ASSAM SILLIMANITE LIMITED AND ANR. v. UNION OF INDIA AND ORS

Citation: [1991] SUPP. 3 S.C.R. 273

Court: Supreme Court of India

Bench: KULDIP SINGH, M. FATHIMA BEEVI

Case summary

The constitutional validity of the Act was challenged by the Assam Sillimanite Coinp~y Limited for short ('the company') in a writ petition filed before the Delhi High Court. 1976, a Division Bench of the High Court dismissed the writ petition.

Judgment text

The Judgment of the Court was delivered by FATHIMA BEEVI, J. Assam Sillimanite Limited is a public limited company mainly carrying on the business of mining and export of Natural Khasi Sillimanite. TheCompany in pursuance to the condition in the lease deed dated 10. 4. 1963 established a Refractory Plant for manufacturing sillimanite corrundum and other associate minerals at Ramgarh in the State of Bihar. The initial investment was Rs. 1. 75 crores. The Refractory Plant went into operation in the year 1964 and was closed down in July 1972. 1 The Undertaking was taken over by the Central Government under Section 18A of the Industries (Development & Regulation) Act for a period of three years which was extended for a further period of one year with effect from 1. 11. 1972. Later, by the Assam Sillimanite Limited (Acquisition & Transfer of Refractory Plant) Act, 1976 (in short 'the Act'), the plant was acquireg ~Y the Government.

The Act received assent of the President on February 11, 1976. The Act provides for the acquisition and transfer of the right, title and interest of the Assam Sillimanite Limited in respect of its Refractory Plant and for matters ::onnected therewith or incidental thereto. The Preamble of the Act reads:- • "WHEREAS it is urgently necessary to augment the supplies of refractories to meet the essential requirements of the iron and steel industry; ········•······························································································· AND WHEREAS special type ofrefractories, including high alumina refractories, needed by the iron and steel industry may be .

manufactured at the Refractory Plant of the Assam Sillimanite Limited and such manufacture will enable the country to progressively reduce the import of such special type of refractories; AND WHEREAS for the purpose of augmenting the supplies of refractories to meet the essential requirements of the iron and steel industry, it is necessary to acquire the right. title and interest of the Assam Sillimanite Limited in respect of its Refractory Plant; Be it enacted by Parliament in the Twenty-sixth year of the Republic of India' as follows. " · Sections 3, 9 and 10 relevant for the purpose of the present case are as follows:- "3. Refractory Plant to vest in the Central Government-On the • appointed day, the Refractory Plant shall, by virtue of this Act, stand transferred to, and the right, title and interest of the company in relation to its Refractory Plant shall vest absolutely in, the Central Government. " "9.

Amount to be paid for transfer and vesting of Refractory Plant-(1) The Company shall be given by the Central Government in cash and in the manner specified in Chapter VI, an amount of one~rore seven lakhs and seventeen thousand rupees for the transfer to, and vesting in it, under section 3 of the Refractory Plant. (2) The amount payable under sub-section (1) shall carry simple interest at the rate of four per cent per annum for the period commencing on the appointed day and ending on the date on which payment ofsuch amount is made by the Central Government to the Commissioner. (3) For the removal of doubts, it is hereby declared that the liabilities of the Company in relation to the Refractory Plant, other than those referred to in sub-~tion (2) of section 8, shall be met from the amount. referred tO in sub-section (1), in accordance with the rights and interests of the creditors of the Company. " "10. Payment ofother amount. -(!

) In addition to the amounts specified in section 9, there shall also be given to the Company, in cash, by the Central Government an amount computed at the rate of rupees two thousand· and five hundred per mensem for the deprivation of the Company of the management of its Refractory Plant during the period commencing on the 2nd day of Novem~r. 1972, and ending on the appointed day. (2) In addition to the amount referred to in sub-section (1), there shall be given by the Central Government, in cash, to the company, simple interestat the rate offour per cent per annum on the amount computed at the rate specified in sub-section (1), for the :Period commencing on the appointed day and ending on the date on which payment of such amount is made by the Central Government to the Commissioner. " Section 30 contains the declaration as to the policy of the State thus:- "30.

Declaration as to the policyofthe State-It is hereby declared that this Act is for giving effect to the policy of the State towards securing the principles specified in clause (b) of Article 39 of the Constitution. " The constitutional validity of the Act was challenged by the Assam Sillimanite Coinp~y Limited for short ('the company') in a writ petition filed before the Delhi High Court. By the impugned judgment dated 29. 11. 1976, a Division Bench of the High Court dismissed the writ petition. This appeal by special leave is directed against the aforesaid judgment (reported in A. I. R. 1977 Delhi 193). . Before the High Court, the appellant challenged the validity of the Act mainly on there grounds : (a) The Central Government could not pass an order under section 18A of the Act witho. ut furnishing of the materials collected against the Company and affording them an opportunity to explain the circumstances sought to be relied upon against the Company. · .

The action is mala fide inasmuch as for the same plant the Government has been negotiating with the Company to purchase for the benefit of Bokoro Steels· Limited and Hindustan Steels · ·Limited. (b) The acquisition of plant under the Act is ma/a fide and is nothing but colourable exercise of jurisdiction. The Act has been paised ,when the matter relating to taking over of the management was subjudice. (c) The amount of price payable under the Act is only illusory. _The respondents have not· taken into consideration the assets and liabilities of the plant while fixing the amount of compensation. The company had ploughed all the resources in the Plant and will never be able to clear its liabilities incurred for the setting up ofthe plant which was put as a condition attached to the mining lease for sillimanite and the lease has also been prematurely and illegally terminated.

(d) The fixation or the determination of the amou~t is based on no norm or principle relevant for the purpose of arriving at the amount payable or in respect of the property acquired or requisitioned. The amount so fixed has no reasonable relationship with the value of the property. The amount has been fixed arbitrarily and, as stated, _is illusory. The amount so fixed. is a fraud on the power, denying the petitioner his fundamental right under Article 31(2) of the Constitution. The appellant prayed for a writ in the nature of certiorari quashing the Act and a writ in the nature of mandamus directing the respondents to reflex > the amount ofprice payable taking into consideration the assests and liabilities, potentialities and the present market value. The High Court formulated the following. two questions for consideration: . J • * 1. Whether the amount of Rs.

1,07,17,000 which is rrtade payable to the company by the Central Government under section 9 of the Act and the other amounts payable under section 10 of the Act is arbitrary, unreasonable and illusory and violating Article 31(2) of the Constitution as it stands after the Constitution (Twentyfifth) Amendment) Act, 1971? ·