MISCELLANEOUSCentral

Section 25 of The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986

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.

Summary

This provision explains what happens if there is not enough money to pay the highest priority debts of the Company.
It specifically covers liabilities listed in Part I of the Schedule, which mostly involve employee dues and secured bank loans.
If the Commissioner of Payments cannot fully pay these specific debts using the available funds, they must notify the Central Government in writing.
The Central Government will then automatically assume responsibility for the unpaid portion of those Part I liabilities.
The Central Government can then order the National Textile Corporation to take over and pay these debts.

Practical examples

1The Commissioner of Payments pays out all the available funds, but there is still 10 lakh rupees owed to former workers for unpaid provident funds (a Category I debt under Part I of the Schedule). Because of Section 25, the Commissioner writes to the Central Government, and the Central Government takes on the responsibility to pay the workers.

2A nationalized bank is owed 50 lakh rupees (a Category II debt under Part I), but the Commissioner only has 30 lakh left to give them. Under Section 25, the Central Government assumes the remaining 20 lakh debt and issues an order directing the National Textile Corporation to pay the bank.

FAQ

1. What types of unpaid debts does the Central Government take over under Section 25 of The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986?

The Central Government only assumes responsibility for liabilities specified in Part I of the Schedule, which mostly include employee dues and secured loans from public financial institutions.

2. How does the Central Government find out about unpaid debts under Section 25 of The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986?

The Commissioner of Payments must intimate in writing to the Central Government the exact extent of the liability that remains undischarged.

Test yourself

Q1.Under Section 25 of The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986, which liabilities will the Central Government assume if they are not fully discharged?

Q2.What action must the Commissioner take under Section 25 of The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986 when a Part I liability is not fully paid?

Q3.After assuming an unpaid liability under Section 25 of The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986, who can the Central Government direct to take over that liability?

Q4.How does Section 25 of The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986 interact with the Schedule of the Act when deciding who gets paid?

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