BINOD MILLS CO. LTD., UJJAIN (M.P.) v.

SURESH CHANDRA MAHA VEER PRASAD

MANTRI, BOMBAY

MAY 6, 1987

[V. KHALID AND G.L. OZA, JJ.] \ Madhya Pradesh Sahayata Upkram (Vishesh Upbandh) Adhiniyam, 1978: ss. 3 and 5-Relief Undertakings-Suspension of decrees against-Object and Scope of-Execution whether barred-Whether in conflict with ss. 40 or 42 C.P. C.

Words and Phrases: Expression 'other legal proceedings'- Whether includes execution petitions.

Sick Textile Undertakings (Taking over of Management) Act, 1972/Sick Textile Undertakings Nationalisation Act, 1974: Sick Units- D Rescue of-Concern expressed at loss Government incurs-Necessity for Government to evolve more acceptable policy-Help labour and l'flodernise industry.

Section 3 of the Madhya Pradesh Sahayata Upkram (Vishesh Upbandb) Adbiniyam, 1978 provides for the declaration of a State E industrial undertaking as a relief undertaking and s. 5 for suspension of suits or other legal proceedings against such relief undertakings and bars institution or commencement of suits or other legal proceedings against such an industrial undertaking during the period in which it remains a relief undertaking notwithstanding any law, usage, custom, contract, instrument, decree, order, award, or settlement.

The appellant, a textile undertaking at Ujjain, M.P. was declared a 'relief undertaking' by notification dated 15.11.1980 issued by the State Government under s. 3 of the Act and the time extended by subsequent orders till 15.11.1987. The respondent filed a summary suit against the appellant in the Bombay High Court for a certain sum with interest and costs, which was decreed ex-parte. He then got the decree G transferred for execution to the Court of District Judge, Ujjain, Madhya Pradesh on 26.9.1986. The appellant resisted execution on the ground of the bar contained in s. 5 of the Act. The respondent while admitting that the appellant was a relief undertaking contended that the District Judge had no jurisdiction to entertain any objection to the execution of the decree validly passed by the High Court as it could not H

A go behind the decree, and the decree mandated execution on its terms.

The District Judge held that the appellant could not take advantage of the notifications under the Act because the rights and liabilities of the parties had to be determined by the transferee court in accordance with the substantive law bearing on the question in the B ccourt .that pessed.tlie decree:, and-Ola! the -uiio11. o( tlte decrcould,.,

not be challenged before the transferee court unless it was shown that the transferor court had no jurisdiction to pass the decree. The High Court took the view that the executing court could not go behind the decree even if it was erroneous on law or on facts and after considering the effect of s. 5 on the general law governing decrees and their execu tion as provided in the Civil Procedure Code held that there was no bar C against execution of the decree,. and consequently rejected the revision and affirmed the order of the District Judge.

In this appeal by special leave.it was contended for the respondent that the expression 'other legal proceedings' would not take in execu D tion proceedings and the execution court could not, therefore, refuse to execute a valid decree, that if such a wide construction was given to that expression institution of even claims of workers under the Industrial Disputes Act and other similar beneficial legislation would be barred, that the execution court could not, while executing decrees, adopt a procedure under any special law available in the State in which the execution court was situate in relation to decrees obtained outside the E States, and finally that s. 5 could not apply to ;>Ost-notification

liabilities.

Allowing the ap'peal, the Court,

HELD: 1. The High Court was in error in alloMng execution to F proceed. It has completely overlooked the purpose of the Madhya Pradesh Sahayata Upkram (Vishesh Upbandh) Adhiniyam, 1978 and the limited period of operation of s. 5. The bar contained in the section by way of suspension of suits or other legal proceedings against relief undertakings is an absolute one for the period contemplated in the Act. [263C; 253B; 262F] G

2. The section is not happily worded. What it intends to convey if ··~ the words are re-arranged, would be: "Notwithstanding any law, usage, custom, contract, instrument, decree, order, award, settlement or other provisions, no suit or other legal proceedings shall he instituted or commenced or if pending shall be pro'ceeded against the industrial H undertaking as from the date specified in the notification under subs.

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B!NOD MILLS v. S.C. MAHAVEER 249

(1) of s. 3 during the period in which it remains a relief undertaking". A So, read, the object of the section becomes clear. [257BD]

3. The section has to be construed and interpreted as it stands. It is unambiguous and mu Import bas to be given to it.I words and Its intent. The expression 'other legal proceedings' In the section Includes execution prncttdings also. The non-obstante clause contained therein B takes within its ambit all the decrees passed against relief undertakings.

The bar of 'institution or commencement' takes within its ambit suits or 'other legal prncttdings', which include execution petitions also. The inclusion of the expression 'decree' in the section further shows that a decree validly obtained against a relief undertaking cannot be executed during the period the declaration is in force. [258C; 261E; 257DE]

The Governor-General in Council v. Shiromani Sugar Mills Ltd., (1946 FCR 40), referred to.

State Bank of India v. Jaipur Udyog & Ors., (Am 1986 Delhi 357), distingliished. .

4. Section 5 has a free field of operation unfettered by any limitation. It is independent and uncontrolled by ss. 4, 6 and 7 which deal with suspension or modification of certain remedies,. rights etc., stay of proceedings, their revival and continuance. It does not make any reference to s. 4. It had been enacted with a definite object and that is to E protect the relief undertakings from litigations and consequent actions during the period the declaration is in force. [257B; 261F]

5. Section 5 operates even against execution of decrees obtained against the relief undertaking by its creditors outside the State of Madhya Pradesh. To direct execution of such decrees would be to F encourage filing of suits in courts situated in areas where the Act is not in operation, secure decrees and then try to circumvent the operation of the Act by getting those decrees transferred under ss. 40 and 42 of the Civil Procedure Code and defeat the purpose of the Act. Such an abuse is not permissible in the face of s. 5 of the Act: [262A; 258B; 253F; 257G]

6. The transferee court has to execute the decree in accordance with the law obtaining in the court that passed the decree and determine the rights and liabilities of the parties in accordance with the substantive law obtaining in the State where that court is situate. That being so, the judgment debtor cannot move th~ execution court and get the benefit of the procedure available in the State in which the trans feree court is situated. [262D]

A In the instant case the decree obtained from the Bombay High Court was a valid decree. No court in Madhya Pradesh could question its validity, nor could refuse to execute it. All that is sought to he done by s. 5 ofthe Act is to suspend its animation for the period mentioned in the notification. It is not a permanent relief. Section 5, therefore, does not come into conflict either with s. 40 or 42 of the Civil Procedure B Code. [257FG; 258AB; 261FG; 262EF] ~

7. It cannot be said that the debts incurred prior to the notifica- tion under s. 3 alone are barred and debts incurred subsequent to the notification under s. 3 are not barred. Section 5 does not permit such an interpretation. [263BC]

8. There is need to evolve a more acceptable procedure while dealing with sick units. Invariably, the amounts pumped in in trying to rescue sick units are ultimately lost. No purpose will be served by giving life to such units. The concern for workers must be matched with concern for modernisation also. The labour should not be leftto the mercy D of such sick units. The Government wtll have to evolve a more acceptable and intelligent policy. Units with decrepit and antiquated machineries must be got rid of and public money must be saved. In their places new units must come into existence. If Government finds it difficult a trial must be undertaken to entrust such units to the labour to test how they work with their cooperative effort. [263DH] E

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1197 of 1987.

From the Judgment and Order dated 5 .1. 1987 of the Madhya Pradesh High Court in Civil Revision No. 382 of 1986.

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.

The Judgment of the Court was delivered by

KHALID, J: Special leave granted.

This is an appeal by special leave against the Judgment & Order H dated 5-1-1987, of the High Court of Madhya Pradesh, Bench at

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Indore, in Civil Revision No. 382 of 1986, by which the High Court A 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 B

Upham (Vishesh Upbandh) Adhiniyam, 1978 (No. 32 of 1978), for sjiort the Act, with the object of giving relief to sick undertakings. "'Relief was given to the appellant-company first by notification No. F-17-87-79'Xl-B-1, dated 15-11-1980, extended from time to time by - subsequent orders, the relief so given to continue till 15-11-1987.

The respondent filed a summary suit against the appellant in the c

Bombay High Court on its original side, as summary suit No. 124 of 1986 claiming a decree for Rs.12,12,327.50, with interest and costs. The appellant did not contest the suit. The suit was accordingly decreed.

The respondent got the decree transferred for execution to the District Judge, Ujjain on 26-9-1986 and then applied for execution of the D 'y decree. The appellant resisted execution by filing objection pleading that it was a relief undertaking under the Act, the benefits under which Act were available till 15-11-1986 at the time the objection was filed (now upto 15-11-1987) and that the decree could not therefore be executed against it in view of the bar contained in Section 5 of the Act.

The respondent admitted the appellant to be a relief undertaking.

E However, it was contended that the District Judge had no jurisdiction 7 to entertain any objection to the execution of the decree, validly passed by the Bombay High Court. The Execution Court, it was contended, could not go behind the decree and the decree mandated execution on its terms.

The learned District Judge upheld the contentions of the respondent and held that the appellant could not take advantage of the notifications under the Act because the rights and liabilities of the parties had to be determined by the transferee court in accordance with the substantive law bearing on the question in the court that passed the

~ decree. He further held that the execution of the decree could not be G

· challenged before the transferee court unless it was shown that the transferor Court had no jurisdiction to pass the decree. The objection of the appellant was thus rejected.

The appellant thereupon filed a revision in the High Court. The High Court rejected the revision and affirmed the order of the District H Judge. Hence this appeal.

The questions of law raised before us are as follows:

(a) Whether on a true construction of Section 5 of the Act, execution of the ex-parte decree obtained by the respondent against the petitioner at Bombay can be instituted, commenced or proceeded with by the respondent against the petitioner, even 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 oi-'

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 y 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 tp the State of Maharashtra, the non- 'I. applicant was manifestly clothed with the absolute right to execute the decree unless some express provisions of law in y Maharashtra empowered the Court to restrain him from executing the same. Such right cannot again be subjected to and/or regulated by any law of the State of M.P. to which the decree is sent only for execution. Any provision to suspend such right of execution of a valid decree does partake of the character of substantive law and cannot be interpreted as merely a rule of procedure within the meaning of Sec. 40 of the C.P.C. prescribing the manner of -{ execution. It has, therefore to be held on the authority of Ramavtar's case (supra) that the provision in Section 5 of the Adhiniyam pertains to the domain of substantive law and cannot be said to relate to the realm of adjective or procedural law. The petitionet, therefore, has no locus standi to seek shelter under Section 5 of the Adhiniyam, against --

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the execution of the decree passed by the Bombay High A Court, it being a substantive law of the State of M.P. and not merely a procedural law, within the meaning of Section 40 of the C.P.C. or procedural power under Section 42 ibid, governing the mode of execution. The suit in the Bombay High Court was not liable to be stayed and so is the decree therein passed."

, B I It is evident from the above discussion that the High Court completely overlooked the purpose of the Act and the limited period of operation of Section 5. It has to be borne in mind that the Act in question was enacted with a specific purpose. The preamble to the Act states that the Act has been enacted to enable the State Government to make special provisions for a limited period in respect of industrial relations, financial obligations 'and other, like matters in relation to industrial undertakings the running of which is considered essential as a measure of preventing, or of providing relief against, unemployment." It is necessary to note that the State Government and other financial u; stitutions invest large sums of money to revive sick units or relief undertakings. The Government and such institutions are interested in seeing that the amount so invested are utilised for the purpose of running the relief undertaking so that it can be gradually revived and what is more important, to provide continuous employment to a large number of workers. The Government is interested in making sure that the relief undertakings do not i, ncur burdonsome debts, engage in costly litigations and consequent attachment of their machineries and moveables thus 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 defea( 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 ands. 2(4) a state indust- H rial undertaking, as follows:

"2(3) "relief undertaking" means a State industrial undertaking in respect of which a declaration under Section 3 is in force:

2( 4) "State industrial undertaking" means an industrial undertaking- B ~

(a) which is started or which, or the management of which is under any law or agreement acquired or otherwise taken over by the State Government or by a Government company and is run or proposed to be run by, or under the authority of, the State Government or a Government company; or

(b) to which any loan, advance, or grant has been given, or in respect of any loan whereof, a guarantee has been given, by the State Government or Government company; or

( c) in respect of which a notified order under the Industries (Development and Regulation) Act, 1951 (No. 65 of 1951) is in operation."

Declaration of l\ relief undertaking is provided for in Section 3 which E reads as follows:

"The State Government may, if it is satisfied that it is necessary or expedient so to do in the public interest, with a view to enabling the continued running or re-starting of a State industrial undertaking as a measure of preventing, or of providing relief against, unemployment, declare, by notification, that the State industrial undertaking shall on and from such date and for such period as may be specified in the notification, be a relief undertaking.

Provided that the period so specified shall not, in the first instance, exceed one year but may, by a like notification, be extended, from time to time, by any period not exceeding one year at any one time so however that such periods in the aggregate shall not exceed seven years."

Section 4 provides for suspension of certain enactments, contracts, agreements etc. appelicable to relief undertaking. The Section reads as follows:

...

"4. Application of certain enactments and contracts, A agreements, etc. to relief undertaking-That State Government may, if it is satisfied that it is necessary or expedient so to do for the purposes specified in section 3, direct, by notification, -

(a) that in relation to any relief undertaking all or B any of the enactments specified in the Schedule to this Act shall not apply or shall apply with such adaptations whether by way of modification, addition or ommission (which does not, however affect the policy of the said enactments), as may be specified in such notification, or I C

(b) that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments, in force (to which any relief undcrtaking is a party or which may be applicable to any relief D 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 E 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) 196.1(No.46 of 196l).

Now we come to the important Section with which we are vitally concerned in this appeal and that is Section 5 which reads as follows:

"5. Suspension of suits or other legal proceedings against ,>.: relief undertakings: As from the date specified in the notification under sub-section (1) of section 3, no suit or other~ legal proceedings shall be instituted or commenced or, if pending, shall be proceeded with against the industrial undertaking during the period in which it remains a relief undertaking any law, usage, custom, contract, instrument, decree, order, award, settlement of other provisions whaty soever notwithstanding."

What we are called upon to decide in this case is whether proceedings taken in the Madhya Pradesh Court for execution of a decree validly obtained in the Bombay High Court has to be or can be stayed '-f under this Section. We have already seen that the maximum period of the stay is seven years and this period will expire on 15-11-1987.

Section 7 deals with suspension or modification of certain remedies, rights etc. and reads as follows:

"7. Suspension or modification of certain remedies, rights 1 etc., stay of proceedings, their revival and continuance.- Any remedy for the enforcement of any right, privilege, obligation or liability referred to in clause (b) of Section 4 )' and suspended or modified by a notification under that section shall, in accordance with the terms of the notification, be suspended modified, and all proceedings relating thereto pending before any court, tribunal, officer or other authority shall accordingly be stayed or be continued subject to such modification, so however, that on the notification ceasing to have effect- -.\

(a) any right, privilege, obligation or liability so suspended or modified shall revive and be enforceable as if the notification had never been issued; and

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\ BINOD MILLS v. S.C. MAHA VJOER (KHALID, J.( 257

(b) any proceeding so stayed shall be proceeded with A \.

subject to the provisions of any law which may then be in force from the stage which had been reached when the proceeding was stayed."

A close scrutiny of the above section reveals that Section 5 has a free field of operation unfettered by any limitation. The section is not B happily worded. What the section intends to convey, according to us, if the words are re-arranged, would be as follows:

"Notwithstanding any law, usage, custom, contract, instrument, decree, order, award, settlement or other provisions, no suit or other legal proceedings shall be instituted C or commenced or if pending shall be proceeded against the industrial undertaking as from the date specified in the notification under sub-section (1) of Section3 during the period in which it remains a relief undertaking." '

' So read, the object of the section becomes clear. The section D 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 I period the declaration is in force. In other words, the section prevents E 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 or' other proceedings. What is disputed is that expression "other legal proceedings" will not take in execution F proceedings; The contention is grounded on the general principle that the execution court cannot go behind a valid decree and that the execution court cannot, therefore, refuse to execute it. It is admitted that the decree obtained from the Bombay High Court is a valid decree. That being so, law should take its course and execution should proceed. It is by virtue of the enabling provisions contained in Sections . G 40 & 42 of the Civil Procedure Code that this validly obtained decree got transferred to the Court in Madhya Pradesh. It is contended that by the mere transfer of this decree in accordance with the procedural law, its validity does not disappear nor its binding force cease to exist.

We find difficulty iri accepting this contention. If we are to accept this 'Submission, it would be rendering section 5 of the Act nugatory and to H

A destroy the benefits sought to be conferred by that section. Nobody questions the validity of the decree. All that is sought to be done is to suspend its animation for the period mentioned in the notification. No Court in Madhya Pradesh can question its validity, nor can refuse to execute it after the period is over. To direct execution of the decree in

B the teeth of Section 5 would be to encourage filing of suits in Courts outside Madhya Pradesh, secure decrees and defeat the purpose of the Act. We do not think that such an abuse is permissible in the face of Section 5 of the Act. We have, therefore, to answer this question in favour of the appellant.

For the disposal of this case, we do not think it necessary to refer C to the lengthy discussion made by the High Co:urt on substantive and - procedural law. We have to construe and interpret the section as it stands. The section is unambiguous and full import has to be given to its words and its intent. The non-obstante clause in this section takes -..(' within its ambit, all the decrees passed against the relief undertakings.

The bar of 'institution or commencement' takes within its ambit suits D or other 'legal proceedings' which include execution petitions also.

An attempt was made by the lea.med counsel for the respondent "{ to contend that the expression "other legal proceedings" cannot take in proceedings to execute validly obtained decrees. It was further contended that if we give such a wide construction to the expression E "other legal proceedings" institution of even claims of workers under the Industrial Disputes Act and other similar beneficial 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 F 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 G (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 H Act. Section 2 of the Act barred institution or commencement of suit.

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or other legal proceedings against a relief undertaking. This section A contains an explanation as to what "legal proceedings" are. Relying upon this section, the company and the guarantors pleaded that the suit was liable to be stayed. The question before the High Court was whether the Act had extra territorial operation. The case was heard by a Single Judge who referred it to a Division Bench in view of the conflict between the Allahabad High Court and the Punjab & Haryana B High Court. The High Court referred to Section 1(2) of the Act which stated that the Act "extends to the whole of the State of Rajasthan" which was an explicit dedaration of the legislature about the territorial application of the Act and held that the contention of the debtors that the suit in Delhi Court ougfit to be stayed was unsustainable. We are here confronted with a different situation. If what is contended before C us had been contended before the Bombay Higb Court, same result would have followed. We have here a situation entirely different and that is, steps to execute a decree in a territory over which the Madhya Pradesh Act has application. If the decree obtained from the Delhi High Court had been transferred to a Rajasthan Court and a decision was rendered on an objection to its execution in favour of the decree D holder, that would havi; helped the respondent. No support can be taken by the respondent from this case.

We may seek support for our construction of the words 'legal proceedings' to include execution proceeding trom a judgment of the Federal Court in the case The Governor-General in Council v. Shiro- E mani Sugar Mills Ltd., [1946] FCR 40. The factual details in brief are as follows:

The respondent-company was assessed to income-tax for the year 1941-42 by an assessment order dated 25th February, 1943. In the meantime, however, a petition to wind up the company had been F presented on the 26th November, 1941, a provisional liquidator had been appointed on the 7th December, 1941 and finally on the 17th April, 1942, a winding up order had been made by the High Court at Allahabad. On 10th March, 1943, a notice of demand was served on the official liquidator of the respondent-company under Section 29 of the Income-tax Act, 1922. The official liquidator pointed out to the G Income-tax department that the proper procedure to be followed was to lodge a claim in the winding up in respect of the tax alleged to be due from the Company. Instead of adopting this procedure the Income-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 H -

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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 th'e 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 pro- ' ceeding 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 leaves open the question whether action under

Section 46 of the Indian Income-tax Act is covered by the phrase "other legal proceeding." Clearly it is not a proceeding in an ordinary Court of law. But we see no reason why in British India no "legal proceeding" can be taken otherwise than in an-' ordinary Court of law, or why a proceeding taken elsewhere than in an ordinary Court of law, provided it be taken in a manner prescribed by law and in pursuance of law or legal enactment, cannot properly be described as a "legal proceeding." If it be considered that y the effect of the Income-tax authorities putting the machinery of s. 46 of the Income-tax Act in motion for the collection of arrears of income-tax is to bring into operation all the appropriate legal enactments relating to the collection . _of land revenue in the Province concerned," it is, in our r< judgment, very difficult to say that they are not taking a "legal proceeding." In fact, in this very case, had the company not been in liquidatiorl, the appellant would have had the choice at his option of (a) proceeding by "suit" in the prdinary Courts in respect of the arrears, or (b) by forwarding (under s. 46(2) of the Income-tax Act) to the Collector . the requisite Certificate, initiating and putting into force collection of the arrears as arrears of land revenue under <' and in accordance with the apprnpriate provisions of the

BIN OD MILLS 1. S.C MAHA VEER [KHALID. J ./ 261

U.P. Land Revenue Act (III) of 1901. Surely such last A mentioned action on the part of the income-tax authorities, would be the adoption of another legal proceeding for the collection of the arrears as opposed to the institution of a suit. The proviso to s. 46(2) empowers the Collector, if he so chooses, to exercise all the powers which a civil court may exercise in respect of the attachment and sale of debts B due to a judgment-debtor. If the Income-tax Officer will be taking a "legal proceeding" when he moves the Collector-as we think he must be held to do-to realize the tax by attachment and sale of debts due to the assesee, it can make no difference in principle that the Collector is asked to exercise his summary powers under the land revenue C law.

Accordingly, we agree with the learned Judges of the Allahabad High Court in holding that the words "other

legal proceeding" in s. 171 of the Indian Companies Act, 1913, comprise any proceeding by the revenue authorities D under s. 46(2) of the Indian 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.

I 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 F 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 G 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 for the period contemplated by the Act.

The limited question that we have to answer is as to whether H

SUPREME COCRT REPORTS

[ 1987] 3 S.C.R.

A Section S operates even against execution of decrees obtained against the relief undertaking by its creditors outside the State of Madhya Pradesh.

The learned counsel for tbe respondent brought to our notice decisions reported in AIR 1948 Patna 245 and AIR 1953- Mysore 37 and similar other decisions to contend that the execution court cannot, \ while executing decrees, adopt a procedure under 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 again 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 i\ be open to the executing court to take re- '{ course to such enactments and give relief to debtors in the State in relation to a decree obtained in a Court outside the State. It is settled law that the transferee Court has to execute the decree in accordance with the law obtaining in the Court that passed the decree and D determine the rights and liabilities of the parties in accordance with the substantive law obtaining in the State where that Court is situate. That -'( being so the judgment-debtor cannot move the execution court and get the benefit of the procedure available in the Sta:te in which the transferee Court is situated.

E 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 specified period. Section 5, therefore, does not come into conflict ' either with Section 40 or Section 42 of the Civil Procedure Code. In our view, the bar under Section 5 is an absolute one for the duration of )--· F the period contemplated in the Act.

If the relief undertakings are not protected by a provision like Section 5, the position will be distressing. The creditors will proceed against them. Their properties and goods will be attached. The workers will be rendered jobless. In this case, this unit is said to employ G nearly 2,000 workers. The creditors will not be in a more advantageous--'(

position either. If liquidation proceedings are initiated, the creditors will get only 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 H Government in enacting this law is thus in the interest of the large

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-~ number of workmen employed in these undertakings and in the revi- A val, 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 postnotification liabilities. In other words, suits and other proceedings in B 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 i~ to end on 18-11-1987. We hold that the c High Court was in error in allowing execution to proceed.

Before parting with this case, we wish to observe that the powers that be will have to evolve a more acceptable procedure while dealing with sick units. We share the concern expressed in high places about the loss that Government incurs in trying to rescue sick units. Invari- D ably, the amounts pumped in are ultimately lost. The machineries of the unit in question are as old as 1920. One can easily imagine the nature of the products that come out of a unit like this. What purpose will be served by giving life to such units by providing artificial respiration

The concern for workers must be matched with the concern for modernisation also. The labour should not be left to the mercy of such sick E units. The Government will have to evolve a more acceptable and intelligent policy, to help the labour and for modernisation of industry.

These units like "flaring tapers brightening as they waste" with temporary financial blood transfusion must, in the interest of all concerned, be subjected to euthanasia. The situation created must be met boldly. Such units with decrepit and antiquated machineries must be F got rid of and public money must be saved. In their places new units must come .into existence. We know that this would involve heavy financial liability. But in the long run, it would save public interest more. If Government find it difficult to pump enough money, at least a trial must be undertaken to entrust such units to the labour to test how they work with their cooperative efforts. In such a situation, there will G not be siphoning of the funds of the unit by the entrepreneurs for self aggrandisement, for, more often than not, sickness in such units sets in, because the funds of the units are diverted to defeat both the Government and the labour and only to benefit the owners of such units.

A With these observations, we set aside the order of the High Court and allow this appeal, but with no order as to costs.

P.S.S.

Appeal allowed .