The Jaipur Udy G. Limited, Sawaimadhopur Vs The Punjab Universtiy and another

Gokal Chand Mittal, J.@mdashM/s Jaipur Udyog Limited, Sawai-Madhopur Rajasthan (hereinafter referred to as the Company), has been declared by the State of Rajasthan as a relief undertaking u/s 3 of the Rajasthan Relief Undertakings (Special Provisions) Act, 1961 (hereinafter referred to as the Act). By subsequent notifications, issued from time to time, in exercise of powers u/s 4 of the Act, the Government of Rajasthan declared as follows:

No suit or other legal proceedings shall be instituted or commenced, or if pending, shall be proceeded with against the said Industrial Undertaking during the period in which it remains a relief undertaking.

2. Seventeen civil suits have been filed against the Company which Is subsisting relief undertaking under the present notification upto 30th September, 198(sic), and the substantial question of law which arises for my consideration is whether the Courts at Chandigarh, i.e., the Courts beyond the territorial limits of Rajasthan, can give effect to the notifications issued by the Rajasthan Government u/s 3 and 4 of the Act in order to stay the suits or whether the Courts outside the limits of Rajasathan State can hold that the notifications issued by the Rajasthan Government would not be taken notice of on the basis of territorial jurisdiction in view of Article 245(1) of the Constitution of India.

3. In order to decide this point, it will suffice to notice the undisputed facts in all the cases. The Company is one of the undertakings which is manufacturing cement and the supplies of cement are made on the basis of the procedure prescribed by the Government of India. The Plaintiffs had obtained allotment of Cement which was to be supplied by M/s Rajiv Trading Company Private Limited, Cbandigarh, which took advances from the Plaintiffs and certain amounts of supplies were received by them which was less than the allotted quota. Since M/s Rajiv Trading Company had received more advances than the price of the supplied cement and it was not possible to set more cement from the Company, the Plaintiffs filed civil suits at Chandigarh against M/s Rajiv Trading Company and the Company, for refund of the excess amount When the Company, was served with the notice it raised an objection that in view of the notifications issued under Sections 3 and 4 of the Act, the suits could not proceed against it till It continued to be a relief undertaking. This stand of the Company was contested by the Plaintiffs and It was urged that the notifications issued by the Rajasthan Government would operate within the territory of the Rajasthan State and any suit filed in the State of Rajasthan could be stayed but the suite instituted outside the territory of Rajasthan could not be rayed as the notifications issued by the Rajasthan Government under the Act could not operate beyond the territory of Rajasthan, The trial Court heard this matter and upholding the stand of the Plaintiffs rejected the objection of the Company on the sole reasoning that the notifications could operate only with in the State of Rajasthan and not outside. Against the aforesaid decision, the Company has come up in revisions to this Court.

4. The counsel for the Company has urged that the Court below has acted illegally and with material irregularity in not arriving at the correct conclusion and in usurping the jurisdiction to proceed with the suits which deserved to be stayed. In highlighting the argument, he has submitted that the scope of Article 245(1) of the Constiution is entirely different and has been misunderstood by the Court below while a State Legislature can make law for whole or any part of the State, Article 245 (l) does not create any bar in the Courts situate outside the State to give effect to the law of another State and this would very much different from saying that the legislature of one State cannot make law for whole or part of mother State. In elaborating the argument, he has urged that the State of Haryana has enacted the Haryana Relif of Agricultural Indebtedness Act, 1976. Where under agricultural Labourer, rural artisans or marginal farmers have been given special protection against recovery of debts from them. If such a farmer who is entitled to projection incurr a debt in the State of Haryana and cases over to the State of Rajasthan, where no similar law is applicable, then the creditor will have the choice either to file a suit in the State of Haryana on the basis that the debt was incurred within the State or to file a suit in the State of Rajasthan where the debtor resided. In the two situations, if the suit is filed in the State of Haryana, the deb or will take the defence of being an agricultural labourer/ marginal farmer, with the result that the suit against him will be dismissed but if knowing the fate the creditor files a suit in Rajasthan, the question would arise whether the objection that the suit is not competent against him on the basis of Haryana law would be noticed and gone into by the Courts in Rajasthan or not. It is the stand of the counsel for the Petitioner that the Courts in Rajasthan will have to give way to the Haryana law as the protection given by the Haryana law is to an agricultural labourer/marginal farmer, irrespective of the fact whether at a given moment he was living in the State of Haryana or outside it.

5. In support of the aforesaid submission and example, reliance has been placed on the following three decisions of the Supreme Court:

1. State of Bihar and Ors. v. Sm. Charusila Dasi AIR 1959 S.C. 1902.

2. The The State of Bihar and Others Vs. Bhabapritananda Ojha,

3. Inderjit C. Parekh and Others Vs. Shri V.K. Bhatt and Another,

6. In State of Bihar v. Sm. Charusila Dasi''s case (supra), the facts were that there was a trust which was functioning in the State of West Bengal also The Legislature of Bihar enacted the Bihar Hindu Religious Trusts Act, 1951, to regulate the working of the trust in the State of Bihar for which matter the Bihar State Board of Religious Trusts was created. Since some of the properties of the trust were outside the State of Bihar, the applicability of the Bihar At as also the management of the trust properties by the Board was challenged by the trustees mainly on the ground that the Bihar Act would apply to religious trusts state(sic) in the State of Bihar as stated in Section 3 of the Act and if this State legislation was to be applied to the concerned trusts, it would mean violation of Article 245 as the State law would operate the properties situate in West Bengal also. The point found favour with the High Court but the Supreme Court reversed the decision, the relevant portion of which is contained in paras 3 and 24(sic) of the report, which may be read with advantage the gist of the conclusion was as(sif) follows:

The question, therefore narrows down to this, in so legislating, has it power to affect trust property which may be outside Bihar but which appertains to the trust situated in Bihar? In our opining, the answer to the question must be in the affirmative.

7. The State of Bihar v. Bhobapiamnda''s(sic) case (supra) is also under the Bihar Hindu Religious Trusts Act and one more argument was advanced before the Supreme Court about Section 92 of the CPC Before the Bihar Act had come into force there was a trust in Bihar which had property in West Bengal also and for management of the trust some scheme was framed by the Calcutta High Court After the Bihar Act came into force, the management of the trust was sought to be handed over to the Board and the question arose whether the scheme framed by the Calcutta High Court would remain is operation or it would be governed by the Board appointed under the State legislation In order to decide this matter the point which came up for consideration was whether Section 92 of the Code of Civil Procedure, under which the scheme was framed by the Calcutta High Court, could be real into the CPC with regard to the trust in dispute Section 4 (5) of the Bihar Act provided that Section 92 of the Code of Civil Procedure, 1908, shall not apply to any religious trust in the State of Bihar as defined in that Act. An argument was raised that Section 4(5) being a State legislation could operate in the State of Bihar but could not operate in West Bengal as the High Court of Calcutta had framed the earlier scheme and therefore, the scheme would remain in operation Rejecting the argument, it was held as follows:

We have considered the effect of this Sub-section in the decision relating to the The State of Bihar and Others Vs. Charusila Dasi, and have held that the Act applies which the trust itself temple or deity or math, is situate in Bihar and also some of its property is in Bihar. We have pointed out therein that the trust being situated in Bihar, that state has legislative power over it and to over its trustees and their servants or agents who must be in Bihar to administer the trust ; therefore, there is really no question of the Act having extra territorial operation. In our opinion, this reasoning is equally valid in respect of the argument of Mr, P.R. Das. If, as we have held it is open to the Bihar Legislature to legislate in respect of religious trust situate in Bihar, then that Legislature can make a law which says, as in sub s (5) of S 4 of the Act, that S. 92 of the CPC shall not apply to any religious trust in the State of Bihar sub s. (5) of S 4 of the Act is valid as we held it is, then no question really arises of interfering with the jurisdiction of the District Judge of Burdwan or of the Calcutta High Court in respect of the Baidyanath temple, in as much as these Courts exercised that jurisdiction under S 92, CPC which no longer applies to the Baidyanath temple and the properties appertaining thereto after the commencement of the Act does put an end to the jurisdiction u/s 92, CPC of all Courts with regard to religious trusts situate in Bihar, but that it does by taking these trusts out of this purview of S. 92. In other, words, the Act does not take away the jurisdiction of any court outside Bihar but takes the religious trust in Bihar out of the operatien of S. 92 so that a court out side Bihar in exercise of its jurisdict on u/s 92 will decline to deal with a religious trust situate in Bihar just as it will decline to entertain a suit under that section regarding a private trust of religious or charitable nature". The last portion of the aforesaid quotation clearly goes to show that even tte Calcutta High Court or the courts outside Bihar will decline to exercise their jurisdiction u/s 92 of the CPC to deal with a religious trust situate in the State of Bihar just as it will decline to entertain a suit under that section regarding a private trust of religious or charitable nature. This clearly goes to show that no court outside the State of Bihar would exercise its jurisdiction u/s 92 of the CPC in respect of any trust whose primary place of management is within the State of Bihar but has part of the properties outside the State of Bihar. Therefore, this case clearly supports the example about the enforcement of the Haryana Relief of Agricultural Indebtnes Act to the Haryana debtor when he goes to stay in the state of Rajasthan or any other State.

8. Inderjit v. B.K. Bhatt''s case (supra) also supports the stand of the Petitioner Company This case relates to the Bombay Relief Under takings (Special Provisions) Act, 1958. The directors of a company were proceeded against in a criminal Court for violation of Employees Provident Funds Act, 1957, as they had failed to pay a large sum of contribution to the Provident Fund for the months of June, July and August 1968. The said company was declared to be a relief undertaking and a point was raised before the Supreme Court that against a relief undertaking 10 proceedings could be initiated. While rejecting the arguments taken by the directors, it was observed as follows:

The object of Section 4(1)(a) is to declare, so to say, a moraterium on actions against the undertaking during the currency of the notification declaring it to be a relief undertaking. By Sub-clause (iv) any remedy for the enforcement of an obligation or liability is suspended and proceedings which are already commenced are to be stayed during the operation of the notification. u/s 4 (b)", on the notification ceasing to have force, such obligations and liabilities revive and become enforceable and the proceedings which are stayed can be continued These provisions are aimed at resurrecting and rehabilitating industrial undertakings brought by Inefficiency or mismanagement to the brink of dissolution, posing thereby the grave threat of unemployment of industrial workers. ''Relief undertaking'' means u/s 2(2) an industrial undertaking in respect of which a declaration u/s 3 is in force. By Section 3, power is conferred on the State Government to declare an industrial undertaking as a relief undertaking''as measure of preventing uremployemnet or of unemployment relief'' Relief undertakings so long as they continue as such, are given immunity from legal actions so to render their working smooth and effective Such undertakings can be run more effectively as a measure of unemployment relief, if the conduct of their affairs is unhampered by legal proceedings or the threat of such proceedings. That is the genesis and justification of Section 4(i)(a)(iv) of the Act.

The aforesaid observations clearly set out the objects declaring a concern to be a relief undertaking and similar are the objects under the present law with which we are concerned in these revisions The main object is to make the concern going within the period of two years if possible which can be further extended from time to time but the maximum period provided under the law is five years Once the creditors are allowed to banker after the relief undertaking, it would not be able to improve its position and that is why all obligations and liabilities are suspended during the period it remains a relief undertaking which get revived and become enforceable after it ceases to be such. The before, if no suit can be filed against the company throughout the territory of Rajasthan State, I fail to understand how it would be transgression of Article 245 (1) of the Constitution for the Count at Chandigarh to give affect to the Rajasthan law so for as the company is concerned. In the words of the supreme Court, as stated in Bhabapritananda''s case (supra), neither the Rajasthan Act nor the notification issued thereunder takes away the jurisdiction of any Court outside the state of Rajasthan but takes away the company from being sued, against so that the Courts situate outside the State of Rajasthan will decline to deal with a case againit the company during the currency of the notifications under which it continues to be a relief undertaking.

9. For the reasons recorded above, I am of the firm view that the company cannot be sued against so long as it is a relief undertking, whether within the State of Rajasthan or outside it as all its obligations and liabilities should remain suspended during the currency , of the notifications and this would in no way violate Article 245 (1) of the Constitution.

10. After I had taken the aforesaid view, Shri Anand Swarup Sr. Advocate appearing for the State of Jammu & Kashmir, who is Plaintiff in C.R. No. 87 of 1980, argued that even if the suit is stayed against the company it can proceed against the remaining two defend a us and a decree can be passed against M/s Rajiv Trading Company, Defendant No. 1, to whom the advance for the purchase of cement was made. In C.R. No. 87 of 1980 no appearance has been put in for Defendants Nos. l and 2 and, therefore, this matter is left to be decided by the trial Court. The counsel for all other Plaintiffs appearing before me, however, stated that they do not want piece meal trial and prayed that if the suit against the company is to be stayed then the entire suits should be stayed, especially when the duration of the company being a relief undertaking would expire on 30th September, 1980, if that is not further extended by the State of Rajasthan.

11. Accordingly, C.R. Nos. 2554 to 2556 of 1979, 87, 30 to 352, 370, 480 to 484, 540, 653, 719 and 842 of 1980 are allowed and all suits, barring the suit out of which C. R. No. 87 of 1980 arises, are stayed till the Petitioner Company continues to be a relief undertaking. As regards C.R. No 87 of 1980, the suit is stayed only against the Petitioner Company and the question whether it can proceed against the remaining Defendants shall be gone into by the trial Court. Any of the parties to the suits would be at librety to move the trial Court to have the suit revived after the present period or the extended period of the Company as a relief undertaking comes to an and Since important question of law was involved, I leave the parties to bear their own costs.