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The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986

The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986 (Act no. 30 of 1986) was enacted by the India Parliament as a Central Government legislation, with the view to make provisions as to acquiring and transferring certain textile undertakings of the Swadeshi Cotton Mills Co. Ltd., in order to secure proper management thereof for sub-serving the general public interests. Such acquisition and transfer is also aimed at to ensure continued manufacture, production, etc. of varieties of cloth and yarn. As such effecting the State’s policy relating to the principles specified under Article 39, clauses (b) and (c) of the Constitution of India. There were six textile undertakings of the Swadeshi Cotton Mills Co. Ltd. which are engaged in manufacturing and production of different varieties of cloth and yarn and the managements thereof were already taken over by the Central Government within the provisions of section 18AA of the Industries (Development and Regulation) Act, 1951. The present Act of 1986 was assented by the President of India on 30th day of May, 1986. The provisions of the Act were brought into force retrospectively on 1st day April, 1985, however, the provisions of section 27 and 28 were to brought into force at once.

Section 3 of the Act makes provisions, being similar to the object and purpose of the Act, dealing with the transfer and vesting all of the textile undertakings along with its rights, title, etc. with the Central Government and thereafter with the National Textile Corporation. Section 4 of the Act provides for general effect of such transfer and vesting of undertakings. It is required that such undertaking should be transferred and vested along with its all assents rights, leaseholds, properties, etc. and also books of account, registers, etc. However, such properties which were vested with the Central Government should be freed from all encumbrances, etc. Provisions regarding any prior mortgage properties have been provided under subsequent sub sections under this Section. Further, section 5 of the Act says that all prior liabilities of aforesaid company relating to such textile undertakings should be remained with the Company itself and also to be enforced against such Company and not against the Central Government or such National Textile Corporation.

Further, the section 6 of the Act provides that there may be transfer of any of textile under taking so acquired, to the Subsidiary Textile Corporation by the National Textile Corporation by making order in relation thereto. Section 7 of the Act requires the National Textile Corporation, to issue shares to the Central Government against the amount of contribution made by it which is in equal to the value to assets of such textile undertaking.

The next chapter of the Act being Chapter III of the Act makes provisions as to making payment of 24 crores and 32 lakhs of rupees by the Central Government to the concerned Company for such transfer of aforesaid undertakings, as has been specifically provided under section 8 of the Act.

Moreover, the further payment of amount is required under section 9, as for taking over of management of the undertakings, which was done previously by the Central Government. The amount of rupees 10,000 annually will be paid by the Central Government. The manner in which such payment is to made is specified in Chapter VI of the Act. There is also required payment of interest on such amounts by the Central Government.

Chapter IV of the Act makes provisions as to management of such textile undertakings, duties of persons who are responsible as to management thereof. Similarly, chapter V provides that the employees of such textile undertakings will be continued to be the employees of the National Textile Corporation and other provisions as to benefits including provident fund, superannuation benefits, etc. are provided under this Chapter. Also chapter VI makes provisions provided procedures as to making of payment as aforesaid, dealing with claims, etc. and especially appointment of Commissioner of Payments for certain relevant purposes.

Chapter VII of the Act makes miscellaneous provisions under this Act. Important among them is relating to penalties under the Act. Maximum punishment is provided under the Act is 2 years imprisonment and maximum fine i.e. 10000 rupees. Section 29 of the Act protects the Central Government, any officers thereof, or other given persons in relation to their actions which are taken under good faith or under this Act. Further, provisions also made for delegation of powers by the Central Government to authorized persons. The Central Government is empowered under section 31 of the Act, to make rules for carrying out the purpose of this Act. There also certain matters given on which such rules to provide. Section 32 makes provisions as to removing difficulties which can arose in relation to effecting the provisions of this Act. Lastly, section 33 provides for repealing of The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Ordinance, 1986 without affecting actions thereof.

Recently, the Act was recommended to consider for its repeal by providing a reason of having fulfilment of its purpose in so far as the nationalisation of the aforesaid entity was concerned. Also it was provided that the Act makes no provisions as to the management of such nationalized entity. However, it was made clear in the recommendation that the study respecting such nationalization Acts should be first done prior to taking such Acts for repeal. The said recommendations were provided under the fourth interim report namely, ‘Obsolete Laws: Warranting Immediate Repeal’ being Report no. 251, dated 14th November, 2014 of the 20th Law commission, while doing the study on project namely, ‘Legal Enactments: Simplifications and Streamlining’.

by Faim Khalilkhan Pathan.