Supreme Court Revisits Textile Nationalisation Act: Union of India vs. Nareshkumar Badrikumar Jagad (2018)

Date of the Judgment: 28 November 2018
Citation: Not available in the source.
Judges: A.M. Khanwilkar, J.
Can a law passed after a court judgment change the outcome of the case? The Supreme Court of India recently addressed this complex question in a review petition concerning the nationalization of textile undertakings. This case explores the impact of a 2014 amendment to the Textile Undertakings (Nationalisation) Act, 1995, on prior court orders regarding property rights. The core issue revolves around whether leasehold rights of nationalized textile companies continue to vest with the Central Government, even after the management of these companies is transferred to the National Textile Corporation (NTC).

Case Background

The case involves a property in Mumbai, originally leased in 1893 for 99 years to Hope Mills Ltd. The land was later sold to Harichand Rupchand, whose will vested it in the Seth Harichand Rupchand Charitable Trust. The leasehold rights transferred through various entities, eventually reaching Toyo Podar Cotton Mills Ltd (later Podar Mills Ltd). In 1983, the management of Podar Mills was taken over by the government under the Textile Undertakings (Taking over of Management) Act, 1983. The lease expired in 1990, but Podar Mills continued as a statutory tenant under the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947.

The Textile Undertakings (Nationalisation) Act, 1995, nationalized several textile undertakings, including Podar Mills, effective from 1st April, 1994. The Trust issued a legal notice in 1994 to the NTC, terminating its tenancy. In 1995, the Trust filed a suit for eviction against Podar Mills, NTC, and the Union of India. This suit was dismissed in 2002. A second suit filed in 1997 was withdrawn in 2004. In 2001, the Trust filed a fresh suit against NTC alone under the Transfer of Property Act, 1882, which was decreed in their favor in 2006. NTC’s appeals were dismissed by the Small Causes Court and the Bombay High Court. The Supreme Court also dismissed NTC’s appeal in 2011, granting time to vacate until December 31, 2013.

The Union of India filed a review petition in 2013, arguing that the property rights vested in the Central Government under the 1995 Act. During the review petition, the Textile Undertakings (Nationalisation) Laws (Amendment and Validation) Act, 2014 was enacted, leading the Union of India to file an application for additional grounds in the review petition.

Timeline:

Legal Framework

The judgment refers to several key legal provisions:

• The Textile Undertakings (Taking over of Management) Act, 1983: This act allowed the government to take over the management of certain textile undertakings, including Podar Mills, pending nationalization.
• The Textile Undertakings (Nationalisation) Act, 1995: This act nationalized several textile undertakings, including Podar Mills, and vested their rights in the Central Government, which were then transferred to the National Textile Corporation (NTC).
• The Textile Undertakings (Nationalisation) Laws (Amendment and Validation) Act, 2014: This act amended the 1995 Act, specifying that leasehold rights of textile undertakings would continue to vest in the Central Government. It also introduced Section 39 to validate past actions and judgments.
• The Bombay Rents, Hotel and Lodging House Rates Control Act, 1947: This act protected tenants from eviction under certain conditions.
• The Maharashtra Rent Control Act, 1999: This act repealed the 1947 Act and provided a new framework for rent control.
• The Transfer of Property Act, 1882: This act governs the transfer of property rights, including leases. Section 105 defines a lease, and Section 116 discusses the effect of holding over.

The 2014 Amendment Act introduced sub-sections (3) and (4) to Section 3 of the 1995 Act, which states:

“(3) Notwithstanding the transfer and vesting of any textile undertaking to the National Textile Corporation by virtue of sub-section (2), the lease-hold rights of the textile undertakings shall continue to remain vested in the Central Government on payment of lease-hold rents and shall be discharged, for and on behalf of that Government, by the National Textile Corporation as and when payment of such lease-hold rents or any amount becomes due and payable.

(4) Subject to sub-section (3), no court shall have jurisdiction to order divestment from the National Textile Corporation of the property vested in it by the Central Government.”

Additionally, Section 39 was inserted into the 1995 Act, stating:

“Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority,—
(a) the provisions of this Act, as amended by the Textile Undertakings (Nationalisation) Laws (Amendment and Validation) Act, 2014, shall have and shall be deemed always to have effect for all purposes as if the provisions of this Act, as amended by the said Act, had been in force at all material times;
(b) any lease-hold property divested from the National Textile Corporation to any person under the provisions of this Act, as it stood immediately before the commencement of the Textile Undertakings (Nationalisation) Laws (Amendment and Validation) Act, 2014, shall stand transferred to and vest or continue to vest, free from all encumbrances, in the National Textile Corporation in the same manner as it was vested in the National Textile Corporation before such divesting of that property under the provisions of this Act as if the provisions of this Act, as amended by the aforesaid Act, were in force at all material times;
(c) no suit or other proceedings shall, without prejudice to the generality of the foregoing provisions, be maintained or continued in any court or tribunal or authority for the enforcement of any decree or order or direction given by such court or tribunal or authority, notwithstanding any undertaking filed by the National Textile Corporation in any court or tribunal or authority, directing divestment of such lease-hold property from the National Textile Corporation vested in it under section 3 of this Act, as it stood before the commencement of the Textile Undertakings (Nationalisation) Laws (Amendment and Validation) Act, 2014, and such lease-hold property shall continue to vest in the National Textile Corporation under section 3 of this Act, as amended by the aforesaid Act, as if the said section was in force at all material times ;
(d) any transfer of any property, vested in the National Textile Corporation, by virtue of any order of attachment, seizure or sale in execution of a decree of a civil court or orders of any tribunal or other authority in respect of lease-hold property vested in the National Textile Corporation which is contrary to the provisions of this Act, as amended by the Textile Undertakings (Nationalisation) Laws (Amendment and Validation) Act, 2014, shall be deemed to be null and void and notwithstanding such transfer, continue to vest in the National Textile Corporation under this Act.”

Arguments

The arguments presented by the parties are as follows:

• Union of India:
  • Argued that the right, title, and interest in the suit property had vested absolutely in the Central Government by virtue of Section 3(1) of the 1995 Act.
  • Contended that the 2014 Validation Act retrospectively altered the status of the parties, rendering the decree against NTC unenforceable.
  • Maintained that the leasehold rights continued to vest in the Central Government, even after the transfer to NTC.
  • Asserted that the suit for possession against NTC was not maintainable, as the Central Government was the real tenant.
• National Textile Corporation (NTC):
  • Supported the Union of India’s claim that tenancy rights vested in the Central Government.
  • Argued that it was merely an agent of the Central Government, and therefore, the suit against it was not maintainable.
  • Sought an extension of time to vacate the premises and a declaration that the building structure on the land should not be handed over free of cost.
  • Claimed that the order to hand over the building was impossible to comply with due to the need for subdivision and demolition.
• The Trust (Respondents):
  • Contended that the Union of India had no locus to file a review petition.
  • Argued that the grounds raised by the Union of India had already been addressed and answered.
  • Maintained that NTC had not specifically pleaded that the tenancy vested in the Central Government in its written statement.
  • Asserted that the review petition was a subterfuge to circumvent the decree of possession and the undertaking given to the Court.
  • Argued that the 2014 Amendment Act did not apply to the case as there were no subsisting leasehold rights at the time of nationalization, and the tenancy rights of Podar Mills had already expired.
  • Claimed that NTC was not a government entity or an agent of the government, and therefore, not protected under the 1999 Act.

The innovativeness of the argument lies in the Union of India’s reliance on the retrospective effect of the 2014 Validation Act to challenge the enforceability of the decree against NTC, despite NTC’s previous undertakings to vacate the premises.

Submissions by Parties

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the Union of India has the locus to file a review petition against the judgment of this Court dated 5th September, 2011.
2. Whether the grounds urged by the Union of India in the review petition regarding the purport of the 1995 Act were specifically raised and have been answered appropriately.
3. Whether the tenancy rights in the suit property of the erstwhile Podar Mills Ltd. vested absolutely in the Union of India after the taking over of the management of the subject Textile Undertaking by operation of the provisions of the 1983 Act and followed by acquisition by virtue of the 1995 Act.
4. Whether the subsequent enactment of the Validation Act 2014 completely changes the status of the parties, namely, Union of India and NTC qua the suit property and bars the enforcement of any decree and including the undertaking given to the Court by NTC.
5. Whether the leasehold rights of textile undertakings continue to vest with the Central Government after nationalization.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Court relied on State of Bombay v. Pandurang Vinayak Chaphalkar [AIR 1953 SC 244]* and East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952 AC 109]* to emphasize the importance of giving full effect to statutory fictions and their logical consequences.
• The Court cited Raja Shatrunji Vs. Mohammad Azmal Azim Khan and Ors. [(1971) 2 SCC 200]* to support the view that a retrospective amendment can impact a decree already passed.
• The Court distinguished Rajah Kotagiri Venkata Subbamma Rao v. Rajah Vellanki Venkatrama Rao* by stating that the present case is not about a subsequent event but about applying the law as it always stood due to the deeming provision.
• The Court distinguished S. Bagirathi Ammal Vs. Palani Roman Catholic Mission [(2009) 10 SCC 464]*, Union of India Vs. Sandur Manganese and Iron Ores Limited and Ors. [(2013) 8 SCC 337]* and Champsey Bhara and Company Vs. Jivraj Balloo Spinning and Weaving Company Limited [(1923) Vol. L (IA) 324]* as the Court was not dealing with the scope of review jurisdiction as such but was dealing with the retrospective effect of law.
• The Court distinguished B. Arvind Kumar Vs. Govt. of India and Others [(2007) 5 SCC 745]* and held that the term leasehold rights includes tenancy rights.
• The Court distinguished Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras [(1992) 3 SCC 158]* and held that it was not a case of assignment of rights by the tenant but involuntary transfer of rights to the Central Government.
• The Court distinguished Bhoolchand and Another Vs. Kay Pee Cee Investments and Another [(1991) 1 SCC 343]* and held that the case was not about subletting by a tenant but about involuntary transfer of rights to the Central Government.
• The Court distinguished T. Sudhakar PrasadVs. Govt. of A.P. and Ors. [(2001) 1 SCC 516]*, Firm Ganpat Ram Rajkumar Vs. Kalu Ram and Ors. [(1989) Supp. (2) SCC 418]* and Noorali Babul Thanewala Vs. K.M.M. Shetty and Ors. [(1990) 1 SCC 259]* by stating that the contempt petition had become infructuous due to the retrospective effect of the 2014 Act.
• The Court distinguished Office of The Chief Post Master General and Ors.Vs. Living Media India Ltd. and Ors. [(2012) 3 SCC 563]* by stating that the delay in filing the review petition was condoned as the Union of India had a valid reason for the delay.
• The Court distinguished State of Tamil Nadu Vs. State of Kerala and Another [(2014) 12 SCC 696]*, Madan Mohan Pathak and Ors. Vs. Union of India (UOI) and Ors. [(1978) 2 SCC 50]* and Shri Prithvi Cotton Mills Ltd. and Ors. Vs. Broach Borough Municipality and Ors. [(1969) 2 SCC 283]* and held that the 2014 Act was not altering the facts but was validating the law as it always stood.
• The Court relied on Section 3 and Section 39 of the Textile Undertakings (Nationalisation) Act, 1995 to support the view that the leasehold rights vested in the Central Government and the 2014 Act confirmed it retrospectively.
• The Court relied on Section 105 and Section 116 of the Transfer of Property Act, 1882 to define lease and the effect of holding over.
• The Court relied on Section 5(11) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 and Section 7(15) of the Maharashtra Rent Control Act, 1999 to define tenant.
• The Court relied on Section 2 and Section 3 of the Maharashtra Rent Control Act, 1999 to discuss the applicability of the Act.

Final Order

The Supreme Court disposed of the review petition, holding that:

• The Union of India had the locus to file the review petition.
• The grounds raised in the review petition regarding the impact of the 2014 Act had not been considered earlier.
• The tenancy rights in the suit property vested in the Central Government.
• The 2014 Act retrospectively altered the status of the parties, rendering the decree against NTC unenforceable.
• The leasehold rights of textile undertakings, including tenancy rights, continue to vest in the Central Government.

The Court held that the decree of possession against NTC was unenforceable due to the retrospective effect of the 2014 Act.

Flowchart of the Case

Conclusion

The Supreme Court’s decision in this case highlights the power of legislative amendments to retrospectively alter the legal landscape, even after a final judgment has been delivered. The Court emphasized the importance of giving full effect to statutory fictions, and that the leasehold rights, including tenancy rights, continued to vest in the Central Government, even after the transfer of management to the NTC.

The case also underscores the complexities of nationalization laws and the challenges of balancing public interest with private property rights. The 2014 Amendment Act was crucial in validating the government’s position and rendering prior court orders unenforceable.

This case serves as a significant precedent for understanding how subsequent legislation can impact prior legal decisions and the enduring nature of government’s rights in nationalized undertakings.