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Baroda Rayon Corporation Ltd. Versus ICICI Ltd. (Debenture Trustees)

2001 (10) TMI 1175 - BOMBAY HIGH COURT

Appeal Nos. 837, 838 and 864 of 2001 in Chamber Summons Nos. 146, 361 and 365 of 2001 in Suit No. 194 of 2001 - Dated:- 22-10-2001 - A.P. Shah And S Bobde, JJ. For Appellant: Janak Dwarkadas and R. Naricharia., i/b., Sushma M. Dave,. For Respondents: Rajani Iyer and Birendra Saraf, M.K. Ambalal, and B.H. Rasputra And Shaunak Satpute & Co JUDGMENT A.P. Shah, 1. As these appeals give vise to common questions of law and facts and arise out of a common order passed by the learned single Judge, t .....

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cement of the securities in the form of mortgage and hypothecation of immovable/movable properties which had been mortgaged/hypothecated in favour of respondent No. 1 as the trustees of the debenture-holders. A notice of motion was filed by respondent No. 1 in the said, suit and by an order dated 14-2-2001, the Court Receiver was appointed in respect of the immovable properties of the appellant and was also given power to take physical possession of the properties and, if required, to take them .....

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r visited the appellant's mill premises on 13th and 14th March 2001, but he could not take possession of the plant and other assets of the appellant. On 16-3-2001, the Receiver took possession of two units of the appellant, viz., Rayon Plant and Nylon Tyre Cord Plant. It seems that the Receiver also took formal possession of the appellants property at Udhana. On 16-3-2001 itself a notification was issued under Section 3 of the Bombay Relief Undertakings (Special Provisions) Act, 1957, herein .....

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spondent No. 1 filed a contempt petition, being Contempt Petition No. 70 of 2001, which is pending. The Receiver could not take possession of the remaining properties and the appellant also failed to execute the undertaking and other documents which were required by the Receiver in respect of the properties of which the Receiver had taken formal possession. The ad hoc royalty was also not fixed by the Receiver. 3. In the above background, Chamber Summons No. 361 of 2001 was taken out by the resp .....

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mber Summons No. 146 of 2001, was filed by the appellant for revocation of the leave granted under Clause XII of the Letters Patent. 4. The learned single Judge, following the Full Bench decision of this Court in Hatimbhai Hasanally v. Framroz Eduljee Dinshaw, reported in AIR 1927 Bom. 278, dismissed Chamber Summons No. 146 of 2001 taken out by the appellant for revocation of the leave. The learned single Judge held that the proceedings against the appellant undertaking in a court outside the St .....

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ber Summons No. 361 of 2001 absolute. 5. Mr. Dwarkadas, learned counsel appearing for the appellants, fairly conceded that in view of the Full Bench decision of this Court in Hatimbhai Hasanally's case (supra), he does not wish to press the prayer for revocation of the leave at this stage. Mr. Dwarkadas, however, strenuously contended that the learned single Judge has completely misconstrued the provisions, the objects and scheme of the Act. The learned counsel submitted that when the order .....

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refore, the Receiver was not entitled to take possession of the two units, viz., Rayon Plant and Nylon Tyre Cord Plant. Mr. Dwarkadas placed heavy reliance on the decision of the Supreme Court in Binod Mills Co. Ltd. v. Suresh Chandra, , and the decision in R. S. D. V. Finance Co. Pvt, Ltd. v. Shree Vailabh Glass Works Ltd. (supra). 6. Ms lyer, learned counsel appearing for respondent No. 1, on the other hand, submitted that the ratio of the decision in Binod Mills' case has no application i .....

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by its creditors outside the State of Gujarat prior to the undertaking having been declared as a relief undertaking. There is no dispute that by a notification dated 16-3-2001 the appellant has been declared as a "relief undertaking" under Section 3 of the Act as amended and applied to the State of Gujarat. It is contended that by virtue of the said notification the order of appointment of Receiver passed by this Court vide order dated 26-2-2001 remains suspended during the period of o .....

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rtakings which were started, acquired or otherwise taken over by the State Government and carried on or proposed to be carried on by itself or under its authority. But by an amendment made in the 1960, the Act was made applicable also to industrial undertakings to which any loan, guarantee or other financial assistance has been provided by the State Government. Section 3 expressly declares that on issuance of a notification thereunder, the specified industrial undertaking shall "be conducte .....

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Section 4(1) is relevant for our purpose and may be set out in full:-"4. Power 'to prescribe industrial relations and other facilities temporarily for relief undertakings. - (1) Notwithstanding any law, usage, custom, contract, instrument, decree, order, award, submission, settlement, order or other provision whatsoever, the State Government may, by notification in the Official Gazette, direct that - (a) in relation to any relief undertaking and in respect of the period for which the r .....

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of the laws in the Schedule to this Act, which may be applicable to the undertaking immediately before it was acquired or taken over by the State Government or before any loan, guarantee or other financial assistance was provided to it by, or with the approval of the State Government for being run as a relief undertaking, shall be suspended in operation, or shall, if so directed by the State Government, be applied with such modifications as may be specified in the notification; (iii) rights, pri .....

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to in Clause (a)(iv) shall, on the notification ceasing to have force, revive and be enforceable and the proceedings referred to therein shall be continued: Provided that in computing the period of limitation for the enforcement of such right, privilege, obligation or liability, the period during which it was suspended under Clause (a)(iv) shall be excluded notwithstanding anything contained in any law for the time being in force." 9. Ms. Iyer, learned counsel for respondent No. 1, has reli .....

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he effect of suspending the enforcement of any decree or order passed by the court in Mumbai and, therefore, bar contained in the Act does not come into play. Secondly, that the Court Receiver having been appointed prior to the issuance of the notification under Section 3, the bar under Section 4(1)(a)(iv) is not attracted. We are unable to accept the submission of the learned counsel. In K. S. D, V. Finance Co. 's case, the question before the Supreme Court was whether the notification issu .....

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s the suit was based on postdated cheques and those cheques being payable in Mumbai, the Court at Mumbai had jurisdiction to decide the case. On an appeal filed by the respondent, the Division Bench held that leave granted under Clause 12 of the Letters Patent is liable to be revoked and that the Bombay High Court had no jurisdiction to entertain and try the suit. In appeal, the Supreme Court reversed the decision of the Division Bench and held that the Bombay High Court had jurisdiction to try .....

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proceedings is bound to affect the undertaking which is situated within the State of Gujarat. The Supreme Court rejected this contention holding, inter alia, that the State Legislatures do not possess the power to make a law having extra-territorial operation and only Parliament has that power. The Gujarat Legislature is not competent to regulate, modify or extinguish the obligations and liabilities incurred by a relief undertaking outside the State of Gujarat nor can it suspend or stay the suit .....

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s incurred by a "relief undertaking" outside the State of Gujarat shall remain suspended during the period the notification under Section 3 read with Section 4 is in operation and/or that no suit or other proceedings can go on in a court outside the State of Gujarat in respect of such an obligation/liability. The Legislature may well confer an immunity (no doubt, temporary) upon the relief undertaking effective within the bounds of the State of Gujarat, but it cannot extend that immuni .....

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it cannot say that the properties of the relief undertaking situated in other States shall not be liable to property tax. Nor can it say that those properties cannot be proceeded against the realisation of amounts due from the relief undertaking to third parties in pursuance of decrees/orders made by courts outside the State of Gujarat. It is true that such proceedings, may ultimately affect the relief undertaking adversely; they may also tend to defeat the objective underlying the Act and the n .....

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e result of the above discussion is that the Gujarat Legislature is not competent to regulate, modify or extinguish the obligations and liabilities incurred by a relief undertaking (declared as such under Section 3 of the Bombay Act) outside the State of Gujarat nor can it suspend or stay the suit or other proceedings relating to such obligations and liabilities. Section 4(1)(a)(iv) is not effective to suspend the plaintiff-appellant's right to money nor can it operate to stay the proceeding .....

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g outside the State of Gujarat cannot be suspended. However, if any execution in respect of a decree or order passed in such proceedings is sought to be levied within the State of Gujarat against the properties of the relief undertaking situate within the State of Gujarat, they can be interdicted by the said notification read with Section 4(1)(a)(iv) of the Act. In other words, though the suit or proceedings outside the State of Gujarat does not come within purview of the Act, the enforcement of .....

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nt therein under the said Act and was extended from time to time by subsequent orders. The respondent, therein filed a summary suit in the Bombay High Court and the suit was decreed. The respondent got the decree transferred for execution to the District Judge, Ujjain, and then applied for execution of the decree. The appellant resisted the execution by pleading that since it was a relief undertaking under the Act, the benefits thereunder were available at the time the objection was filed and th .....

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spondent was accepted by the District Judge and the revision filed against the said order was dismissed by the Madhya Pradesh High Court. The matter was then carried to the Supreme Court. The question before the Supreme Court was whether proceedings taken in M. P. Court for execution of a decree validly obtained from the Bombay High Court has to be or can be stayed under Section 5 of the M.P. Relief Undertaking Act and whether Section 5 of that Act operates even against execution of decrees obta .....

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r any special law available in the State in which the execution court is situate, in relation to decrees obtained outside the States. For example, suppose a decree is obtained in Madras and it is transferred to Madhya Pradesh. Suppose against that in Madhya Pradesh, there is an enactment to scale down the decree amount either in instalments or to wipe out the debt of an agriculturist; will it be open to the executing court to take recourse to such enactments and give relief to debtors in the Sta .....

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feree Court is situated. 25. Here we are not confronted with such a situation. Nobody contends that the executing Court has to change the terms of the decree. All that is stated is that its execution has to be suspended for a specified period. Section 5, therefore, does not come into conflict either with Section 40 or Section 42, Civil Procedure Code. In our view, the bar under Section 5 is an obsolute one for the duration of the period contemplated in the Act. 26. If the relief undertakings are .....

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e assets and the products of the undertaking, that would be detrimental to the heavy investment made by the State and other financial institutions. The concent 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 sick unit. It is to protect them and not to render them unemployed that such relief undertakings are financed by the State." 13. Now coining to the facts of the present case, .....

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