Chapter II ACQUISITION OF THE RIGHTS OF OWNERS OF SICK TEXTILE UNDERTAKING

Acquisition of rights of owners in respect of sick textile undertaking.—(1) On the appointed day, the sick textile undertaking and the right, title and interest of the owner in relation to such sick textile undertaking shall, by virtue of this Act, stand transferred to, and shall vest absolutely in the State Government.

1. (2) The sick textile undertaking which stands vested in the State Government under sub-section
2. (1) shall, immediately after it has So vested, stand transferred to, and vest in the State Textile Corporation.

General effect of Vesting.—(1) The sick textile undertaking 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 and all other rights and interests in, or arising out of, such property as were immediately before the appointed day in the possession, power or control of the authorised person and all books of account, registers and all other documents of whatever nature relating thereto and shall also be deemed to include the liabilities and obligations specified in sub-section

1. (2) of section 5.
2. (2) All property as aforesaid which have vested in the State Government under sub-section
3. (1) of section 3 shall, by reason of such vesting, be freed and discharged from any trust, obligation, mortgage, charge, lien and all other encumbrances affecting it, and any attachment, injunction or decree or order of any court restricting the use of such property in any manner shall be deemed to have been withdrawn.
4. (3) Where any licence or other instrument in relation to the sick textile undertaking had been granted at any time before the appointed day to an owner by the Central Government or a State Government or any other authority, the State Textile Corporation shall, on and from the appointed day, be deemed to be substituted in such licence or other instrument in place of the owner referred to therein as if such licence or other instrument had been granted to the State Textile Corporation and it shall hold such licence or the sick textile undertaking specified in such other instrument for the remainder of the period for which the owner would have held such licence or the sick textile undertaking under such other instrument.
5. (4) Every mortgagee of any property which has vested under this Act in the State 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.
6. (5) For the removal of doubts, it is hereby declared that the mortgagee of any property referred to in sub-section
7. (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 interest, payment of the mortgage money or other dues, in whole or in part, out of he amount specified in relation to such property, in the First Schedule, but no such mortgage, charge, lien or other interest shall be enforceable against any property which has vested in the State Government.
8. (6) If, on the appointed day, any suit, appeal or other proceeding of whatever nature in relation to any matter specified in sub-section
9. (2) of section 5 in respect of the sick textile undertaking, instituted or preferred by or against the textile company or the authorised person, is pending, the same shall not abate, be discontinued or be, in any way, prejudicially affected by reason of the transfer of the sick textile undertaking or of anything contained in this Act but the suit, appeal or other proceedings may be continued, prosecuted and enforced by the State Textile Corporation.

Owner to be liable for certain prior liabilities.—(1) Every liability other than the liability specified in sub-section (2), of the owner of the sick textile undertaking, in respect of any period prior to the appointed day shall be the liability of such owner and shall be enforceable against him and not against the State Government or the State Textile Corporation.

1. (2) Any liability arising in respect of—
   • (a) loans advanced by the Central Government or the State Government to the sick textile undertaking (together with interest due thereon) after it has been declared as a sick company by the Board for Industrial and Financial Reconstruction (BIFR);
   • (b) amount advanced to the sick textile undertaking after it has been declared as a sick company by the Board for Industrial and Financial Reconstruction
   • (BIFR) by the State Textile Corporation together with interest due thereon;
   • (c) wages, salaries and other dues of employees of the sick textile undertaking, in respect of any period after the company has been declared as a sick company by the Board for Industrial and Financial Reconstruction
   • (BIFR) shall on and from the appointed day, be the liability of the State Government and shall be discharged, for and on behalf of that Government, by the State Textile Corporation as and when repayment of such loans or amounts become due or as and when such wages, salaries or other dues become due and payable.
2. (3) 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, other than the liability specified in sub-section (2), in relation to the sick textile undertaking in respect of any period prior to the appointed day, shall be enforceable against the State Government or the State Textile Corporation;
   • (b) no award, decree or order of any court, tribunal or other authority in relation to this sick textile undertaking passed after the appointed day in respect of any matter, claim or dispute, in relation to any matter not referred to in sub-section
3. (2) which arose before that day, shall be enforceable against the State Government or the State Textile Corporation;
   • (c) no liability of the sick textile undertaking or any owner thereof for the contravention, before the Company has been declared as a sick company by the Board for Industrial and Financial Reconstruction
   • (BIFR) of any provision of a law for the time being in force, shall be enforceable against the State Government or the State Textile Corporation.

State Textile Corporation to form subsidiary corporations.—(1) The State Textile Corporation may, if it considers necessary to do so, form subsidiary corporations under the Companies Act, 1956 (Central Act 1 of 1956), and register them under that Act.

1. (2) The State Textile Corporation may, by order in writing, transfer the sick textile undertaking 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. (3) 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. (3) of section 4 in place of the State 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 State Textile Corporation would have held such licence or other instrument.
4. (4) On the transfer to a Subsidiary Textile Corporation of the sick textile undertaking or any part thereof, the liabilities required to be discharged, by the State Textile Corporation under sub-section
5. (2) of section 5 shall, in so far as they relate to the sick textile undertaking or part thereof so transferred to the Subsidiary Textile Corporation, be discharged, on and from the date of such transfer, by the Subsidiary Textile Corporation as and when any such liability is required to be discharged.
6. (5) Save as otherwise expressly provided in this Act, references in this Act to the State Textile Corporation in respect of the sick textile undertaking or any part thereof which is transferred to a Subsidiary Textile Corporation, be construed as references to the Subsidiary Textile Corporation.

Shares to be issued by the State Textile Corporation for the value of the assets transferred to it by State Government.—(1) An amount equal to the value of the assets of the sick textile undertaking transferred to, and vested in, the State Textile Corporation under sub-section

1. (2) of section 3, shall be deemed to be the contribution made by the State Government to the equity capital of the State Textile Corporation; and for the contribution so made, the State Textile Corporation shall issue (if necessary after amending its memorandum and articles of association) to the State Government paid-up shares, in its equity capital, having a face value equal to the amount specified against the sick textile undertaking in the corresponding entry in column
2. (3) of the First Schedule.
3. (2) Where any liability is assumed by the State Government under sub-section
4. (1) of section 25, they may call upon the State Textile Corporation to issue (if necessary, after amending the memorandum and articles of association of the Corporation) to the State Government additional paid-up shares, in its equity capital, having a face value equal to the amount of the liability assumed by the State Government under the said sub-section.