The Textile Undertakings (Nationalisation) Act, 1995
📘 Background of the Act
In the late 20th century, many textile mills in India were facing severe financial problems and were unable to operate properly. These mills were often sick (financially unviable), and their continued closure was affecting:
Workers (job loss, unpaid wages)
Public interest (shortage in cloth production)
National economy (important sector)
To address this, the government initially took over management of these mills under temporary laws like the Sick Textile Undertakings (Taking Over of Management) Act, 1972. But since revival wasn't possible through management control alone, the government decided to nationalize them completely.
🎯 Objective of the Act
The main aim of the Act is to:
Provide for the acquisition and transfer of the rights, title, and interest of certain textile undertakings.
Ensure continued production of textiles.
Secure employment of workers.
Protect the interests of creditors and shareholders.
🏭 Scope of the Act
It applies to national textile corporations (NTCs).
Covers all assets, rights, liabilities, and undertakings of sick textile companies specified in the Schedule to the Act.
Undertakings are transferred to and vest in the Central Government and then to National Textile Corporation Limited (NTC).
🔑 Key Provisions
1. Acquisition of Undertakings (Section 3)
All rights, title, and interest of the textile companies mentioned in the Schedule are transferred to the Central Government from the appointed day (1st April 1994). These are then vested in the NTC.
2. Transfer of Liabilities (Section 4)
Only certain liabilities are transferred, mainly those related to the operation of the mills (like unpaid wages, statutory dues, etc.). Other liabilities (e.g., loans not related to the undertakings) are not transferred.
3. Payment of Amount (Section 8)
A specified compensation amount is paid to the companies whose undertakings are acquired.
4. Management of Undertakings (Section 10)
Management and operations of these undertakings are taken over by the National Textile Corporation.
5. Employees' Rights (Section 11)
All employees (except managerial staff) are deemed to be re-employed under the NTC without any break in service and on the same terms and conditions.
6. Validation of Past Actions (Section 16)
Actions taken by the government before the passing of this Act (like taking over management under earlier laws) are validated.
⚖️ Important Case Laws
1. National Textile Corporation Ltd. v. Nareshkumar Badrikumar Jagad & Others (2011)
Issue: Whether an employee who was working in a sick textile company before nationalization could claim employment benefits from NTC.
Held: The Supreme Court held that only those employees who were working immediately before the appointed day and continued in service were deemed re-employed. Others (who had left earlier) were not entitled to employment or benefits from NTC.
2. Doypack Systems Pvt. Ltd. v. Union of India (1988)
Though this case relates to nationalisation in another context, it clarified legal concepts around:
What constitutes an "undertaking"
What is meant by "property and assets"
These principles have been applied in interpreting similar provisions under the Textile Undertakings (Nationalisation) Act.
3. Bank of India v. National Textile Corporation (2008)
Issue: Whether secured creditors can enforce their security interest against the property of the textile undertakings post-nationalisation.
Held: The court ruled that the rights of secured creditors are protected, but subject to the provisions of the Act. If the liability was not transferred, the creditor could not enforce it against the NTC.
✅ Effects of the Act
The Act helped revive several sick textile mills.
Protected jobs of thousands of workers.
Boosted textile production in India.
Prevented loss of public resources due to mismanagement in private companies.
📌 Summary
| Feature | Description |
|---|---|
| Name | Textile Undertakings (Nationalisation) Act, 1995 |
| Purpose | Nationalisation of sick textile mills for public interest |
| Key Body | National Textile Corporation (NTC) |
| Effective Date | 1st April 1994 (Retrospective) |
| Compensation | Paid to previous owners |
| Employees | Retained with continuity of service |
| Legal Effect | Supersedes previous temporary takeover laws |
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