Sick Textile Undertakings (Nationalisation) Act, 1974 – Sections 5(1), 5(2), 30 – Liability of National Textile Corporation (NTC) for pre-acquisition debts: Under Section 5(1) of the Act, any liability of a sick textile undertaking for a period prior to the “appointed day” (date of nationalization) is solely the liability of the original owner and not enforceable against the Central Government or the NTC, unless it falls within the exceptions specified in Section 5(2).
Interpretation of “Contract for Service, Sale or Supply” under Section 30: A loan agreement or credit facility provided by a bank to a sick textile undertaking does not fall under the purview of “contracts for any service, sale or supply” as defined in Section 30 of the Act. Therefore, NTC is not obliged to ratify such financial contracts.
Acquisition of Sick Undertakings – Effect on Liabilities: Upon nationalization of a sick textile undertaking, while assets vest in the NTC, liabilities, especially those pre-dating the appointed day, are generally not transferred to the NTC unless specifically provided for by the Act.