Case Law Details
RELEVANT PARAGRAPH
7.4 The reconstruction of a business or an industrial undertaking must necessarily involve the concept that the original business or undertaking is not to cease functioning, and its identity is not to be lost or abandoned. The concept essentially rests on changes but the changes must be constructive and not destructive. There must be something positive about the whole matter as opposed to negative. The underlying idea of a reconstruction evidently must be – and this is brought out by the section itself – of a `business already in existence’. There must be continuation of the activities and business of the same industrial undertaking. The undertaking must continue to carry on the same business though in some altered or varied form. If the alterations and changes are substantial, there would be little scope for describing what emerges as a reconstruction of the business. The word ‘reconstruction’ postulates something which is already constructed in a particular manner because where there is no construction; there cannot be any question of ‘reconstruction’ . Webster’s Dictionary, 2nd Edition, explains the word ‘reconstruction’ as ‘the act of constructing again’. Therefore, while considering the question whether a particular business is or is not ‘reconstruction’ , it is first necessary to enquire what was the nature of the business which was already in existence was the nature of the business, which was already in existence, the same as the nature of business which acquired a new shape ? If the answer is in the negative, there is no scope for holding that there is any ‘reconstruction’ of the existing business because ‘reconstruction’ implies the continuation of the same business in some altered form. This alteration may assume the form of changing the manner or method of carrying on the same business; it may involve change or rationalization of the administrative set up or business organization. But when its basic nature changes, it cannot be said that the business is ‘reconstructed’ It is not every alternation in the mode, method or scope of the activities of a business and it is not every transfer of assets from one unit to another that will involve reconstruction. The expression is no doubt very wide but it does not take in a case of company setting up or establishing a totally independent and viable industrial unit for carrying on the same or similar business even though it might be so set up by way of expanding the already existing business The expression ‘reconstruction’ , in the context in which it is used denotes that the original business or undertaking continues to exist without its identity being In the reconstruction of a business, as in the lost or abandoned . reconstruction of a company, there is an element of transfer of assets and of some change, however, partial or restricted it may be, of ownership of the assets. The transfer, however, need not be of all the assets. It is nonetheless imperative that there should be continuity and preservation of the old undertaking though in an altered form. The concept of reconstruction of business would not be attracted when a company which is already running one industrial unit sets up another industrial unit. The new industrial unit would not lose its separate and independent identity even though it has been set up by a company which is already running an industrial unit before the setting up of the new unit.The situation can be explained by simple example that there is one state line like “line A”. If same type of another line like “B” is drawn and same put together the position will be as under:-
“Line A ____________ _________ ___”
“Line B___________ _________ ____”
7.5 From above we find that “line A” and “Line B” both are similar nature and style or say same type but it is to note that “Line B” has been drawn independently without disturbing or destroying or even without touching to that “line A”. Under this circumstances it cannot said that “Line B” is splitting up, or the reconstruction, of a “line A” already in existence.
