TMI Blog1987 (5) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... tation. The object of Section 5 is to protect the relief undertakings from all suits and legal proceedings. This protection is to end on 18-11-1987. We hold that the High Court was in error in allowing execution to proceed. Set aside the order of the High court and allow this appeal. - Civil Appeal No. 1197 of 1987 - - - Dated:- 6-5-1987 - KHALID, V. AND OZA, G.L., JJ. K.K. Venugopal, A.K. Chitale, Deepak K. Thakur and S.K. Gambhir for the Appellant Y.S. Chitale, M.S. Ganesh and Ravi Wagmare for the Respondent. JUDGMENT KHALID, J: Special leave granted. This is an appeal by special leave against the Judgment Order dated 5-1-1987, of the High Court of Madhya Pradesh, Bench at Indore, in Civil Revision No. 382 of 1986, by which the High Court affirmed the order dated 28-11-1986 of the District Judge, Ujjain in Civil Execution Case No. 1249 of 1986, filed by the respondent against the appellant. The appellant is a textile undertaking at Agra Road, Ujjain. The Madhya Pradesh Government enacted the Madhya Pradesh Sahayata Upkram (Vishesh Upbandh) Adhiniyam, 1978 (No. 32 of 1978), for short the Act, with the object of giving relief to sick undertakings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en though the petitioner's textile undertaking is admittedly a State Relief Undertaking under the Act? (b) Whether Section 5 of the aforesaid Act is substantive law or procedural law? The High Court considered this question and held that there was no bar against execution of the decree after considering the effect of Section 5 quoted above on the general law governing decrees and their execution as provided in the Civil Procedure Code. The High Court relied upon the settled position that the executing Court cannot go behind the decree even if it is erroneous on law or on facts. We extract below the finding by the High Court against the appellant in paragraph 20: It may be stated that it was perhaps due to the position of the law as propounded in the Delhi decision that the suit in the Bombay High Court was not contested by the petitioner. With the determination of the rights of the parties by the Bombay High Court according to the substantive law applicable to the State of Maharashtra, the nonapplicant was manifestly clothed with the absolute right to execute the decree unless some express provisions of law in Maharashtra empowered the Court to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gradually destroying the units completely. The Act has been enacted to safeguard the interest of the general public, the workers and the amounts invested. It is for this purpose that relief was given to the unit against execution of decrees for a maximum period of seven years. If creditors of the relief undertakings ingeniously manage to obtain decrees against them from Courts situated in areas where the Act is not in operation and thus try to circumvent the operation of the Act by getting such decrees transferred to the area where the Act is in operation and plead that their decrees are saved from the mischief of the Act, such actions would be to defeat the very purpose of the Act. When we say this, we do not want to encourage such relief undertakings not to pay current liabilities. We are only concerned here with the interpretation of the sections of the Act. We will presently refer to some of the relevant sections and consider their operation both for pre-notification and post-notification debts. Section 2(3) defines relief undertaking and s. 2(4) a state industrial undertaking, as follows: 254 2(3) relief undertaking means a State industrial undertaking in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of property, agreements, settlements, awards, standing orders or other instruments, in force (to which any relief undertaking is a party or which may be applicable to any relief undertaking) immediately before the date on which the State industrial undertaking is declared to be a relief undertaking, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such modifications and in such manner as may be specified in such notification. The Schedule to the Act mentions the following six Acts: (1) The Industrial Employment (Standing Orders) Act, 1946 (No. 20 of 1946). (2) The Industrial Disputes Act, 1947 (No. 14 of 1947). (3) The Minimum Wages Act, 1948 (No. 11 of 1948). (4) The Madhya Pradesh Shops and Establishments Act, 1958 (No. 25 of 1958). (5) The Madhya Pradesh Industrial Relations Act, 1960 (No. 27 of 1960). (6) The Madhya Pradesh Industrial Employment (Standing Orders) 1961 (No. 26 of 1961). Now we come to the important Section with which we are vitally concerned in this appeal and that is Section 5 which reads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding shall be proceeded against the industrial undertaking as from the date specified in the notification under subsection (1) of Section 3 during the period in which it remains a relief undertaking. So read, the object of the section becomes clear. The section seeks to confer benefit to the relief undertakings from the ravages of litigation during the period it remains a relief undertaking. The expression 'decree' is very material for our purpose. Inclusion of 'decrees' in the section shows that the fact that decrees were validly obtained against a relief undertaking will not pose any danger to it during the period the declaration is in force. In other words, the section prevents execution of a decree validly obtained against the undertaking during the period mentioned above. That takes us to the question as to whether the words other legal proceedings in the section would take in execution proceedings. It is not disputed that the Section bars institution of suits and starting of other proceedings. What is disputed is that expression other legal proceedings will not take in execution proceedings. The contention is grounded on the general principle that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icial legislations, arising after the issue of notification, will be barred. On the wording of the section we feel such a conclusion is inescapable. Reliance was placed by the counsel for the respondent on the decision in the case of State Bank of India v. Jaipur Udyog Ors., AIR 1986 Delhi 357 to contend that no objection can be raised to the execution of the decree validly obtained from the Bombay High Court. We find that the above decision has no application to our case. In that case, an attempt was made to block a suit filed in the Delhi Court against a relief undertaking under the Rajasthan Relief Undertakings (Special Provisions) Act 9 of 1961, based on Section 3 4. That contention was repelled and according to us rightly. There the State Bank of India brought a suit for the recovery of certain amounts against Jaipur Udyog Limited, the principal debtor, a company based in Rajasthan and the guarantors. This company had been declared by the State of Rajasthan as a relief undertaking under Section 3 of the Act. Section 2 of the Act barred institution or commencement of suit or other legal proceedings against a relief undertaking. This section contains an explanation as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax department adopted its statutory procedure under Section 46 and accordingly sent an arrear demand, informing the latter that the demand was recoverable as arrears of land revenue. The official liquidator thereupon made an application to the High Court under Sections 171, 228 and 233 of the Indian Companies Act, 1913, against the department asking for an order that the respondent be directed to put in a formal claim to the official liquidator in respect of the sum due. The Allahabad High Court restrained the department from proceeding accepting the plea of the company as the leave of the Court was not obtained under Section 171. We are only concerned with the manner in which the Federal Court understood the expression other legal proceeding occurring in Section 171 of the Indian Companies Act. That Section reads as follows: When a winding-up order has been made or a provisional liquidator has been appointed, no suit or other legal proceeding shall be proceeded with or commenced against the company except by leave of the Court, and subject to such terms as the Court may impose. The Federal Court discussed this question at page 56 as follows: That still ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian Income-tax Act, and that accordingly before forwarding the requisite certificate under s. 46(2) of the Indian Income-tax Act. There is no reason why the expression 'other legal proceedings' in section 5 should not include execution petitions also. If we look into the scheme of the Act and the various sections, it will be evident that Section 5 is an independent section uncontrolled by Sections 4, 6 7. Sections 4, 6 7, deal with suspension or modification of certain remedies, rights etc., stay of proceedings, their revival and continuance. Section 5 does not make any reference to Section 4. It had been enacted with a definite object and that is to protect the relief undertakings from litigations and consequent actions. The object is clear. The Government wants to relieve such undertakings from litigative pressure for a period of time. It is not a permanent relief. The Government are interested to see that the investments made by it and other financial institutions do not get frittered away by avoidable litigation and other legal proceedings. The bar contained in Section 5 by way of suspension of suits or other legal proceedings is thus an absolute bar but only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y pro-rata from the sale proceeds of the assets. If creditors are permitted to proceed against the assets and the products of the undertaking, that would be detrimental to the heavy investment made by the State and other financial institutions. The concern of the Government in enacting this law is thus in the interest of the large number of workmen employed in these undertakings and in the revival, if possible, of a sick unit. It is to protect them and not to render them unemployed that such relief undertakings are financed by the State. A contention was raised that Section 5 cannot apply to post notification liabilities. In other words, suits and other proceedings in relation to the debts incurred prior to the notification under Section 3 alone are barred and debts incurred subsequent to the notification under Section 3 are not barred under Section 5. In our view, the reading of the Sections does not permit such an interpretation. The object of Section 5 is to protect the relief undertakings from all suits and legal proceedings. This protection is to end on 18-11-1987. We hold that the High Court was in error in allowing execution to proceed. Before parting with this case, w ..... 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