1 app1007-05 ttm IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO.1007 IF 2005 IN SUIT NO.1652 OF 1980 The Cotton Corporation of India Ltd. .. Appellants Vs. The Co-operative Textiles Mills Ltd. .. Respondents Mr.Gaurav Joshi with Mr.U.M.Mahajan and Ms.Sanika Karnik i/b M/s.Divekar and Co. for the appellants None for the respondents CORAM: D.K.DESHMUKH & K.K. TATED, JJ. DATE: 22nd FEBRUARY, 2011 P.C. 1. This appeal is filed against the judgment dated 2.8.04 passed by the learned single Judge of this court in suit no.1652 of 1980. That suit was filed by the appellants for recovery of Rs.15,78,006.49 along with interest thereon @ 20% p.a. The plaintiffs were claiming this amount as damages for breach of contract which according to the plaintiffs were committed by the defendants. The defendants appeared, filed written statement and contested the suit. On the basis of the rival pleadings and the documents, following issues were raised: 2 app1007-05 ISSUES 1. Whether the suit filed by the plaintiffs is bad and liable to be dismissed as the plaintiffs have not obtained leave under Clause XII of Letters Patent alleged by the defendants in paragraph 1 of the written statement? 2. Whether the suit of the plaintiffs is not maintainable as no notice under section 117 of the U.P.Co-operative Societies Act, 1965 was given before filing of the suit as alleged in paragraph 2 of the written statement? 3. Whether the Hon ble Court has no jurisdiction to entertain ’ and try this suit? 4. Whether the suit of the plaintiffs is barred by the law of Limitation? 5. Whether the defendants prove that the letter dated 15th March, 1977 placing the order of cotton with the Plaintiffs is not binding on the defendants as the signatory of the said letter was not authorized to do so under the Bye-laws of the defendants as alleged in paragraph 6 of the written statement? 6. Whether the Plaintiffs prove that there was a concluded valid and binding contract bearing No.G/655 dated 12th May, 3 app1007-05 1977 for the sale and supply of 500 bales of Sudan cotton by the plaintiffs to the defendants? 7. Whether the Plaintiffs prove that the defendants committed breach of the contract by refusing to take delivery of 500 bales of cotton? 8. Whether the defendants prove that the plaintiffs committed breach of the contract as alleged in paragraph 8 of the written statement? 9. Whether the plaintiffs prove that the plaintiffs suffered loss of Rs.15,78,006.49 on account of breach of contract on the part of the defendants and that the plaintiffs are entitled to claim the said loss and interest thereon as claimed by the plaintiffs in the plaint? 10. What reliefs? 11. By the order which is impugned in this appeal, the learned single Judge has decided issue nos.1 to 4. The learned single Judge has answered issued no.1, 3 and 4 in favour of the plaintiffs. Only issue no.2 has not been answered against the plaintiffs and in favour of the defendants. The learned single Judge has held that notice required to be served on the Registrar by the provisions of section 117 of the U.P. Co-operative Societies Act, 1960 was, admittedly, not served on the Registrar and hence, 4 app1007-05 the suit is not maintainable. Therefore, it is only this finding which is challenged in the present appeal by the plaintiffs. 12. The learned counsel for the plaintiffs relying on the following judgments of the Supreme Court in the cases of Gwalior Dugdha Sangh Sahakari Ltd Vs. G.M.Govt.Milk Scheme, Nagpur and Others reported in (2003) 7 Supreme Court Cases 529, R.S.D.V.Finance Co. Pvt. Ltd. Vs. Shree Vallabh Glass Works Ltd. reported in AIR 1993 SUPREME COURT 2094 and Shrikant Bhalchandra Karulkar and Others Vs. State of Gujarat and Another with Vrandavandas Kikabhai Shriff and Another Vs. Shri Khan Memlatedar and Agricultural Land Tribunal District Surat and Another reported in (1994) 5 Supreme Court Cases 459, submits that the U.P.Co-operative Societies Act operates withing the limits of the State of U.P. Therefore, will not operate to curtail the Jurisdiction of the court in Bombay to entertain the suit. 13. The learned counsel submits that the learned single Judge has not properly appreciated the law laid down by the Supreme Court in its judgment in the case of Gwalior Dugdha Sangh Sahakari Ltd. (Supra) which was cited before the learned single Judge. 14. The learned counsel submits that the learned single Judge recorded a finding that the entire cause of action had arisen for filing the suit in Bombay. Therefore, this court has exclusive Jurisdiction to try the suit and therefore, there is no question of complying with the provisions of 5 app1007-05 section 117 of the U.P.Co-op.Societies Act before instituting the suit in this court. The respondents have been served. Affidavit of service has been filed but none appears for the respondents. 15. We have perused the record. Perusal of the record shows that the learned single Judge has recorded a clear finding that the entire cause of action for filing the suit had arisen in Bombay and this court has exclusive Jurisdiction to entertain the suit. Section 117 of the U.P. Co- op.Societies Act has been quoted in the judgment by the learned single Judge which lays down that no suit shall be instituted against a Co- operative Society or any of its officers in respect of any act relating to the constitution, management or the business of the Society until the expiration of two months next after notice in writing has been delivered to the Registrar. In the present case, admittedly, no such notice has served on the defendant which is a Co-op.Society registered under the Co-op.Societies Act. 16. The case of the plaintiffs is that the provisions of section 117 of the U.P. Co-op.Societies Act will not be applicable to a suit filed in this court because section 117 has no application outside the State of U.P. 17. We find that the judgment of the Supreme Court in R.S.D.V.Finance Co. Pvt. Ltd. (supra) referred to above supports the contention of the appellants. In that case, a Summary Suit was filed in this court for money decree against a company which was registered in the State of 6 app1007-05 Gujarat. While the matter was pending in the Supreme Court, a notification was issued by the State of Gujarat under the Bombay Relief Undertakings (Special Provisions) Act, 1958. The effect of that notification was that any remedy for the enforcement of a liability accrued or incurred before the undertaking was declared a relief undertaking was to be suspended. 18. On the basis of that declaration / notification a contention was made before the Supreme Court that in view of that notification, the right of the plaintiffs to institute the suit in the Bombay High Court also stood suspended. This contention has been negatived by the Supreme Court by the Judgment in the case of R.S.D.V.Finance Co. Pvt. Ltd. (supra). In our opinion what is observed by the Supreme Court in para 17 to 21 of that judgment is relevant. The same reads as under: 17. The question is whether the ratio of the said decisions has “ any application herein and whether it has the effect of suspending the proceedings in the Bombay Court? The suit is not filed within the State of Gujarat nor are any proceedings being taken in any Court in Gujarat not, at any rate, as yet. The proceedings are being taken to establish the plaintiff's right to recover a particular sum of money from the defendant. The argument of Sri Nariman, however, is two-fold: Firstly, he says, Section 4(i)(a)(iv) suspends 'any right', privilege, obligation or liability accrued or incurred before the undertaking was declared a relief undertaking". If the very right/liability itself is suspended, no suit to establish or enforce such right/liability can proceed. Secondly, he says, even though the proceedings are going on in a court outside the State of Gujarat, the outcome of the proceedings are bound to affect the undertaking which is situated within the State of 7 app1007-05 Gujarat. Applying the logic of Charusila Dasi (AIR 1959 SC 1002), he says, the Gujarat Legislature is competent to stay the proceedings in a court outside the State so long as such proceedings are likely to have an adverse impact upon the undertaking - adverse impact in the sense that it disables the undertaking being run as an employment relief undertaking. 18. Mr. Salve, the learned counsel for the plaintiff/appellant, on the other hand, submits that the ratio of the aforesaid decisions has no application herein and that so long as no proceedings are taken and no execution is levied in the State of Gujarat or against the properties of the defendant situated in the State of Gujarat, the bar contained in the Act does not come into play. He relies upon the decision of the Delhi High Court in State Bank of India v. Jaipur Udyog (AIR 1986 Delhi 357), and submits that the same has been approved by this Court in Binod Mills Ltd. v. Suresh Chandra, [1987] 3 SCC 99 at 108: (AIR 1987 SC 1739 at p.1744). 19. The legislature of a State is competent to make laws for the whole or any part of the State [Article 245(1). It has exclusive power to make laws with respect to any of the matters enumerated in List-II of the Seventh Schedule to the Constitution. Subject to any law made by the Parliament, the State legislature can also make a law with respect to any of the matters enumerated in List-Ill. The Bombay Act is relatable to entry 22 of List-III (Industrial and Labour Disputes) and probably to entry 24 (Welfare of Labour) and entry 20 (Economic and Social Planning). The Code of Civil Procedure which provides where a particular suit has to be instituted, is relatable to entry 13 of List-III. It is a central enactment applicable to the entire country. Both the enactments relate to and deal with different subject-matters. There is no question of any inconsistency between them. 20. The State legislatures do not possess the power to make a law having extra-territorial operation (See Kochanu v. State of Madras, AIR 1960 S.C. 1080. Only the Parliament has that power [Art. 245(3)]. Charusila Dasi (AIR 1959 SC 1002) and Bhabapritananda (AIR 1959 SC 1073) do not say to the contrary as explained hereinbefore. The legislature of Gujarat cannot say that obligations and liabilities 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 8 app1007-05 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 State of Gujarat, but it cannot extend that immunity beyond its bounds. By way of illustration, it cannot say that the sales/purchase effected by the relief undertaking in other State shall not be liable to sales tax under the law of that other State. It cannot prevent the other State from levying and realising (by proceedings, if necessary, against the properties and assets of the undertaking situate outside the State of Gujarat) the tax due from the relief undertaking in respect of the sales and purchases effected in that State. Similarly, 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 for 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 notification. But that can't be helped. Thatis the limitation of power. Probably, for this reason has the Parliament enacted 'The Sick Companies (Special Provisions) Act, 1985'. Incidently, it may be mentioned that according to the respondent company, a rehabilitation scheme has been sanctioned by the B.I.F.R. for the respondent company on January 21, 1992 but the inter- corporate depositors are said to have been kept out of the scheme as framed by I.C.I.C.I. Ltd., the operating agency. 21. The 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 proceedings in the present suit in the Bombay Court. If and when any execution is levied within the State of Gujarat and/or against the properties of the relief undertaking situated within the State of Gujarat, they can be interdicted by the said notification read with Section 4(i)(a)(iv) of the Act, as held by this Court in Binod Mills (AIR 1987 SC 1739).” 9 app1007-05 19. In our opinion, thus the law is clearly laid down by the Supreme Court that the enactment made by the State Legislature operates within the territory of that State and not outside. Therefore, if the suit had to be filed by the plaintiffs in the State of U.P. it was necessary for him to comply with the requirements of section 117 of the U.P. Co-op.Societies Act but if the cause of action for filing the suit had entirely accrued in Bombay then, section 117 of the U.P. Co-op.Societies Act will not operate to curtail the Jurisdiction of this court to entertain the suit in the absence of notice issued under section 117 of the U.P.Co-op.Societies Act. Thus, the finding recorded by the learned single Judge on issue no.2 has to be set aside and it has to be held that absence of issuance of notice under section 117 of the U.P.Co-op.Societies Act does not make the suit of the plaintiff not maintainable. It is accordingly so held that the suit of the plaintiffs was maintainable and as the learned single Judge has already recorded the finding in favour of the plaintiffs on issue no.1, 3 and 4, the matter will have to be sent back to the learned single Judge for trial of issue. It is accordingly so ordered and the appeal is disposed of. (D.K. DESHMUKH, J) (K.K. TATED, J) 10 app1007-05