THE SWADESHI COTTON MILLS COMPANY LIMITED (ACQUISITION AND 
TRANSFER OF UNDERTAKINGS) ACT, 1986 
______ 

ARRANGEMENT OF SECTIONS 
________ 

CHAPTER I 

PRELIMINARY 

SECTIONS 

1.  Short title and commencement. 
2.  Definitions. 

CHAPTER II 

ACQUISITION AND TRANSFER OF THE TEXTILE UNDERTAKINGS 

3.  Transfer and vesting of the textile undertakings. 
4.  General effect of vesting. 
5.  Company to be liable for certain prior liabilities. 
6.  Transfer of any textile undertaking or part thereof to a Subsidiary Textile Corporation. 
7.  Shares to be issued by National Textile Corporation for the value of assets transferred to it by the 

Central Government. 

8.  Payment of amount. 
9.  Payment of further amounts. 

CHAPTER III 

PAYMENT OF AMOUNTS 

CHAPTER IV 

MANAGEMENT, ETC., OF THE TEXTILE UNDERTAKINGS 

10.  Management, etc., of the textile undertakings. 
10A. Special provision for disposal of assets of the textile undertakings in certain circumstances. 
11.  Duty of persons in charge of management of the textile undertakings to deliver all assets, etc. 

CHAPTER V 

PROVISIONS RELATING TO EMPLOYEES OF THE TEXTILE UNDERTAKINGS 

12.  Continuance of employees of the textile undertakings. 
13.  Provident and other funds. 
14.  Transfer of employees to a Subsidiary Textile Corporation. 

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CHAPTER VI 

COMMISSIONER OF PAYMENTS 

SECTIONS 

15.  Appointment of Commissioner of Payments. 
16.  Payment by the Central Government to the Commissioner. 
17.  Certain powers of the National Textile Corporation. 
18.  Claims to be made to the Commissioner. 
19.  Priorities of claims. 
20.  Examination of claims. 
21.  Admission or rejection of claims. 
22.  Disbursement of money by the Commissioner to claimants. 
23.  Undisbursed or unclaimed amount to be deposited with the general revenue account. 

CHAPTER VII 

MISCELLANEOUS 

24.  Act to have overriding effect. 
25.  Assumption of liability. 
26.  Contracts to cease to have effect unless ratified by National Textile Corporation. 
27.  Penalties. 
28.  Offences by companies. 
29.  Protection of action taken in good faith. 
30.  Delegation of powers. 
31.  Power to make rules. 
32.  Power to remove difficulties 
33.  Repeal and saving. 
THE SCHEDULE. 

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THE SWADESHI COTTON MILLS COMPANY LIMITED (ACQUISITION AND 
TRANSFER OF UNDERTAKINGS) ACT, 1986 

ACT NO. 30 OF 1986 

[30th May, 1986.] 

An Act to provide for the acquisition and transfer of certain textile undertakings of the Swadeshi 
Cotton  Mills  Company  Limited,  with  a  view  to  securing  the  proper  management  of  such 
undertakings so as to subserve the interests of the general public by ensuring the continued 
manufacture, production and distribution of different varieties of cloth and yarn and thereby 
to give effect to the policy of the State towards securing the principles specified in clauses (b) 
and  (c)  of  article  39  of  the  Constitution  and  for  matters  connected  therewith  or  incidental 
thereto. 

WHEREAS  the  Swadeshi  Cotton  Mills  Company  Limited  has,  through  its  six  textile  undertakings, 

been engaged in the manufacture and production of different varieties of cloth and yarn; 

AND  WHEREAS  the  management  of  the  said  textile  undertakings  was  taken  over  by  the  Central 
Government under section 18AA of the Industries (Development and Regulation) Act, 1951(65 of 1951); 

AND  WHEREAS  large  sums  of  money  have  been  invested  with  a  view  to  making  the  said  textile 

undertakings viable; 

AND  WHEREAS  further  investment  of  very  large  sums  of  money  is  necessary  for  the  purpose  of 

securing  the  optimum  utilisation  of  the  available  facilities  for  the  manufacture,  production  and              
distribution of cloth and yarn by the said textile undertakings of the Company; 

AND  WHEREAS  such  investment  is  also  necessary  for  securing  the  continued  employment  of  the 

workmen employed in the said textile undertakings; 

AND  WHEREAS  it  is  necessary  in  the  public  interest  to  acquire  the  said  textile  undertakings  of  the 
Swadeshi Cotton Mills Company Limited to ensure that the interests of the general public are served by 
the continuance by the said undertakings of the Company of the manufacture, production and distribution 
of different varieties of cloth and yarn which are vital to the needs of the country; 

AND  WHEREAS  such  acquisition  is  for  giving  effect  to  the  policy  of  the  State  towards  securing  the 

principles specified in clauses (a) and (b) of article 39 of the Constitution; 

BE it enacted by Parliament in the Thirty-seventh Year of the Republic of India as follows:— 

CHAPTER I 

PRELIMINARY 

1.  Short  title  and  commencement.—(1)  This  Act  may  be  called  the  Swadeshi  Cotton  Mills 

Company Limited (Acquisition and Transfer of Undertakings) Act, 1986. 

(2) The provisions of sections 27 and 28 shall come into force at once, and the remaining provisions 

of this Act shall be deemed to have come into force on the 1st day of April, 1985. 

2. Definitions.—In this Act, unless the context otherwise requires,— 

(a) “appointed day” means the 1st day of April, 1985; 

(b) “Commissioner” means the Commissioner of Payments appointed under section 15; 

(c) “Company” means the Swadeshi Cotton Mills Company Limited, Kanpur, a company within 
the  meaning  of  the  Companies  Act,  1956  (1  of  1956),  and  having  its  registered  office  at  Swadeshi 
House, Civil Lines, Kanpur, in the State of Uttar Pradesh; 

(d) “date of taking over” means the date on which the management of the textile undertakings of 
the Company was taken over by the Central Government by virtue of the order of the Government of 
India  in  the  late  Ministry  of  Industrial  Development  No.  S.O.  265(E),  dated  the  13th  April,  1978, 

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made  under  clause  (a)  of  sub-section  (1)  of  section  18-AA  of  the  Industries  (Development  and 
Regulation) Act, 1951(65 of 1951); 

(e) “National Textile Corporation” means the National Textile Corporation Limited, a company 

formed and registered under the Companies Act, 1956 (1 of 1956); 

(f) “notification” means a notification published in the Official Gazette; 

(g) “Ordinance” means the Swadeshi Cotton Mills Company Limited (Acquisition and Transfer 

of Undertakings) Ordinance, 1986 (5 of 1986); 

(h) “prescribed” means prescribed by rules made under this Act; 

(i)  “specified  date,”  in  relation  to  any  provision  of  this  Act,  means  such  date  as  the  Central 
Government  may,  by  notification  in  the  Official  Gazette  and  in  the  newspapers  circulating  in  the 
locality  in  which  the  registered  office  of  the  Company  is  situated,  specify  for  the  purposes  of  that 
provision and different dates may be specified for different provisions of this Act; 

(j) “Subsidiary Textile Corporation” means a textile corporation formed by the National Textile 

Corporation as its subsidiary; 

(k) “textile undertakings” means the six textile undertakings of the Company specified below:— 

(i) the Swadeshi Cotton Mills, Kanpur; 

(ii) the Swadeshi Cotton Mills, Pondicherry; 

(iii) the Swadeshi Cotton Mills, Naini; 

(iv) the Swadeshi Cotton Mills, Maunath Bhanjan; 

(v) the Udaipur Cotton Mills, Udaipur; 

(vi) the Rae Bareli Textile Mills, Rae Bareli; 

(l)  words  and  expressions  used  herein  and  not  defined  but  defined  in  the  Companies  Act,                

1956 (1 of 1956), shall have the meanings respectively assigned to them in that Act. 

CHAPTER II 

ACQUISITION AND TRANSFER OF THE TEXTILE UNDERTAKINGS 

3.  Transfer  and  vesting  of  the  textile  undertakings.—(1)  On  the  appointed  day,  every  textile 
undertaking and the right, title and interest of the Company in relation to every such textile  undertaking 
shall, by virtue of this Act, stand transferred to, and shall vest in, the Central Government. 

(2)  Every  such  textile  undertaking  which  stands  vested  in  the  Central  Government  by  virtue  of             

sub-section (1) shall, immediately after it has so vested, stand transferred to, and vested in, the National 
Textile Corporation. 

4. General effect of vesting.—(1) The textile undertakings referred to in section 3 shall be deemed to 
include  all  assets,  rights,  lease  holds,  powers,  authorities  and  privileges  and  all  property,  movable  and 
immovable,  including  lands,  buildings,  workshops,  stores,  instruments,  machinery  and  equipment,  cash 
balances, cash on hand, reserve funds, investments and book debts pertaining to the textile undertakings 
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  Company  in  relation  to  the  said 
undertakings, whether within or outside India, and all books of account, registers and all other documents 
of whatever nature relating thereto. 

(2) All property as aforesaid which have vested in the Central Government under sub-section (1) of 
section  3  shall,  by  force  of  such  vesting,  be  freed  and  discharged  from  any  trust,  obligation,  mortgage, 
charge, lien and all other incumbrances affecting it, and any attachment, injunction or decree or order of 
any court or other authority restricting the use of such property in any manner shall be deemed to have 
been withdrawn. 

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(3) Where any licence or other instrument had been granted at any time before the appointed day to 
the Company in relation to the textile undertakings by the Central Government or a State Government or 
any  local  authority,  the  National  Textile  Corporation  shall,  on  and  from  such  day,  be  deemed  to  be 
substituted  in  such  licence  or  other  instrument  in  place  of  the  Company  as  if  such  licence  or  other 
instrument had been granted to the National Textile Corporation and that Corporation shall hold it for the 
remainder of the period of which the Company to which it was granted would have held it under the terms 
thereof. 

(4) Every mortgagee of any property which has vested under this Act in the Central Government and 
every person holding any charge, lien or other interest in, or in relation to, any such property shall give, 
within such time and in such manner as may be prescribed, an intimation to the Commissioner of such 
mortgage, charge, lien or other interest. 

(5) For the removal of doubts, it is hereby declared that the mortgagee of any property referred to in 
sub-section (2) or any other person holding any charge, lien or other interest in, or in relation to, any such 
property shall be entitled to claim, in accordance with his rights and interests, payment of the mortgage 
money or other dues, in whole or in part, out of the amounts specified in section 8 and section 9, but no 
such mortgage, charge, lien or other interest shall be enforceable against any property which has vested in 
the Central Government. 

(6) If, on the appointed day, any suit, appeal or other proceeding of whatever nature in relation to any 
property  which  has  vested  in  the  Central  Government,  under  section  3,  instituted  or  preferred  by  or 
against the Company is pending, the same shall not abate, be discontinued or be, in any way, prejudicially 
affected by reason of the transfer of the textile undertakings or of anything contained in this Act, but the 
suit,  appeal  or  other  proceeding  may  be  continued,  prosecuted  or  enforced  by  or  against  the  National 
Textile Corporation. 

5.  Company  to  be  liable  for  certain  prior  liabilities.—(1)  Every  liability  of  the  Company  in 
relation to the textile undertakings in respect of any period prior to the appointed day shall be the liability 
of  the  Company  and  shall  be  enforceable  against  it  and  not  against  the  Central  Government  of  the 
National Textile Corporation. 

(2) For the removal of doubts, it is hereby declared that,— 

(a)  save  as  otherwise  expressly  provided  in  this  section  or  in  any  other  section  of  this  Act,  no 
liability of the Company in relation to the textile undertakings, in respect of any period prior to the 
appointed  day  shall  be  enforceable  against  the  Central  Government  or  the  National  Textile 
Corporation; 

(b)  no  award,  decree  or  order  of  any  court,  tribunal or  other  authority  in  relation  to  any  textile 
undertaking,  passed  after  the  appointed  day,  in  respect  of  any  matter,  claim  or dispute  which  arose 
before  that  day  shall  be  enforceable  against  the  Central  Government  or  the  National  Textile 
Corporation; 

(c)  no  liability  incurred  by  the  Company  in  relation  to  any  textile  undertaking  before  the 
appointed  day,  for  the  contravention  of  any  provision  of  law  for  the  time  being  in  force,  shall  be 
enforceable against the Central Government or the National Textile Corporation. 

6.  Transfer  of  any 

textile  undertaking  or  part 

thereof 

to  a  Subsidiary  Textile                  

Corporation.—(1) The National Textile Corporation may, by order in writing, transfer any of the textile 
undertakings or part thereof to a Subsidiary Textile Corporation and any such transfer shall be subject to 
such terms and conditions as may be specified in the said order. 

(2) The Subsidiary Textile Corporation shall, on and from the date of such transfer, be deemed to be 
substituted  in  the  licence  or  other  instrument  referred  to  in  sub-section  (3)  of  section  4  in  place  of  the 
National  Textile  Corporation  as  if  such  licence  or  other  instrument  had  been  granted  to  the  Subsidiary 
Textile Corporation, and shall hold such licence or other instrument for the remainder of the period for 
which the National Textile Corporation would have held such licence or other instrument. 

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(3)  Save  as  otherwise  expressly  provided  in  this  Act,  references  in  this  Act  to  the  National  Textile 
Corporation shall, in respect of any textile undertaking or part thereof which is transferred to a Subsidiary 
Textile Corporation, be construed as references to the Subsidiary Textile Corporation. 

7. Shares to be issued by National Textile Corporation for the value of assets transferred to it by 
the  Central  Government.—An  amount  equal  to  the  value  of  the  assets  of  the  textile  undertakings 
transferred to, and vested in, the National Textile Corporation under sub-section (2) of section 3 shall be 
deemed  to  be  the  contribution  made  by  the  Central  Government  to  the  equity  capital  of  the  National 
Textile  Corporation;  and  for  the  contribution  so  made,  the  National  Textile  Corporation  shall  issue              
(if necessary after amending its memorandum and articles of association) to the Central Government paid 
up shares, in its equity capital having a face value equal to the amount specified in section 8. 

CHAPTER III 

PAYMENT OF AMOUNTS 

8. Payment of amount.—For the transfer to, and vesting in the Central Government, under section 3, 
of the textile undertakings of the Company, and the right, title and interest of the Company in relation to 
such  undertakings,  there  shall  be  given  by  the  Central  Government  to  the  Company  in  cash  and  in  the 
manner specified in Chapter VI, an amount of rupees twenty-four crores and thirty-two lakhs. 

9. Payment of further amounts.—(1) For the deprivation of the Company of the management of the 
textile undertakings, there shall be given by the Central Government to the Company, in cash, an amount 
calculated at the rate of rupees ten thousand per annum for the period commencing on the date on which 
the  management  of  the  textile  undertakings  of  the  Company  was  taken  over  in  pursuance  of  the  order 
made  by  the  Central  Government  under  section  18AA  of  the  Industries  (Development  and  Regulation) 
Act, 1951 (65 of 1951) and ending on the appointed day. 

(2) In consideration of the retrospective operation of the provisions of  sections 3  and 4, there shall 
also  be  given  by  the  Central  Government  to  the  Company,  in  cash,  an  amount  calculated  at  the  rate  of 
rupees ten thousand per annum for the period commencing on the appointed day and ending on the date 
on which the Ordinance was promulgated. 

(3) The amount specified in section 8 and the amounts determined in accordance with the provisions 
of sub-sections (1) and (2) 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 of such amounts is made by 
the Central Government to the Commissioner. 

(4) The amounts determined in accordance with the provisions of sub-sections (1), (2) and (3) shall be 

given by the Central Government to the Company in addition to the amount specified in section 8. 

(5) For the removal of doubts, it is hereby declared that the liabilities of the Company in relation to 
the textile undertakings which have vested in the Central Government under section 3 shall be discharged 
from the amount referred to in section 8 and also from the amounts determined under sub-sections (1), (2) 
and (3), in accordance with the rights and interests of the creditors of the Company. 

CHAPTER IV 

MANAGEMENT, ETC., OF THE TEXTILE UNDERTAKINGS 

10.  Management,  etc.,  of  the  textile  undertakings.—The  National  Textile  Corporation  or  any 
person which that Corporation may, by order in writing, specify, shall be entitled to exercise the powers 
of  general  superintendence,  direction,  control  and  management  of  the  affairs  and  business  of  a  textile 
undertaking,  the  right,  title  and  interest  of  the  Company  in  relation  to  which  have  vested  in  that 
Corporation under sub-section (2) of section 3, and do all such things as the Company is authorised to 
exercise and do. 

1[10A.  Special  provision  for  disposal  of  assets  of  the  textile  undertakings  in  certain                     

circumstances.—If  the  National  Textile  Corporation  considers  it  necessary  or  expedient  for  the  better 
management,  modernisation,  restructuring  or  revival  of  a  textile  undertaking  so  to  do,  it  may,  with  the 

1. Ins. by Act 40 of 1995, s. 3 (w.e.f. 27-6-1995). 

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previous sanction of the Central Government, transfer, mortgage,  sell or otherwise dispose of any land, 
plant, machinery or any other assets of any of the textile undertakings: 

Provided  that  the  proceeds  of  no  such  transfer,  mortgage,  sale  or  disposal  shall  be  utilised  for  any 

purpose other than the purpose for which the sanction of the Central Government has been obtained.] 

11.  Duty  of  persons  in  charge  of  management  of  the  textile  undertakings  to  deliver  all  assets, 
etc.—On the vesting of a textile undertaking in the National Textile Corporation, all persons in charge of 
the management of a textile undertaking immediately before such vesting shall be bound to deliver to the 
National Textile Corporation, all assets, books of account, registers or other documents in their custody 
relating to the textile undertaking. 

PROVISIONS RELATING TO EMPLOYEES OF THE TEXTILE UNDERTAKINGS 

CHAPTER V 

12.  Continuance  of  employees  of  the  textile  undertakings.—(1)  Every  person  who  has  been, 
immediately  before  the  appointed  day,  employed  by  the  Company  in  relation  to  a  textile  undertaking, 
shall become, on and from the appointed day, an employee of the National Textile Corporation and shall 
hold office or service in that Corporation with the same rights and privileges as to pension, gratuity and 
other like matters as would have been admissible to him if the rights in relation to such textile undertaking 
had not been transferred to, and vested in, the National Textile Corporation, and shall continue to do so 
unless and until his employment in that Corporation is duly terminated or until his remuneration, terms 
and conditions of employment are duly altered by that Corporation. 

(2) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1974), or in any 
other law for the time being in force, the transfer of the services of any officer or other person employed 
in a textile undertaking to the National Textile Corporation shall not entitle such officer or other employee 
to any compensation under this Act or any other law for the time being in force and no such claim shall be 
entertained by any court, tribunal or other authority. 

13.  Provident  and  other  funds.—(1)  Where  the  Company  has  established  a  provident  fund, 
superannuation, welfare or other fund for the benefit of the persons employed in a textile undertaking, the 
moneys relatable to the officers and other employees whose  services have been transferred by or under 
this Act to the National Textile Corporation shall, out of the moneys standing, on the appointed day, to 
the credit of such provident fund, superannuation, welfare or other fund, stand transferred to and vest in, 
the National Textile Corporation. 

(2)  The  moneys  which  stand  transferred  under  sub-section  (1)  to  the  National  Textile  Corporation, 

shall be dealt with by that Corporation in such manner as may, be prescribed. 

14. Transfer of employees to a Subsidiary Textile Corporation.—Where any textile undertaking 
or any part thereof is transferred under this Act to a Subsidiary Textile Corporation, every person referred 
to  in  section  12  shall,  on  and  from  the  date  of  such  transfer,  become  an  employee  of  the  Subsidiary 
Textile  Corporation,  and  the  provisions  of  sections  12  and  13  shall  apply  to  such  employee  of  the 
National Textile Corporation as if references in the said sections to the National Textile Corporation were 
references to the Subsidiary Textile Corporation. 

CHAPTER VI 

COMMISSIONER OF PAYMENTS 

15.  Appointment  of  Commissioner  of  Payments.—(1)  The  Central  Government  shall,  for  the 
purpose  of  disbursing  the  amounts  payable  under  sections  8  and  9  to  the  Company,  by  notification, 
appoint a Commissioner of Payments. 

(2)  The  Central  Government  may  appoint  such  other  persons  as  it  may  think  fit  to  assist  the 
Commissioner  and  thereupon  the  Commissioner  may  authorise  one  or  more  of  such  persons  also  to 
exercise  all  or  any  of  the  powers  exercisable  by  him  under  this  Act  and  different  persons  may  be 
authorised to exercise different powers. 

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(3)  Any  person  authorised  by  the  Commissioner  to  exercise  any  of  the  powers  exercisable  by  the 
Commissioner may exercise those powers in the same manner and with the same effect as if they have 
been conferred on that person directly by this Act and not by way of authorisation. 

(4) The salaries and allowances of the Commissioner and other persons appointed under this section 

shall be defrayed out of the Consolidated Fund of India. 

16.  Payment  by  the  Central  Government  to  the  Commissioner.—(1)  The  Central  Government 
shall,  within  thirty  days  from  the  specified  date  pay  in  cash  to  the  Commissioner,  for  payment  to  the 
Company, an amount equal to the amount specified in section 8 and the amounts payable to the Company 
under section 9. 

(2) A deposit account shall be opened by the Central Government in favour of the Commissioner in 
the  Public  Account  of  India,  and  every  amount  paid  under  this  Act  to  the  Commissioner  shall  be 
deposited by him to the credit of the said deposit account, and the said deposit account shall be operated 
by the Commissioner. 

(3) The interests accruing on the amount standing to the credit of the deposit account referred to in 

sub-section (2) shall enure to the benefit of the Company. 

17.  Certain  powers  of  the  National  Textile  Corporation.—(1)  The  National  Textile  Corporation 
shall be entitled to receive, up to the specified date, to the exclusion of all other persons, any money due 
to a textile undertaking, realised after the appointed day, notwithstanding that the realisation pertains to a 
period prior to the appointed day. 

(2)  The  National  Textile  Corporation  may  make  a  claim  to the  Commissioner  with regard  to  every 
payment made by it as the authorised person in relation to a textile undertaking after the appointed day 
but before the date on which the Ordinance was promulgated for discharging any liability of the Company 
in  relation  to  any  period  prior  to  the  appointed  day,  and  every  such  claim  shall  have  priority,  in 
accordance with the priorities attaching, under this Act, to the matter in relation to which such liability 
has been discharged by the authorised person. 

(3) Save as otherwise provided in this Act, the liabilities in relation to a textile undertaking in respect 
of any period prior to the appointed day which have not been discharged by the authorised person shall be 
the liabilities of the Company. 

Explanation.—For the purposes of this section,  “authorised person” means the person authorised to 
take over the management of any textile undertaking in pursuance of the order of the Government of India 
in the late Ministry of Industrial Development No. S.O. 265(E), dated the 13th April, 1978, issued under 
clause  (a)  of  sub-section  (1)  of  section  18AA  of  the  Industries  (Development  and  Regulation)  Act,             
1951 (65 of 1951). 

18. Claims to be made to the Commissioner.—Every person having a claim against the Company 
in  relation  to  the  textile  undertakings  with  regard  to  any  of  the  matters  specified  in  the  Schedule  shall 
prefer such claim before the Commissioner within thirty days from the specified date: 

Provided  that  if  the  Commissioner  is  satisfied  that  the  claimant  was  prevented  by  sufficient  cause 
from preferring the claim within the said period of thirty days, he may entertain the claim within a further 
period of thirty days, but not thereafter. 

19.  Priorities  of  claims.—The  claims  arising  out  of  matters  specified  in  the  Schedule  shall  have 

priorities in accordance with the following principles namely:— 

(a)  Category  I  shall  have  precedence  over  all  other  categories  and  Category  II  shall  have 

precedence over Category III and so on; 

(b) the claims specified in each of the categories, shall rank equally and be paid in full, but, if the 
amount is insufficient to meet such claims in full, they shall abate in equal proportions and be paid 
accordingly; and 

(c) the question of discharging any liability with regard to a matter specified in a lower category 
shall arise only if a surplus is left after meeting all the liabilities specified in the immediately higher 
category. 

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20. Examination of claims.—(1) On receipt of the claims made under section 18, the Commissioner 
shall  arrange  the  claims  in  the  order  of  priorities  specified  in  the  Schedule  and  examine  the  same  in 
accordance with such order. 

(2) If on examination of the claims against the Company, the Commissioner is of the opinion that the 
amounts paid to him under this Act for payment to such Company are not sufficient to meet the liabilities 
specified in any lower category, he shall not be required to examine any claim in respect of such lower 
category. 

21. Admission or rejection of claims.—(1) After examining the  claims against the Company  with 
reference to the priorities set out in the Schedule, the Commissioner shall fix a date on or before which 
every claimant shall file the proof of his claim. 

(2) Not less than fourteen days’s notice of the date so fixed shall be given by advertisement in one 
issue of any daily newspaper in the English language having circulation in the major part of the country 
and  in  one  issue  of  any  daily  newspaper  in  such  regional  language  as  the  Commissioner  may  consider 
suitable,  and  every  such  notice  shall  call  upon  the  claimant  to  file  the  proof  of  his  claim  with  the 
Commissioner within the period specified in the advertisement. 

(3)  Every  claimant  who  fails  to  file  the  proof  of  his  claim  within  the  period  specified  by  the 

Commissioner shall be excluded from the disbursements made by the Commissioner. 

(4) The Commissioner shall, after such investigation as  may, in his opinion, be necessary  and after 
giving  the  Company  an  opportunity  of  refuting  the  claim  and  after  giving  the  claimant  a  reasonable 
opportunity of being heard, by order, in writing, admit or reject the claim in whole or in part. 

(5) The Commissioner shall have the power to regulate his own procedure in all matters arising out of 
the discharge of his functions, including the place or places at which he may hold his sittings and shall, 
for the purpose of making any investigation under this Act, have the same powers as are vested in a civil 
court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following 
matters, namely:— 

(a) the summoning and enforcing the attendance of any witness and examining him on oath; 

(b)  the  discovery  and  production  of  any  document  or  other  material  object  producible  as 

evidence; 

(c) the reception of evidence on affidavit; 

(d) the issuing of any commission for the examination of witnesses. 

(6) Any investigation before the Commissioner shall be deemed to be a judicial proceeding within the 
meaning of sections 193 and 228 of the Indian Penal Code (45 of 1860), and the Commissioner shall be 
deemed to be  a  civil court for the purposes of  section 195 and Chapter XXVI  of the Code of Criminal 
Procedure, 1973 (2 of 1974). 

(7)  A  claimant  who  is  dissatisfied  with  the  decision  of  the  Commissioner,  may  prefer  an  appeal 
against  the  decision  to  the  principal  civil  court  of  original  jurisdiction  within  the  local  limits  of  whose 
jurisdiction the registered office of the Company is situated: 

Provided that where a person who is a Judge of a High Court is appointed to be the Commissioner, 
such appeal shall lie to the High Court of Allahabad and such appeal shall be heard and disposed of by not 
less than two Judges of that High Court. 

22.  Disbursement  of  money  by  the  Commissioner  to  claimants.—(1)  After  admitting  a  claim 
against  the  Company  under  this  Act,  the  amount  due  in  respect  of  such  claim  shall  be  paid  by  the 
Commissioner to the person or persons to whom such amount is due and on such payment, the liability of 
the Company in respect of such claim shall stand discharged. 

(2) If, out of the moneys paid to him in relation to the textile undertakings, there is a balance left after 
meeting the liabilities as specified in the Schedule, the Commissioner shall disburse such balance to the 
Company. 

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23. Undisbursed or unclaimed amount to be deposited with the general revenue account.—Any 
money  paid  to  the  Commissioner  which  remains  undisbursed  or  unclaimed  on  the  date  immediately 
preceding the date on which the office of the Commissioner is finally wound up, shall be transferred by 
the  Commissioner  before  his  office  is  finally  wound  up,  to  the  general  revenue  account  of  the  Central 
Government, but a claim to any money so transferred may be preferred to the Central Government by the 
person  entitled  to  such  payment  and  shall  be  dealt  with  as  if  such  transfer  had  not  been  made,  and  the 
order, if any, for payment of the claim being treated as an order for the refund of revenue. 

CHAPTER VII 

MISCELLANEOUS 

24.  Act  to  have  overriding  effect.—The  provisions  of  this  Act  shall  have  effect  notwithstanding 
anything inconsistent therewith contained in any other law for the time being in force or in any instrument 
having effect by virtue of any law, other than this Act, or in any decree or order of any court, tribunal or 
other authority. 

25.  Assumption  of  liability.—(1)  Where  any  liability  of  the  Company  in  relation  to  any  textile 
undertaking  arising  out  of  any  item  specified  in  Part  I  of  the  Schedule  is  not  discharged  fully  by  the 
Commissioner out of the amounts paid to him under this Act, the Commissioner shall intimate in writing 
to the Central Government the extent of the liability which remains undischarged and that liability shall 
be assumed by the Central Government. 

(2) The Central Government may, by order, direct the National Textile Corporation to take over the 
liability  assumed  by  the  Central  Government  under  sub-section  (1),  and  on  receipt  of  such  direction, it 
shall be the duty of that Corporation to discharge such liability. 

26.  Contracts  to  cease  to  have  effect  unless  ratified  by  National  Textile  Corporation.—Every 
contract,  entered  into  by  the  Company  in  relation  to  any  textile  undertaking  which  has  vested  in  the 
National  Textile  Corporation  under  sub-section  (2)  of  section  3,  for  any  service,  sale  or  supply  and  in 
force immediately before the appointed day, shall, on and from the expiry of a period of one hundred and 
eighty  days  from  the  date  on  which  the  Ordinance  was  promulgated,  cease  to  have  effect  unless  such 
contract is, before the expiry of that period, ratified in writing by the National Textile Corporation, and in 
ratifying  such  contract,  the  National  Textile  Corporation  may  make  such  alterations  or  modifications 
therein as it may think fit: 

Provided that the National Textile Corporation shall not omit to ratify a contract and shall not make 

any alteration or modification in a contract— 

(a) unless it is satisfied that such contract is unduly onerous or has been entered into in bad faith 

or is detrimental to the interests of the textile undertaking concerned, and 

(b)  except  after  giving  the  parties  to  the  contract  a  reasonable  opportunity  of  being  heard  and 
except  after  recording  in  writing  its  reasons  for  refusal  to  ratify  the  contract  or  for  making  any 
alteration or modification therein. 

27. Penalties.—Any person who,— 

(a) having  in  his  possession,  custody  or  control  any  property  forming  part  of  any  of  the textile 

undertakings, wrongfully withholds such property from the National Textile Corporation; or 

(b)  wrongfully  obtains  possession  of,  or  retains  any  property  forming  part  of  any  of  the  textile 

undertakings; or 

(c) wilfully withholds or fails to furnish to the National Textile Corporation or any person or body 
of  persons  specified  by  that  Corporation,  any  document  or  inventory  relating  to  any  of  the  textile 
undertakings which may be in his possession, custody or control; or 

(d)  wilfully  fails  to  deliver  to  the  National  Textile  Corporation  any  inventory  or  property  and 

assets forming part of any of the textile undertakings; or 

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(e) fails to deliver to the National Textile Corporation or any person or body of persons specified 
by  that  Corporation,  any  assets,  books  of  account,  registers  or  other  documents  in  his  possession, 
custody or control relating to any of the textile undertakings; or 

(f) wrongfully removes or destroys any property forming part of any of the textile undertakings or 
prefers  any  claim  under  this  Act  which  he  knows  or  has  reason  to  believe  to  be  false  or  grossly 
inaccurate, 

shall  be  punishable  with  imprisonment  for  a  term  which  may  extend  to  two  years  and  with  fine  which 
may extend to ten thousand rupees. 

28.  Offences  by  companies.—(1)  Where  an  offence  under  this  Act  has  been  committed  by  a 
company,  every  person  who,  at  the  time  the  offence  was  committed,  was  in  charge  of,  and  was 
responsible to, the company for the conduct of the business of the company, as well as the company, shall 
be deemed to be guilty of the offence and shall be liable to be preceded against and punished accordingly: 

Provided  that  nothing  contained  in  this  sub-section  shall  render  any  such  person  liable  to  any 
punishment, if he proves that the offence was committed without his knowledge or that he had exercised 
all due diligence to prevent the commission of such offence. 

(2)  Notwithstanding  anything  contained  in  sub-section  (1),  where  any  offence  under  this  Act,  has 
been committed by a company and it is proved that the offence has been committed with the consent or 
connivance of, or is attributable to any neglect on the part  of, any director, manager, secretary or other 
office of the company, such director, manager, secretary or other officer shall be deemed to be guilty of 
that offence and shall be liable to be proceeded against and punished accordingly. 

Explanation.—For the purposes of this section,— 

(a) “company” means anybody corporate and includes a firm or other association of individuals; 

and 

(b) “director”, in relation to a firm, means a partner in the firm. 

29.  Protection  of  action  taken  in  good  faith.—(1)  No  suit,  prosecution  or  other  legal  proceeding 
shall lie against the Central Government or any officer of, or other person authorised by, that Government 
or  the  National  Textile  Corporation  or  any  Subsidiary  Textile  Corporation  or  any  officer  of,  or  other 
person authorised by, such Corporation for anything which is in good faith done or intended to be done 
under this Act. 

(2)  No  suit  or  other legal  proceeding  shall  lie  against  the  Central  Government  or  any  officer  of,  or 
other  person  authorised  by,  that  Government,  or  the  National  Textile  Corporation  or  any  Subsidiary 
Textile  Corporation  or  any  officer  of,  or  other  person  authorised  by,  such  Corporation  for  any  damage 
caused or likely to be caused by anything which is in good faith done or intended to be done under this 
Act. 

30. Delegation of powers.—(1) The Central Government may by notification, direct that all or any of 
the powers exercisable by it under this Act, other than the powers conferred by this section and sections 
31 and 32, may also be exercised by such person or persons as may be specified in the notification. 

(2) Whenever any delegation of power is made under sub-section (1), the person to whom such power 

has been delegated shall act under the direction, control and supervision of the Central Government. 

31.  Power  to  make  rules.—(1)  The  Central  Government  may,  by  notification,  make  rules  for 

carrying out the provisions of this Act. 

(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  foregoing  powers,  such  rules  may 

provide for all or any of the following matters, namely:— 

(a) the time within which, and the manner in which, an intimation referred to in sub-section (4) of 

section 4 shall be given; 

(b)  the  manner  in  which  the  moneys  in  any  provident  fund  or  other  fund,  referred  to  in                        

sub-section (2) of section 13 shall be dealt with; 

11 

 
(c) any other matter which is required to be, or may be, prescribed. 

(3) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it 
is made, before each House of Parliament, while it is in session, for a total period of thirty days which 
may be comprised in one session or in two or more successive sessions, and if, before the expiry of the 
session  immediately  following  the  session  or  the  successive  sessions  aforesaid,  both  Houses  agree  in 
making any modification in the rule or both Houses agree that the rule should not be made, the rule shall 
thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that 
any such modification or annulment shall be without prejudice to the validity of anything previously done 
under that rule. 

32. Power to remove difficulties.—If any difficulty arises in giving effect to the provisions of this 
Act, the Central Government may, by order, not inconsistent with the provisions of this Act, remove the 
difficulty: 

Provided that no such order shall be made after the expiry of a period of two years from the date on 

which the Ordinance was promulgated. 

33.  Repeal  and  saving.—(1)  The  Swadeshi  Cotton  Mills  Company  Limited  (Acquisition  and 

Transfer of Undertakings) Ordinance, 1986 (5 of 1986), is hereby repealed. 

(2) Notwithstanding such repeal, anything done or any action taken under the Ordinance so repealed 

shall be deemed to have been done or taken under the corresponding provisions of this Act. 

12 

 
 
 
THE SCHEDULE 

[See sections 18, 19, 20 (1), 21 (1), 22 (2) and 25 (1)] 

ORDER OF PRIORITIES FOR THE DISCHARGE OF LIABILITIES OF THE COMPANY 

PART I 

Category I 

Employees’ dues on account of unpaid salaries, wages, provident fund, Employees’ State Insurance 
contribution or premiums relating to the Life Insurance Corporation of India and any other amounts due 
to  employees  in  respect  of  any  period  whether  before  or  after  the  date  of  taking  over  of  the  textile 
undertakings. 

Category II 

Secured  loans  obtained  from  nationalised  banks  and  public  financial  institutions,  other  than  the 
National Textile Corporation, in respect of any period whether before or after the date of taking over of 
the textile undertakings. 

Category III 

Any  credit  availed  of  for  trade  or  manufacturing  purposes  during  the  post-take  over  management 

period. 

Category IV 

Revenue,  taxes,  cesses,  rate  or  other  dues  to  the  Central  Government,  State  Government  and  local 

authorities for the period after the date of taking over of the textile undertakings. 

Category V 

PART II 

Revenue,  taxes,  cesses,  rate  or  other  dues  to  the  Central  Government,  State  Government  and  local 

authorities or State Electricity Boards for the pre-take over management period. 

Category VI 

Any  credit  availed  of  for  trade  or  manufacturing  purposes  during  the  pre-take  over  management 

period. 

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