(3) First petitioner furnished the information of its Directors and informed that the investment ceiling had been complied. Further stated that each of the undertaking was distinct from the other. The respondents, however, rejected all the applications lodged by the first petitioner vide their separate orders of the same date date i.e. 27th November, 1990. Rejection was based, inter alia, on the ground that value of plant & machinery in respect of all units where Directors of the company were common had to be clubbed and since after clubbing exceeded the limit of Rs.35 lakhs, hence could not be registered nor could continue.
(4) The main point for determination is (i) whether the respondent could reject petitioner's request on the ground that in some of its industrial undertakings there art common Directors; and (ii) Could the respondent club the investment of all the industrial undertakings of the petitioner?
(5) M/S Inalsa Ltd., the first petitioner is engaged in the manufacturing of deep well hand pump and its spares. Second petitioner is the Director of First petitioner. First respondent is entrusted with the administration of the provisions of Industries (Development and Regulation) Acl,1951 (hereinafter called the Idr Act). Development Commissioner formulates coordinating and monitoring provisions for promotion and development of small scale industries. Third and fourth respondents arc the directors in the office of Development Commissioner, Ministry of Industry, entrusted with the certification and or other responsibilities for administering the small scale industries in India. They arc also responsible for renewal of the capacity assessment certification for consumption of iron and steel which are raw material for the manufacturing of hand pump and spares in the small scale industrial undertakings like the first petitioner. The five existing small scale industries of petitioner No. 1 received Small Scale Industries Certificate as under:
UNDERTAKING and Address
1.Knitting Machine/ Electrical Appliances Factory B-35, G.T.Karnal Road Industrial Area, Delhi.
2.Hand Pump Factory 9/51, Kirti Nagar Ind. Area, New Delhi.
3.Hand Pump Factory 42-B2, Rajinder Nagar Industrial Area, Mohan Nagar, Ghaziabad.
4.Cold Chain Equipment 10/62, Kirti Nagar Factory Industrial Area, New Delhi.
5.Gas Appliances Factory 10/62 Kirti Nagar Ind. Area, New Delhi.
(6) A joint certificate was issued by the Commissioner of Industries, Delhi Administration on 7th ()ctobcr,1988 which recognised these as separate undertakings and permitted the continuation of each undertaking of first petitioner as a small scale industry. Regarding the Undertaking of first petitioner at Ghaziabad, U.P.Government through G.M., District Industries Centre, Ghaziabad on 28th August, 1985 issued certificate of registration as a Ssi unit. Each of the undertaking of the first petitioner was treated as district undertaking for the purpose of Income tax. Sales tax, Central Taxes, P.F' E.S.I., and were manufacturing separate items/ products. These were separate legal entities.
(7) Ministry of Industry issued notification under Section 29B of the I.D.R.Act explaining the applicability of certain provisions of the Act for specified undertakings vide notification dated 16th February,1973. It also notified the criteria for constituting a Small Scale Industry and its investment limit not exceeding Rs.10 lakhs. From time to time respondent had been revising this investment limit. Lastly it was revised and raised to Rs.35 lakhs vide order dated 18th March,1985 vide Notification dated 30th June,1988. Ssi Undertaking has been defined with reference to the investment ceiling of Rs.35 lakhs.
AS the petitioner had already been running five Ssi units, it applied on 22nd February,1990 for reassessment and certification of consumption capacity of iron and steel raw material etc. Instead of acceding to petitioner's request the respondent on 29th March,1990 asked the petitioner to furnish the value of the plant & machinery with details in respect of the Ghaziabad unit and also whether Directors of this unit were having any interest in any other unit as partner/proprietor/Director. The requisite information was given by the petitioner vide letter dated 12th 0ctober,1990. It was also informed that each of these undertakings was distinct from the other. It was specifically mentioned that first petitioner had no control over the Management or affairs of any of the companies nor first petitioner had any investment in these companies. This reply did not satisfy the respondent thereforee, vide the impugned order dated 27th November,1990 the request was rejected.
(8) The first petitioner had also applied on 4th October,1990 seeking permanent registration for manufacturing of electric motors at its undertaking called 'Electro Motors Industries'. This was also rejected vide order dated 27th November,1990 and so was the request of the first petitioner dated 8th 0ctober,1990 asking for provisional registration and amendment of Ssi Certificate at an Ssi Undertaking at Kirti Nagar.
(9) The first and the second respondents' took up very interesting defense thereby denying that third and fourth respondents being Commissioner and Director in the office of the Development Commissioner (SSI), Ministry of Industry, Govt.of Ikndia, entrusted with the certification and other responsibilities for administering the small scale industrial Sector in India. Respondent No.3 is the Commissioner of Industries for the Delhi Administration and is not directly under the control of respondents 1 & 2. Respondent No.4 is the subordinate officer of the respondent No.3. Its second respondent who is apex body and Nodal Agency for formulating and monitoring policies and programmes for development and growth of small scale industries in the country. It is this respondent who issues directions to all the States/ Union Territories to handle the work of granting permanent registration to the small scale industries undertakings. That under Section 11-B of the' Industries (Development and Regulation) Act, (in short the Idr Act) makes it clear that investment ceiling is one of the factor to be taken into account to find that small scale industrial unit is not a subsidiary of or owned and controlled by any other undertaking. Manufacturing of separate items not related to other industries is another criteria to be kept in mind but this is not the sole criteria. If this is treated as the sole criteria then it would mean that each of petitioner's industrial undertaking can enjoy investment ceiling in plant and machinery up to Rs.35 lacs even though, controlled by a single undertaking. This is not the intention of the provision of Section 11-B read with Section 3(d) of the Idr Act. Each of the activities conducted in separate factory of the first petitioner even though located at different places but being under single control has to be considered one industrial undertaking. All the factories of first petitioner are being run by the first petitioner as such they all jointly qualified for being recognized or de-recognised as one small industrial undertaking. Different factories located at the same or different postal addresses but having common Directors or controlling Directors, shall constitute one single industrial undertaking. Hence, applications of the first petitioner were rightly rejected.
(10) On the same line is the defense set up by 3rd and 4th respondents. On behalf of respondents 3 & 4 affidavit of Mr.M-L.Bhatt, Joint Director (Industries) has been filed where he clarified that an undertaking shall not qualify as Small Scale Industrial Undertaking if it is the subsidiary of, or owned or controlled by any other undertaking. Since each of the undertaking is owned by the first petitioner, thereforee, they could not have registered separately. It has to be treated as one single industrial undertaking. Moreover the petitioner company is owned by a large industrial house having various subsidiaries and connected undertakings, thereforee, the first petitioner cannot be given the benefit which are to be given to small scale industrial undertakings.
(11) Arguments advanced at the bar by Mr.Arun Jaitley, Sr.Advocate for the petitioner, Mr.E.X.Joseph, Senior Advocate for respondents 1 & 2 and Ms.Geeta Luthra for respondents 3 & 4 were very convincing.
(12) MR.ARUN Jaitley, appearing for the petitioners at the outset gave up the ground of his attack relating to the mode of calculation of investment for small scale industrial units. Mr.Jitley, however, restricted his challenge to the clubbing of the investment ceiling of the assets of all the existing Ssi units of the first petitioner by taking the plea that since each of these undertakings are distinct and are manufacturing separate products/items, hence were eligible for separate registration and for continued registration. In this regard he placed reliance on the decision of the Gujarat High Court. That Court vide order dated 19th June, 1989 restrained the clubbing of investment on the ground that interest of Directors in other units is not a relevant factor at the time of registration or for continuing registration. thereforee, according to MrJaitley the impugned order being vocative of petitioner's right are liable to be quashed.
(13) To appreciate the challenge, we must have a quick glance at the scheme of the Act. Section 2 of the Act deals with the declaration as to the expediency of control by the Union. This Section is only declaratory to the intention of the Union to take under its control certain industries specified in the Schedule. Section 3 gives the definitions of various expressions used in the Act. Section 3(d) defines 'Industrial Undertaking' as under :-
'INDUSTRIAL Undertaking' means any undertaking pertaining to a scheduled industry carried on in one or more factories by any person or authority including Government:'
(14) Section 3(j) defines small scale industrial undertaking:
'SMALL scale industrial undertaking means an industrial undertaking which, in accordance with the requirements specified ;under sub-section (1) of Section 11B, is entitled to be regarded as a small scale industrial undertaking for the purpose of this Act.
(15) For an undertaking to be a small scale undertaking it should be 'industrial undertaking' as defined under Section 3(d) read with the definition of 'factory' in Section 3(c). Thus only those units employing at less then 50/100 workers and operating with/ without any power would attract the provision of the Act. Other units are not subject to the regulatory provision relating to licensing under the Act. Undertaking must fulfill all requirements that government may lay down under Section 11-B of the Act.
(16) Section 11-B was inserted by the Amendment Act,1984 with the intention to lay down the statutory guidelines for determining what should constitute ancillary small scale industrial undertaking. Central Government issued Notifications under Section 11B read with Section 29 of the Act. These Notifications laid down the criteria under which an industrial undertaking may be treated as small scale industrial undertaking. Notification issued under Section 29B of the Act, intended to reflect the statutory criteria for determining what should constitute ancillary or Ssi undertaking. The same is reproduced as under:-
(I)The Value of investment in fixed assets be not more than Rs.35 lakhs for small scale ancillary industrial undertaking.
(II)Small scale/ ancillary industrial undertaking owned and controlled by any other undertaking will be outside the purview of the exemption.
(17) Meaning thereby that it should not be a subsidiary of or owned by any other industrial undertaking. Under Section 11-B the Central Government assumed the powers to make reservation of items for exclusive products in the small scale sector. This amended provision empowered the Central Government to specify the requirements to be complied with by an industrial undertaking to enable it to be registered as an ancillary or small scale industrial undertaking. It also envisages power to make reservation of any Article or class of articles for exclusive production by an ancillary or small scale industrial undertaking thereby fixing the production capacity of large and minimum scale units. This in fact was necessary because there was need to lay guidelines for industrial license with the object in mind to regulate the deployment of material resources.
(18) Mr. Jaitley contended that in view of the above provisions the definition of the words 'industrial undertakings' assumes importance, read with the intention of the Legislature it can be inferred from this amended provision of Section 11B that the intention was to regulate the products of the industries called the scheduled industries. The amendment provision empowered the Central Government to make reservation of a article or class of articles for exclusive production by a small scale industrial undertaking. Further the expression 'industrial undertaking' used in Section 3(d) read with 1st Schedule leads to only one inference that industrial undertaking has a direct nexus with the products it manufactures and not with its corporate character. It only relates to its products which can fall under scheduled industry. In this view of the matter, MrJaitley contended that reading of Section 11B read with the Notifications issued under Section 29 read with Section 3(d), by no stretch of imagination the Central Government became empowered to club various industrial undertakings of the first petitioner on the basis of its Directors being Directors of another unit. In fact Schedule to the Act is in relation to the items or products it manufactures and not as to who is owner or having control of the industries, viz-a-viz. the directors or the partners. Nor the registration could be denied on the basis of clubbing of investment of all the five units. The interest of one Director in one company could be different than in the other unit. This is not a relevant factor for registering or de-registering any small scale industrial unit.
(19) Admittedly, the Central Government issued notifications as per provision of Section 11B read with Section 29B of the Act laying down the limit for the purposes of fixed assets in plant and machinery to make a Ssi Unit claim exemption. Initially this limit/ceiling was not to exceed Rs.20 lakhs, thereafter it was enhanced by the second notification issued on 31st August,1987 thereby raising the limit of investment and fixed assets to Rs.35 lacs. By the subsequent notification issued on 2nd April, 1991, this limit has now been increased to Rs.60 lacs. Out of which if 30% products are exported the limit would reach to Rs.75 lacs. It is not disputed that no restrictions have been imposed with regard to the turn over, profitability or size of the industry. thereforee, what we have to keep in mind is that if two restrictions namely (i) value of invest- ment in fixed assets; and (ii) that the undertaking should not be owned or controlled by any other undertaking are complied then such an Ssi unit will get the registration and also the continued registration as the case may be. Mr.Jaitley in order to support his arguments drew the attention of this Court to the plea taken by the respondent that since first petitioner has another unit located at Ghaziabad where some of the Directors of that unit also have interest in other unit. hence request of the first petitioner could not be acceded. This plea, Mr.Jaitley contended, suffer from arbitrariness. This is not stipulated in the Act nor in the two restrictions so notified. He also pointed out that the petitioner in response to respondent's letter furnished the information regarding its directors, thereby informing the respondent that none of its Director was aware of the details of undertakings of other companies in which he. or they were Directors. Moreover, the undertakings of these companies did not vest nor were owned and controlled by any of these directors or shareholders. But this information did not satisfy the respondent. The rejection vide impugned orders, thereforee, appear due to non-application of mind and on irrelevant consideration
(20) Mrjaitley, thereforee, contended that harmonious reading of various provisions of the Act and schedules therein leads to only one inference that this Act is not concerned with the Corporate Character or with its directors or partners. Corporate Shell of the Company may be the same or different, but the Act is concerned with the products the company manufacture in order to ensure that such a company could be declared a Scheduled Company. Some products require license while other products manufactured by the Company would still remain reserved wholly for the small scale sector. By interpreting the intention of the legislature by the use of the expression 'industrial undertaking' and 'factory' appearing in Section 3(d) and 3(j) Mr.Jaitely drew the conclusion that even if a company carries on business of different products, but if it requires its industrial undertaking to he a small scale industrial undertaking it has to prove and establish that that unit is manufacturing a reserved product. First Petitioner's existing five undertakings and the two for which it applied for registration are manufacturing different products unrelated to each other. The directors or partners cannot own the Company. Their association or non association would not determine the character of the undertaking. Refuting the arguments of Mr.Joseph and Ms.Pinky Anand, Mr.Jaitly urged that a case of fraud cannot be built on these facts simply because some of the directors of one Ssi unit of the First Petitioner are directors or partners or proprietor of other Ssi unit manufacturing totally different and unrelated goods/ items. A case of fraud would rest on the facts if one unit of the petitioner under the garb of separate registration but having the same ownership was manufacturing identical goods/ items. But that is not the case in hand. He thus sumed up by saying that no restrictions have been imposed with regard to the turn over, profitability or size of the owner. Moreover, under the Scheme of the Act it is possible for an owner to manufacture several different products in its separate industrial undertakings and still each of those undertaking would be perfectly justified to be called small scale industrial undertaking eligible for the benefit of being registered as such provided it fulfills the investment limit laid down by the Central Government from time to time. The concept of owner/ director/ partner/ proprietor of that particular undertaking has no relevance for declaring a unit as industrial undertaking. Out of the five units of petitioners some are private limited and others are public limited. Some are dealing with investment only having no manufacturing activities. How could the investment of the finance companies be clubbed with those which are having manufacturing activities. Even otherwise ownership of the company does not vest in any director, the company has a distinct legal entity from its directors. These directors cannot stake claim of ownership of the company nor any director controls the company. Thus, the multiple undertakings by one owner are recognised by the Act and the Notifications issued thereunder. The proviso to the notification issued by the Central Government contemplates restriction to manufacture some products by the same group of persons in different undertakings/ factories under different forms of ownership. Such an act would constitute fraud. First petitioner is neither owned nor is controlled by any other industrial undertaking. To support his arguments Mr.Jaitley relied on the latest notification issued by the Central Government dated 1st January,1993. Mr.E.X.Joseph and Ms.Pinky centering the arguments of Mr.Jaitley contended that petitioner is a big business house. All its existing undertaking are functioning under its umbrella. The legislature never intended to give the benefit of exemption to a big house under the garb that it is manufacturing different products under its different units. The fact remains the overall control is of one industrial undertaking i.e. petitioner No.1. Director of Ssi unit are directors of other unit and control the management. Hence, ownership and control of industrial undertaking is an essential restriction which in this case having been violated hence rejection.
(21) Admittedly, the notification issued under Section 29B of the Act imposes two restrictions. The restriction of ownership and control is equally important Along with restriction of Fixing the investment limit. thereforee, it would not be correct on the part of Mr.Jaitley to contend that only criteria to look at the time of registration or continued registration is products/items produced or class of products.
(22) Section 3(d) of the Act defines 'Industrial undertaking'. The emphasis in this Section is to a Scheduled industry. A Small Scale Industrial Undertaking must necessarily relate to a Scheduled Industry but that does not mean it has no nexus as to who will be controlling it. thereforee, corporate shell of the company is a relevant factor but simply if one director happens to be a partner or director in another company that by itself does not indicate that this unit controls or owns the other. In this case so far as the investment limit is concerned, the rejection is not on that basis. The only ground taken for rejection is that the director of one company happens to be the director in the other company. One fails to understand how director of 'A' company who happens to be director of 'B' company or partner of 'C' Company would have control over the management of 'A' or 'B' or 'C' company. The word 'management' and 'control' have not been defined in the Act. The use of these expressions give an impression as if intention of the drafter was to make a distinction between vesting of management in the industry on one hand and vesting of control in the said industry on the other. The import of word 'management' used in Section 11B shows that in order to deprive the exemption, the respondent had to keep in mind, that the management should be different from the identity having ultimate control over the affairs of the undertaking. A simple director or a partner of the company or a firm being a partner or a director of another company by no stretch of imagination would mean that he had the ultimate control on that undertaking where he happens to be director or a partner. Be that as it may, the fact remains that by reading the Act as a whole in a harmonious manner one can reach to the conclusion that the Legislature had in mind to disallow the benefit of exemption if the Ssi unit is controlled by another undertaking or is owned by other unit. The Supreme Court in the case of Hingir Rampur Coal Cop. Ltd. & Ors. V. The State of Orissa and Ors. : [1961]2SCR537 held that while the object of the Act is to deal more directly with the control of all industries the intention of the Parliament is really to regulate the Scheduled Industries with a view to secure the improvement and development of the service that these industries may render to the Society and thus assesses the solution of large problem of national economy. thereforee, the Act is more concerned with the products being manufactured for which licenses are required and for that purpose the Corporate legal entity has to be ascertained. But the question is can a Director stake a claim to the property or the undertaking of the Company simply being a director of that company. Fact remains the legal entity of the director is distinct and separate from the legal entity of its directors. That is the reason the notifications issued by the Government of India dated 16th February,1973, 31st August,1987 and 2nd April,1991 respectively do not mention that if director of a small scale industries is also director of another unit then it would not be eligible for exemption. Rather as discussed above the first notification dated 16th February,1973 clearly stipulates that the restrictions relevant for the purpose are (i) the investment in fixed assets should not exceed the limit fixed; and (ii) that the said undertaking should not be a subsidiary or owned or controlled by any other undertaking. The word 'subsidiary', 'owned' or 'controlled' have not been defined. Dictionary meaning of the word 'subsidiary' is 'Serving, to assist or supplement, auxiliary (of a Company) controlled by another, paid for by subsidy, hired by another nation, a sibsidiary thing or person an accessory, a subsidiary company.' Reading of dictionary meaning of 'subsidiary' shows that the other company which is subsidiary of this company must serve its purpose or assist it or supplement it by controlling it. Merely because Director happens to be a Director in another unit would neither mean that unit serves this unit nor would supplement its products. The word 'owned' is synonymous to 'owner' as specified in clause (F) of Section 3 of the Act which reads as under:-
'owner'in relation to an industrial undertaking means the person who or the authority which, has the ultimate control over the affairs of the undertaking, and where the said affairs are entrusted to a Manager, Managing Director or Managing agent, such Manager, Managing Director or Managing Agent shall be deemed to be the owner of the undertaking.'
(23) It is clear that even the legislation did not intend that a Director would become owner. I think keeping in view the intents of the legislation, the respondent has now issued the notification on 1st January,1993 clarifying the restrictions and laying down the, guidelines to be followed. In this notification it is made clear that if the Managing directors of two companies are same that factor would be considered for clubbing the investment of these two companies. For arriving at correct decision about the definition of the word 'subsidiary' reference can also be made to Section 2 read with Section 4 of the Companies Act,1956. Even the Central Govt. in its notification dated 1st January,1993 issued by the Ministry of Industries Department of Industrial Development, published in Extraordinary Gazette of India in Part-11, under the heading Explanationn has given definition of the words 'owned', 'subsidiary' and of the words 'controller by any other industrial undertaking'.
'EXPLANATION: For the purposes of this Note
(A)'Owned' shall have the meaning as derived from the definition of the expression 'owner' specified in clause (f) of Section 3 of the Industries (Development and Regulation) ACt,1951.
(B)'Subsidiary shall have the same meaning as in clause (47) of Section 2 read with Section 4 of the Companies Act,1956.
(24) Section 4 of the Companies Act defines 'Subsidiary'. The relevant provisions are reproduced as under:-
'SECTION 4(1)
FOR the purpose of this Act a company shall, subject to the provisions of Sub- section (3), be deemed to be a subsidiary of another if, but only if;
(A)that other controls the composition of its board of directors;
(B)that other-
(I)where the first mentioned company is an existing company in respect of which the holder's of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holder of equity shares, exercise or controls more than half of the total voting power of such company.
ILLUSTRATION(2) to Section 4 of the Companies Act states that for the purpose of subsection (1) the composition of a company's Board of Directors shall be deemed to be controlled by another company if, but only if, that other company by exercise of some power exercisable by it at its discretion without the consent or concurrence of any other person can appoint or remove the holder of all or majority of the directorship, but for the purposes of this provision that other company shall be deemed to have power to appoint a directorship with respect to which any of the following conditions are satisfied. Subsection (3) of Section 4 lays down the conditions in determining whether a company is a subsidiary of another;
(A)any shares held or power exercisable by that other company in a fiduciary capacity shall be treated as not held or exercisable by it;
(B)subject to the provisions of Clause (c) and (d) any shares held or power exercisable;
(I)by any person as a nominee for that other company;
(II)by or by a nominee for, a subsidiary of that other company, not being a subsidiary which is concerned only in a fiduciary capacity shall be treated as held or exercisable by that other company.
(25) thereforee, to say that one undertaking of the first petitioner is a subsidiary of the other, the. respondent was to come to a definite finding that that company's Board of Directors were controlling this factory and that other undertaking had the power to exercise the discretion without the consent and concurrence of this undertaking in the matter of appointments and removal of directors or that, that other undertaking was exercising the powers in a fiduciary capacity. But alas no such finding was arrived at by the respondents before communicating the rejection vide impugned letter dated 27th Novemebr,1990 nor any such finding has been placed on this record. thereforee, the first limb of respondents' arguments that since certain directors of Ghaziabad Unit of the First petitioner were directors in other units hence Ghaziabad Unit had to be treated as subsidiary of the other cannot be sustained. Advantage of the notification dated 1st January, 1993 has been taken because the same has been notified during the pendency of this writ petition and this Court cannot shut its eyes to the same. By no stretch of imagination the mere status of the directors of one or the other undertaking would determine the status of the undertaking to be subsidiary of the other.
(26) The word used in the notification for imposing restriction is 'controlled by any other industrial undertaking' in simple and layman's language it would mean controlling the Management and affairs of that other company, including the policy decision. thereforee, in order to control another undertaking the person must be having powers to determine the policy and the business of other company specially by exercising ownership rights and having majority of the shares. He must be in a position to check and verify the accounts. Hold a check and restraint on the affairs of that company and be in a position of command and dominance. Can a director of one company control, dominant, command and check the accounts of another company, simply because he happens to be a director? This I have failed to appreciate. Mr. Jaitley rightly contended that there could be a situation where a person could be a sleeping partner in more than one company. Even then according to respondent such a unit where he is a partner should be deregistered or registration be refused. This will create a position which is even not invented by the legislature, but the respondent wants to achieve by administrative instructions. It is to remove such like difficulties that the Government of India issued new notification dated 1st January, 1993, clarifying the position. .It is not disputed that the products which are manufactured by these existing five undertakings of the first petitioner are manufacturing different products and some are not producing any items but only deals with investments. Similarly by the two applications lodged the petitioner has sought registration of industrial undertakings intend to manufacture totally different products under different control and management. So far, there is no difficulty in appreciating the arguments of Mr.Jaitley. However, when he contends that corporate control is immaterial, to my mind, this argument is without merits. To determine that a company which is asking for registration is not a subsidiary of or owned or controlled by another undertaking it is necessary for the respondent to examine the corporate character of the company by lifting the veil. thereforee, the information sought cannot be called irrelevant. But at the same time, merely on the basis that one director happens to be a director of another company cannot be a ground to reject the request of the first petitioner. However, if the Board of Directors/partners are same having control over the affairs of the company then of course the position will be different. It may lead to the inference that the other undertaking was owning and controlling this company. Manufacturing of the products may be another factor but that by itself will not exclude the respondent from scrutinising the character of the undertaking. If the corporate character of the two undertakings is the same then the mere fact that these companies were manufacturing different products would not be the sole determining factor. Nor it can be said that imposition of this condition in the notification is arbitrary or against any law. Neither the Act nor the notifications issued anywhere indicate that those restrictions and the provisions provided under Section Iib would not be attracted if the units are manufacturing different products. The intention of the Legislature was to ensure that the corporate entity of the one factory or industrial undertaking should not be controlled by some group of people, The reason for bringing Section Iib on the statute book was to ensure that the exemption is granted to maintain the viability and strength of the unit. The object was to give exemption to those persons who have to start a new industry and not to a big business house who may start a different units under its umbrella with the intention to reap the exemption benefit which in fact was not meant for it.
(27) The provision of Section Iib was promulgated to give employment and maintaining the viability and strength. If the corporate entity is not a relevant factor nor a restriction as Mr.Jaitley wants this court to hold then the very purpose of bringing Section 11B on the Statute Book will become redundant. A big business House can afford to have different units under its umbrella for producing or manufacturing different products, thereby getting away with the exemptions and benefits which is supposed to be given to new entrants. The restriction imposed in the impugned notification, to my mind, is a reasonable restriction. It is in consonance with the object of the Act. The impugned notification is in fact based on evolving circumstances. The idea behind the object was to encourage small scale industries. thereforee, exemptions are granted but not to benefit big business houses. This is necessary for the purposes of ascertaining what is the character of ownership and what products it manufactures. The investment limit in plant and machinery. Hence these arc reasonable restrictions and so is the control and ownership of the company.
(28) It cannot be said by reading and re-reading of the Act that for the grant of the benefit only the products manufactured by the industrial undertakings have to be noticed and nothing else. It must be understood clearly that if the petitioner No. 1 or its Ssi units are not controlled or owned by other units or undertakings and similarly the unit at Ghaziabad is not a subsidiary or controlled by any other undertaking then the respondents cannot reject the applications made by the first petitioner for grant of fresh registration or reassessment as the case may be. The respondent had to give a categorical finding in this regard. Having failed to do so the impugned three orders dated 27th November,1990, respectively cannot be sustained. The same are quashed. The respondent would decide these applications submitted by first petitioner afresh within one month from today keeping in view the above observations. No order as to costs.