Section 5 of The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986
- (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.
Summary
- This section protects the new owners (the government and the National Textile Corporation) from paying for the old company's past mistakes.
- Any debts or liabilities created by the old company before the appointed day remain the sole responsibility of the old company.
- You cannot legally force the Central Government or the National Textile Corporation to pay these old debts.
- Even if a court issues an order after the takeover, if the dispute is about something from before the takeover, the government does not have to pay.
- If the old company broke the law before the takeover, the government and the new corporation cannot be punished or held financially responsible for it.
Practical examples
FAQ
1. If the government owns the factory now, why don't they pay the factory's old bills?
The law specifically separates the past from the present. The old company kept the responsibility for its old actions and debts, protecting the new public corporation.
2. What if I win a court case today against the mill for an injury that happened in 1983?
You cannot enforce that court award against the Central Government or the National Textile Corporation. You must seek payment from the old company.
3. Can the government be fined if the old owners failed to pay their taxes years ago?
No, any liability for contravening a law before the appointed day cannot be enforced against the new owners.
Test yourself
Q1.Under Section 5 of The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986, who is legally responsible for a factory debt that was incurred prior to the appointed day?
Q2.Under Section 5 of The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986, a court passes a decree in 1987 regarding a contract dispute from 1984. Who is protected from having this decree enforced against them?
Q3.Under Section 5 of The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986, what happens regarding a penalty for a safety law broken by the mill before the appointed day?
Q4.Under Section 5 of The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986, is there any situation mentioned where the government assumes the old company's liabilities from before the appointed day?