TMI Blog1987 (3) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... under the entries 43, 44 and 95 of the List I Union List in the VII Schedule, whereas the case of the non-petitioner-company is that the Act is covered under entries 23 and 33(a) of list III of the 7th Schedule i.e. Concurrent List. 2. In order to appreciate the controversy, it would be proper to reproduce the relevant entries, reference of which has been made by the learned counsel for the parties. Entries 43, 44 and 95 of List I are as under with comment thereunder in the shorter Constitution of India (VIII) edition by P. D. Basu : -- 43. Incorporation, regulation and winding up of the trading corporations, including banking, insurance and any financial corporations but not including co-operative societies. 1. Incorporation, regulation and winding up of trading corporations-- An Act which regulates the affairs of a company by laying down certain special rules for its management and administration is fully covered by this item. It would also include legislation providing for the amalgamation of companies, but not the regulation of their functions. 2. Read with entry 95 of List I, this present Entry empowers Parliament to define the jurisdiction of Courts ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employment. 33. Trade and commerce in, and the production, supply and distribution of : -- (a) The products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the Public interest, and imported goods of the same kind as such products; (b) Foodstuffs, including edible oilseeds and oils; (c) Cattle fodder, including oilcakes arid other concentrates; (d) Raw cotton, whether ginned or unginned, and cotton seed; and (e) Raw Jute. 4. Reference may also be made to the provisions of the Act, its preamble as well as the statement of objects and reasons for enacting the Act. The statement of objects and reasons appended with the Rajasthan Relief Undertakings (Special Provisions) Bill, 1961 is as under :-- Where the State Government, in order to prevent or to provide relief against, unemployment, starts, takes over, or acquires, or grants any financial assistance to, any industry, it is necessary to protect it, for such time as such industry may take to come to its own, from legal proceedings and also to extend the period of limitation in order to save the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : -- (b) no suit, or other legal proceeding shall be instituted or commenced, or if pending, shall be proceeded with, against any industrial undertaking during the period in which it remains a relief undertaking. Explanation :-- Legal proceeding means any proceeding under any law before any Court, tribunal, officer, authority, or arbitrator, started on a plaint, petition of appeal, application, reference, or otherwise. 7. It is Clause (b) which is in controversy in these petitions. An explanation has been appended to clause (b) to explain the meaning of the words Legal Proceeding . The State Government has issued the notification in exercise of the powers conferred Under Section 4 staying the proceedings pending in any Court. Clause (b) provides that, when the State Government issues a notification in the Official Gazette, then, as a result of that notification no suit or other legal proceedings shall be instituted or commenced or if pending, shall be proceeded with, against any industrial undertaking during the period in which it retains a relief undertaking and the expression Legal Proceeding means any proceeding under any law before any court, tribunal, of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the State legislature had intended to extend the law to winding up proceeding which are being heard and decided by the High Court, it would have made it clear that the provision would include all proceedings relating to companies before the High Court. 9. So far as the second contention is concerned, I may at once state that the expression used by the State legislature in Section 4(b) is of widest amplitude. Legal proceeding has been explained and the explanation makes it abundantly clear that the expression would mean, any proceeding before any Court. It cannot be conceived that the words any proceeding excludes the proceedings of winding up and the word court exclude the proceeding before the High Court it should be presumed that the State legislature knows that the proceeding in the nature of winding up exclusively fall within the jurisdiction of the High Court under the Companies Act. That being so, if the legislature had intended to exclude the proceeding before the High Court, the State legislature would have made such a provision. The very object of the Act, in that situation, would have been defeated. Normally industries are incorporated companies and if the companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod under Sub-section (2) of Section 3 is 5 years. Section 4 further provides for specifying the industrial relations and other facilities temporarily for relief undertakings. The application of certain laws may be stayed and even application of certain agreements, settlements and awards or standing orders may also be stayed or suspended. When laws can be suspended, when awards can be suspended and when standing orders can be stayed, then Under Section 4(1)(b) it was necessary to make a provision for staying pending proceeding or bar the institution or commencement of any suit or other proceeding. Viewed in the light of the preamble and the Statement of Objects and Reasons along with provisions of the Act, it would appear that the legislation was intended to prevent unemployment and the legislation was also intended to continue the industry or undertaking to run so as to continue to manufacture the products by such industrial undertaking's, the control of which has been declared by Parliament to be expedient in the public interest. Section 2 of the Industries (Development and Regulation) Act, 1951 makes a provision for declaration as to control by the Union. It was declared by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct decision of the Calcutta High Court in Pushraj Puranmull v. N. Roy AIR 1978 Cal 215. The Full Bench of the Calcutta High Court considered the question of constitutional validity of Relief Undertakings (Special Provisions), Act 1972. Their Lordships considered the question as to whether that Act falls within the legislative competence of the legislature of West Bengal or it is beyond its competence. Referring to the decisions relating to the doctrine of pith and substance, their Lordships found that from all the provisions set out in the Act, the pith and substance of the legislation appears to be prevention of unemployment or providing relief against the unemployment and it comes directly within the scope of item 23 of List III. Their Lordships referred to a decision of the D. S. Patel v. Gujarat State Textile Corporation Ltd. (1971) 41 Com Cas 10 where the Bombay Relief Undertakings I Special Provisions) Act was in question. The Gujarat High Court found the law to be valid. In the Calcutta decision item 33 of List III was also taken into consideration although it was earlier staled that it would not be necessary in view of the entry 23 but still it has been observed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference of which has been made by the learned counsel for the parties. Entries 43, 44 and 95 of List I are as under with comment thereunder in the shorter Constitution of India (VIII) edition by P. D. Basu : -- 43. Incorporation, regulation and winding up of the trading corporations, including banking, insurance and any financial corporations but not including co-operative societies. 1. Incorporation, regulation and winding up of trading corporations-- An Act which regulates the affairs of a company by laying down certain special rules for its management and administration is fully covered by this item. It would also include legislation providing for the amalgamation of companies, but not the regulation of their functions. 2. Read with entry 95 of List I, this present Entry empowers Parliament to define the jurisdiction of Courts (other than the Supreme Court) relating to the subject-matters coming under the present entry e.g. banking companies. 44. Incorporation, regulation and winding up of corporations, whether trading or not, with objects not confined to one State, but not including universities. Scope of Entries 43-44 of List I. The scope of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dstuffs, including edible oilseeds and oils; (c) Cattle fodder, including oilcakes arid other concentrates; (d) Raw cotton, whether ginned or unginned, and cotton seed; and (e) Raw Jute. 4. Reference may also be made to the provisions of the Act, its preamble as well as the statement of objects and reasons for enacting the Act. The statement of objects and reasons appended with the Rajasthan Relief Undertakings (Special Provisions) Bill, 1961 is as under :-- Where the State Government, in order to prevent or to provide relief against, unemployment, starts, takes over, or acquires, or grants any financial assistance to, any industry, it is necessary to protect it, for such time as such industry may take to come to its own, from legal proceedings and also to extend the period of limitation in order to save the interests of the creditors. Similarly, it is also necessary to suspend temporarily certain laws which provide the machinery of settling labour disputes and certain other conditions of service of labour. Some retrenchment in labour will also be required and unless the labour laws are suspended, reduction of labour in the industry will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority, or arbitrator, started on a plaint, petition of appeal, application, reference, or otherwise. 7. It is Clause (b) which is in controversy in these petitions. An explanation has been appended to clause (b) to explain the meaning of the words Legal Proceeding . The State Government has issued the notification in exercise of the powers conferred Under Section 4 staying the proceedings pending in any Court. Clause (b) provides that, when the State Government issues a notification in the Official Gazette, then, as a result of that notification no suit or other legal proceedings shall be instituted or commenced or if pending, shall be proceeded with, against any industrial undertaking during the period in which it retains a relief undertaking and the expression Legal Proceeding means any proceeding under any law before any court, tribunal, officer, authority or arbitrator started on a plaint-petition of appeal, application, reference or otherwise. 8. On behalf of the creditor petitioners, it is urged that the matter relating to winding up is a matter falling exclusively in entry 43 of List I and under entry 43 the Companies Act has been enacted by the Parliament provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression used by the State legislature in Section 4(b) is of widest amplitude. Legal proceeding has been explained and the explanation makes it abundantly clear that the expression would mean, any proceeding before any Court. It cannot be conceived that the words any proceeding excludes the proceedings of winding up and the word court exclude the proceeding before the High Court it should be presumed that the State legislature knows that the proceeding in the nature of winding up exclusively fall within the jurisdiction of the High Court under the Companies Act. That being so, if the legislature had intended to exclude the proceeding before the High Court, the State legislature would have made such a provision. The very object of the Act, in that situation, would have been defeated. Normally industries are incorporated companies and if the companies winding up proceeding would have been outside the purview of the Act then the whole object of the Act would be defeated Thus the submission made on behalf of the creditor petitioners in my opinion, has no substance that the word legal proceedings explained in Section 4(l)(b) excludes from its scope the proceedings of winding up bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded. When laws can be suspended, when awards can be suspended and when standing orders can be stayed, then Under Section 4(1)(b) it was necessary to make a provision for staying pending proceeding or bar the institution or commencement of any suit or other proceeding. Viewed in the light of the preamble and the Statement of Objects and Reasons along with provisions of the Act, it would appear that the legislation was intended to prevent unemployment and the legislation was also intended to continue the industry or undertaking to run so as to continue to manufacture the products by such industrial undertaking's, the control of which has been declared by Parliament to be expedient in the public interest. Section 2 of the Industries (Development and Regulation) Act, 1951 makes a provision for declaration as to control by the Union. It was declared by Section 2 and it is expedient in the public interest that the Union should take in its control the industries specified in 1st schedule and in the first schedule in item 23(i), there is mention of the industry, Textiles (including those dyed, printed or otherwise processed) made wholly or in part of cotton including cotton yarn, hosi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpetence of the legislature of West Bengal or it is beyond its competence. Referring to the decisions relating to the doctrine of pith and substance, their Lordships found that from all the provisions set out in the Act, the pith and substance of the legislation appears to be prevention of unemployment or providing relief against the unemployment and it comes directly within the scope of item 23 of List III. Their Lordships referred to a decision of the D. S. Patel v. Gujarat State Textile Corporation Ltd. (1971) 41 Com Cas 10 where the Bombay Relief Undertakings I Special Provisions) Act was in question. The Gujarat High Court found the law to be valid. In the Calcutta decision item 33 of List III was also taken into consideration although it was earlier staled that it would not be necessary in view of the entry 23 but still it has been observed that the Act intends to give breathing time to a sick industry and thereby encourage them to continue its productive activity and from this point of view it may be stated that the Act is within the competence of the powers of the State legislature in item 33(a) of List III. 13. Although reference has been made by the learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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