Aastha Mehta, Student of Law, GNLU, Gandhinagar

Textile industry has been a priority sector since independence, on the lines of the agriculture, and was seen as a huge employment inducing sector also. However Indian Mills have suffered an economic setback, and therefore the revival of such units is on prime agenda of the Government. “The sector has immense employment potential and India had many “Manchesters” but neglect during the past years has resulted in the closure of these units ((‘Government promises turnaround of textile sector, Parliament passes Bill’ Available at (accessed on 23rd December, 2014).)).” This bill was passed in Lok Sabha, and it was earlier promulgated as an Ordinance which by way of the Bill is repealed now. The bill amends two Acts


The Bill’s purpose is “necessary for the proper and effective implementation of the revival scheme and to protect the public investments in the acquired textile undertakings to explicitly clarify the status of such vesting of the lease-hold rights in the Central Government ((Statement of Objects and Reasons, Text Available at,%202014.pdf (23rd December 2014).)).”

  1. This bill adds a new sub section after Section 3(2) of Sick Textile Undertakings Act 1974. Section 3 of the 1974 Act, basically vests the sick undertakings within the control of Central Government, and thereafter the National textile Corporation (herein after referred as NTC), which means that the interests and the undertaking is firstly transferred to the Central Government, having primary control and thereafter to the NTC. The new bill further adds this “lease-hold rights of the sick textile undertakings shall continue to remain vested in the Central Government on payment of lease-hold rents”. Further this starts with a non-obstante clause which would mean that, nothing in original section 3(2) which vests all interest from the Government to NTC, the right over the land stays with the Central government. Further, the new provision seeks to take away the jurisdiction of any court to order divestment of any property from NTC, vested by Central Government. Similarly, the same provisions are added in the 1995 Act. This is basically done to avoid the problem which arose in one of the case, National Textile Corporation v. Nareshkumar Badrikumar Jagad (([2011] 12 SCC 695))wherein it was held by Division Bench of the Supreme Court explained the meaning of “vesting” after reading section 3 of the 1995 Act which is also sought to be amended here, and held as follows,

“Vesting’ means having obtained an absolute and indefeasible right. It refers to and is used for transfer or conveyance. `Vesting’ in the general sense, means vesting in possession. However, ‘Vesting’ does not necessarily and always means possession but includes vesting of interest as well. `Vesting’ may mean vesting in title, vesting in possession or vesting in a limited sense, as indicated in the context in which it is used in a particular provision of the Act. Word `Vest’ has different shades, taking color from the context in which it is used. It does not necessarily mean absolute vesting in every situation and is capable of bearing the meaning of a limited vesting, being limited, in title as well as duration.”

‘NTC had argued that they need not vacate the premises as lease hold rights were with the central government. The Maharashtra Rent Control Act, 1999, under which NTC was asked to vacate the land, exempts land leased by the central government ((Bill Summary, Textile Undertakings (Nationalisation) Laws (Amendment and Validation) Bill 2014 Available at (23rd December 2014).)).’

In this NTC and Central Government were separated, and were given distinct identity, whereby it was the opinion of the Honorable Court that land stood vested in NTC and Central Government had no right. Herein NTC was asked to vacate the premises, and it was further said that NTC is neither a governmental department nor an agent of the Central Government. However after this bill, it could be said in one way that it seeks to over-ride the situation of NTC being disinvested of the mill premises by Court orders. Further the new provision which is sought to be added in the both the laws show that the dues of the rents have to be paid by the NTC on behalf of the Central government. Moreover, these provisions, state subject to subsection 3, which shows proposed section 3(4) is subject to the 3(3), therefore the court’s jurisdiction is not completely taken away as with regards to payment of dues and rents for the property, courts jurisdiction is left intact, it is only when the divestment of property is concerned, court’s jurisdiction is taken away.

  1. It further intends to add to section 4 of the 1974, and section 4 of the 1995 Act, which are also drafted on the same lines. It firstly ensures that even if in a textile unit the operations are not in continuance, there is a legal fiction, which is incorporated whereby even if the unit is not functioning, and is in the process of revival it is deemed to be a unit in continuation of operation. Secondly no prosecution can be instituted against the NTC, on the ground that any sick unit is not in operation however the next provision, states that this would not affect the right of NTC to prosecute or defend any action as a subsequent vestee of the lease-hold property. This gives one-sided right to the NTC, however it has a beneficial rational behind it as NTC would require to concentrate all its energies solely on the revival scheme of the units and not on litigation. It can also be a step, whereby the government is given a chance to revive the industries, and mills more effectively from people claiming to have a right in the land.
  2. New provision after section 40 of the 1974 Act and section 38 of the 1995 Act and it starts with “Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority”. The first addition intends to give retrospective effect to the Bill, which is shown clearly from the words “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.” However it needs to be seen if in individual cases, if a right has already been accrued in regard to the matters presented in the Bill, and that is taken away by this Bill, than can a suit be brought against NTC, which is prohibited under this Bill. When a person is deprived of an accrued right vested in him under a statute or under the Constitution and he successfully challenges the same in the court of law, the legislature cannot render the said right and the relief obtained nugatory by enacting retrospective legislation ((UOI V. Tushar Ranjan Mohanty 1994 SCC (5) 450)).

It further states that any property which was divested from NTC, after the Commencement of the Bill will be now be vested in NTC free from all encumbrances and new Bill will be applicable. This bill also tends to bar the enforcement of any decree of the court whereby divestment of lease hold property is ordered.


Over-all this legislation does not have many substantive provisions, but it also is clarifying piece of legislation, which seeks to ensure that the property for the purpose of the revival and profitability of these sick textile units is increased.

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