General Manager, Kaleeswarar Mills vs Savani Transport Pvt. Ltd.

Paul, J.—The revision petition has been preferred against the order of the learned Additional First Class Magistrate of Coimbatore passed in

C.M.P. No. 1133 of 1973 dismissing the petition filed by the General Manager of the Kaleeswarar Mills, Coimbatore, representing the Tamil

Nadu Textiles Corporation Ltd. and Custodian of the Kaleeswarar Mills, Coimbatore, for suitable orders exonerating him from the criminal

proceedings launched by the respondent as he was not competent to represent the first accused company. The learned Additional First Class

Magistrate while dismissing that petition has observed that ""since the private complaint preferred against the Kaleeswarar Mills by the Savani

Transport Private Ltd., the respondent herein, was for certain offences committed in regard to certain goods entrusted to the Kaleeswarar Mills

Ltd. and even now the goods formed part of the assets, the present management, namely, the general manager of the Kaleeswarar Mills

representing the Tamil Nadu Textile Corporation, is equally culpable for the cheating and misappropriation in respect of the goods as they had not

paid for the same and since u/s 4(1) of the Sick Textile Undertakings Act, 1972, the whole assets vest with the present management, the present

management have to account for the goods received on credit and pay for the same and cannot take advantage without paying for the same and

are equally liable to account and for payment towards the goods now in their hands and as such substitution for the accused-company was justified

as they are the custodian of the property now "" and he ordered the present management to be the first accused in the case.

It is contended now in, this revision proceedings that the aforesaid order of the learned Magistrate and the above said findings of his are

erroneous and illegal.

The respondent filed a private complaint before the Additional First Class Magistrate of Coimbatore against the Kaleeswarar Mills Ltd. and its

directors accused 2 to 9 alleging offences under Sections 403, 405, 420 and 112 of the Indian Penal Code. It is alleged in the complaint that under

L.R. No. 55 and 56 dated January 3, 1971, M/s. Pannalal Hiralal and Co., Akola, consigned 50 bales of cotton 1007 quality through the

complainant with an intimation to deliver the same to the first accused against payment for all goods by the first accused through bankers and the

goods were sent by the complainant through one of their agents in Lorry No. MDS 5283 and the first accused took delivery of the goods from the

lorry transport but without paying for the same and without the complainant''s knowledge or consent and subsequently when a demand was made

by the lorry driver to the first accused-company for payment of or re-delivery of the goods, the first accused sent 22 bales of 1007 quality and 25

bales of TRT cotton bearing press mark M4-71 Zoda cotton of Tirupur of inferior quality. It also appears that C.M P. No. 95/73 was also filed by

the respondent requesting the court to amend the cause title and description of the first accused by incorporating after the name of the first accused

in words "" represented by the Authorised Controller, Tamil Nadu Textile Corporation.

The question is whether the revision petitioner is the representative of the first accused-company and as such should be impleaded in the

aforesaid case as representing the first accused-company.

The Sick Textile Undertakings (Taking Over of Management) Act, 1972, came into force on December 23, 1972. It is an Act "" to provide for

the taking over, in the public interest, of the management of the sick textile undertakings, pending nationalisation of such undertakings, for the

expeditious rehabilitation of such undertakings, so that such rehabilitation may subserve the interest of the general public by the augmentation of the

production and distribution, at fair prices, of cheaper varieties of cloth, and for matters connected therewith or incidental thereto "" as the preamble

of the Act shows. It must be noted that the Act is "" to provide for the taking over of the management of the sick textile undertaking"". These words

need particular emphasis in view of the contentions of both the parties in these proceedings. The word ""owner"" in relation to a textile undertaking is

defined in Section 2(c) of the Act as meaning the company, individual, body of individuals or firm by which it is owned. The term "" textile company

as defined in Section 2(f) of the Act means a company specified in the third column of the First Schedule as owning the textile undertaking

specified in the corresponding entry in the second column of that Schedule. The term "" textile undertaking "" as defined in Section 2(g) means an

undertaking engaged in the manufacture of textiles and to which the provisions of the Factories Act, 1948, apply.

Now, in the First Schedule, the Kaleeswarar Mills, A Unit, Coimbatore, has been mentioned as item No. 18 in column (1) and is noted as a

sick textile undertaking in column (2). In column (3) the owner of that sick textile undertaking is mentioned as the Kaleeswarar Mills Ltd.,

Coimbatore, namely, the first accused herein. The private complaint preferred by the first respondent is against the Kaleeswarar Mills Ltd.,

Coimbatore, who are the owners of the sick textile undertaking, the Kaleeswarar Mills, A Unit, Coimbatore. Now, the Act deals only with the

management of sick textile undertakings and Section 4 of the Act says that the management of the sick textile undertakings would vest in the

Central Government on the appointed day. In effect by this statute the management of the textile undertaking in question is taken away from the

hands of the textile company which owns the textile undertaking. It should, however, be noted that the Act does not take over the textile company

itself, nor does the textile company cease to exist by reason of the passing of the statute. In fact, the textile company, namely, the Kaleeswarar

Mills Ltd., continues to exist and its directors are still managing the affairs of the company. Neither the Central Government nor the Custodian

appointed by the Central Government for the management of the sick textile undertaking has anything to do with the textile company which owns

the sick undertaking. But Section 4(3) of the Act runs as follows :

The sick textile undertaking shall be deemed to include all assets, rights, powers, authorities and privileges of the textile company, in relation to the

said sick textile undertaking, and all property, movable and immovable, including lands, buildings, workshops, stores, instruments, machinery,

automobiles and other vehicles and goods under production or in transit, cash balances, reserve fund, investments 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 the textile

company, whether within or outside India, and all books of account, registers and all other documents of whatever nature relating thereto.

Section 4(4) runs as follows :

Any contract, whether express or implied, or other arrangement (whether under any statute or otherwise) in so far as it relates to the management

of the business and affairs of the sick textile undertaking, and in force immediately before the appointed day, or any order made by any court in so

far as it relates to the management of the business and affairs of the sick textile undertaking and in force immediately before the appointed day, shall

be deemed to have terminated on the appointed day.

Section 4(5) states that all persons in whom the management of the business and affairs of the sick textile undertaking vests immediately before

the appointed day, shall, as from that day, cease to be so vested. These provisions have been made for the purposes of enabling the sick textile

undertaking to be managed by the Central Government through a Custodian and to that extent the powers of the directors of the textile company

would be restricted in accordance with these provisions. Section 5 also makes it clear that the Central Government may appoint an individual or a

Government company as the Custodian of a sick textile undertaking for the purpose of taking over the management of such undertaking. Section

5(3) says that on the appointment of a Custodian, the charge of the management of the sick textile undertaking shall vest in such Custodian and all

persons in charge of the management of such undertaking immediately before such appointment shall cease to be in charge of such management

and shall be bound to deliver to the Custodian all assets, books of account, registers or other documents in their custody relating to the sick textile

undertaking. Section 6 of the Act says that the owner of every textile undertaking shall be given by the Central Government an amount, in cash, for

vesting in it, under Sub-section (1) or Sub-section (2), as the case may be, of Section 4, the management of the sick textile undertaking of such

company. It is, therefore, abundantly clear that by reason of the various provisions of this Act, only the management of the sick textile undertaking

has been taken over leaving intact the textile company which owns the undertaking and the affairs of the textile company are left to be managed by

the directorate of the company subject to certain restrictions which have been imposed under Sections 4(3), 4(4), 4(8) and Section 7 for the

effective management of the sick textile undertaking under the provisions of the Act.

Now, the offence alleged is not against the textile undertaking of which the management now vests in the Central Government represented by

the revision petitioner, but the textile company of which accused 2 to 9 are the directors. The general manager of the Kaleeswarar Mills which is

the textile undertaking representing the Tamil Nadu Textile Corporation, can only represent the textile undertaking and not the textile company

which owns that textile undertaking. Therefore, when the complaint is against the first accused which is the textile company, the persons who could

effectively represent the textile company are the directors of it and not the general manager of the Kaleeswarar Mills representing the Tamil Nadu

Textile Corporation which is in management of only the sick textile undertaking.

On behalf of the respondent, however, it has been contended that u/s 5(4) of the Act, legal proceedings before any court are to be taken by

the Custodian or Custodian-General on the instruction of the Central Government and Section 11(2) of the Act duly empowers the general

manager to effectively represent the company. But then Section 5(4) merely states that the Central Government may issue such directions

(including directions as to initiating, defending or continuing any legal proceedings before any court, tribunal, or other authority) to the Custodian or

Custodian-General as to his or its powers and duties as the Central Government deems desirable and the Custodian or the Custodian-General may

apply to the Central Government at any time for instructions as to the, manner in which the Custodian shall conduct the management of the

undertaking of the company or in relation to any matter arising in the course of such management. Therefore, it is only in the reference to the

management of the undertaking that the Central Government may issue such direction with regard to initiating, defending or continuing any legal

proceedings.

Section 11(2) does not certainly empower the general manager of the undertaking to effectively represent the textile company which owns the

undertaking. Therefore, the order of the learned Additional First Class Magistrate directing that the present management, namely, the general

manager of the Kaleeswarar Mills, Coimbatore, representing the Tamil Nadu Textile Corporation Ltd. and Custodian of the Kaleeswarar Mills,

Coimbatore, will be the first accused in the case is clearly not sustainable and it is, therefore, set aside, as the said general manager cannot

represent the textile company against which the criminal complaint has been lodged. This criminal revision petition is allowed accordingly.