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State Bank of India Versus Saksaria Sugar Mills Ltd. and ors.

1986 (2) TMI 340 - SUPREME COURT OF INDIA

Civil Appeal Nos. 569-70 of 1986 - Dated:- 14-2-1986 - E. S. Venkataramiah And M. P. Thakkar, JJ. For the Appellant : Y. S. Chitale and S. A. Shroff For the Respondents : Yogeshwar Prasad and S. R. Srivastava JUDGMENT E. S. Venkataramiah, J. These appeals by special leave are filed against the order dated May 25, 1984 passed by the High Court of Allahabad in Civil Revision No. 136 of 1982 and the order dated February 22, 1985 in C.M.A. No.644(M) of 1984 on the file of that Court. The appellant, .....

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s, Shri K.G. Saksaria, Shri G.L. Vaid and Shri R.K. Saksaria had agreed to be the guarantors for the repayment of any amount due from respondent No.1 under the said cash credit account. Since there was default in repayment of the amount due under the said cash credit account the State Bank of India instituted a suit in Suit No. 18 of 1980 on the file of the Additional District Judge, Gonda for recovery of a sum of ₹ 54,89,822.99 as on March 6, 1980 against respondents Nos. 1 to 5 who were .....

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ian of the said undertaking. The State Bank of India, therefore, impleaded Raghubir Singh and the Union of India also as defendants Nos. 6 and 7 in the suit. In the suit respondents Nos. 1 to 5 pleaded inter alia that the trial court had no territorial jurisdiction to try the suit and that the suit was not maintainable and at any rate the suit was liable to be stayed in view of the provisions of the Act. The trial court had framed two issues arising out of the above pleas. The defendants filed a .....

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by the Central Government under the Act. Aggrieved by the said decision of the trial court, respondent No.1 filed a revision petition in Civil Revision No. 136 of 1982 before the High Court of Allahabad. The High Court allowed the revision petition holding that the trial of suit in so far as relief No.1 namely the prayer for decree for ₹ 54,89,822.99 against respondent Nos. 1 to 5 was concerned was liable to be stayed by virtue of the provisions of the Act. The High Court, however, direct .....

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Court by its order dated February 22, 1985 holding that the provisions of order 34, rule 4 C.P.C. were quite clear and it was for the court below to proceed in accordance with law. The High Court was of opinion that the order needed no further clarification. Aggrieved by the others passed on revision in Civil Revision No. 136 of 1982 and the order passed in C.M.A. No. 644(M) of 1984 the State Bank of India has filed this appeal by special leave. The only question canvassed before us by the part .....

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to be stayed. It is no doubt true that the Central Government has taken over the management of the sugar undertaking belonging to the respondent No. 1 by issuing a notification under section 3 of the Act and has appointed a Custodian under section 5 thereof. The material part of section 7 of the Act which is relevant for the purposes of this case reads thus: "7. Power of Central Government to make certain declarations.- (1) The Central Government may, if it is satisfied, in relation to a n .....

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r which may be applicable to such sugar undertaking or person) immediately before the date of issue of the notification 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 adaptations and in such manner as may be specified in the notification. .................................................. . (4) Any remedy for the enforcement of any right, .....

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ge, obligation or liability so remaining suspended or modified shall become revived and enforceable as if the notification had never been made; (b) any proceeding so remaining stayed shall be proceeded with subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed." Clause (b) of section 7(1) of the Act which is extracted above empowers the Central Government to issue a notification declaring that the operation .....

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emain suspended or shall be enforceable with such adaptations and in such manner as may be specified in the notification. Subsection (4) of section 7 of the Act provides that any remedy for the enforcement of any right, privilege, obligation or liability referred to in clause (b) of sub-section (1) of section 7 and suspended or modified by a notification made under that sub-section shall in accordance with the terms of the notification, remain suspended or modified and all proceedings relating t .....

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orce from the stage which had been reached when the proceedings became stayed. A reading of clause (b) of sub-section (1) and subsection (4) of section 7 of the Act makes it clear that it is only on the issuance of a notification by the Central Govt. under section 7(1)(b) containing the necessary declaration that the operation of all or any of the contracts etc. entered into by the notified sugar undertaking which are referred to in the said notification shall remain suspended or that all or any .....

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contracts) would become suspended and the rights, privileges, obligation and liabilities arising under them would not be enforceable. In the instant case the Central Government has issued notifications from time to time specifying the contracts, assurances of property, agreements etc. the operation of which would stand suspended or stayed during the period of its management of the sugar undertaking in question. The latest notification issued in that connection is dated March 21, 1984. It reads t .....

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n (2) of section 7 of the Sugar Undertakings (Taking Over of Management) Act, 1978 (49 of 1978), and in continuation of the notification of the Government of India in the Ministry of Food and Civil Supplies (Department of Food) No. S.O. 196(E) dated the 22nd March 1983, the Central Government hereby declares that the operation of all obligations and liabilities accruing or arising out of all contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments .....

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uspended or stayed. The Central Government has made a declaration by that notification to the effect that the operation of all obligations and liabilities accruing or arising out of all contracts, assurances of properties, agreements, settlements, awards, standing orders or other instruments in force immediately before the 28th March 1980 (other than those relating to secured liabilities to banks and financial institutions) to which the said sugar undertaking or the person owning the said sugar .....

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the State Bank of India is to be suspended and the suit in respect of them should be stayed in view of the Act and the notification issued thereunder. It is unfortunate that the High Court erred in overlooking words "other than those relating to secured liabilities to banks and financial institutions" referred to in the notification which had the effect of excluding the mortgage in favour of the State Bank of India from the scope of the notification issued under section 7 of the Act. .....

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