Full Judgment Text
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PETITIONER:
R.S.D.V. FINANCE CO. PVT. LTD.
Vs.
RESPONDENT:
VALLABH GLASS WORKS LTD.
DATE OF JUDGMENT03/02/1993
BENCH:
KASLIWAL, N.M. (J)
BENCH:
KASLIWAL, N.M. (J)
KULDIP SINGH (J)
JEEVAN REDDY, B.P. (J)
CITATION:
1993 AIR 2094 1993 SCR (1) 455
1993 SCC (2) 130 1993 SCALE (1)262
ACT:
Code of Civil Procedure, 1908.
Section 20-Junsdiction-Deposit Receipt containing
endorsement subject to jurisdiction of a particular place-
Whether excludes jurisdiction of all other Courts otherwise
competent to entertain the suit.
Section 21(1)Objection to jurisdiction-Plea before Appellate
or Revisional Court-Conditions-Whether all the conditions
are to be fulilled
Bombay Relief Undertaking (Special Provisions) Act, 1958:
Sections 3 and 4(1)(a)(iv)-Notification declaring relief-
Undertaking-Extending beyond the State immunity to Relief
Undertaking from legal liability-Competence of State
Legislature.
HEADNOTE:
The appellant deposited with the Respondent a sum of Rs.
10,00,000 for a period of 90 days on interest @ 19% p.a. The
date of maturity of the said deposit was 3.10.83. The
deposit receipt contained an endorsement ’Subject to Anand
jurisdiction." The Respondent failed to pay the amount on
maturity and requested the appellant to continue the said
deposit till the end of November 1983 and handed over 5 post
dated cheques for Rs. 2,00,000 each. A cheque for interest
was also given. All these cheques were drawn on a Bombay
Bank. Since these cheques bounced back the appellant filed
before the High Court a summary suit against the Respondent
for recovery of the amount with interest.
The Respondent contested the suit on the ground of
jurisdiction. It also contested the claim for interest
after maturity on the ground that interest ceased on
maturity. The Single Judge who heard the matter decreed the
suit in favour of the appellant for a sum of Rs. 10,00,000
with interest.
456
The Respondent preferred an appeal and the Division Bench
allowed the same and dismissed the suit.
Aggrieved by the judgment of the Division Beach, the
appellant has preferred the present appeal.
Allowing the appeal, this Court,
HELD : 1.1. Admittedly, leave to defend the suit was
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obtained by the dependent from the Bombay High Court itself
Therefore, the Division Bench of the High Court was wrong in
holding that the suit was not based on the five post dated
cheques and that the High Court had no jurisdiction to try
the suit as the deposit receipt contained an endorsement
’Subject to Anand jurisdiction’. The suit ’was based not
only on the deposit receipt of Rs. 10,00,000 but also on the
five post dated cheques. When the plaintiff had made a
request for allowing him to amend the plaint such request
was wrongly refused by the Bench. The Division Bench was
totally wrong in passing an order of dismissal of the suit
itself when It had arrived at the conclusion that the High
Court had no jurisdiction to try the suit. The only course
to be adopted in such circumstances was to return the plaint
for presentation to the proper Court and not to dismiss the
suit. [462D-F]
1.2. Sub-section (1) of Section 21 of the Code of Civil
Procedure provides that no objection as to the place of
suing shall be allowed by any appellate or revisional court
unless such objection was taken in the Court of first
instance at the earliest possible opportunity. This
provision clearly lays down that such objection as to the
place of suing shall be allowed by the appellate or
revisional court subject to the conditions that such
objection was taken in the Court of first Instance at the
earliest possible opportunity-, that in all cases where
issues are settled then at or before such settlement of
issues; and that there has been a consequent failure of
justice. [462G-H]
2. In the instant case the condition of failure of justice
is not fulfilled. There was no dispute regarding the merits
of the claim. The defendant has admitted the deposit of Rs.
10,00,000 by the plaintiff, as well as the issuing of the
five cheques. There Is no failure of justice to the
defendant in decreeing the suit by the Single Judge. On the
contrary It would be totally unjust and failure of justice
to the plaintiff in case such objection relating to
jurisdiction is to be maintained as allowed by the
457
Division Bench of the High Court in its appellate
jurisdiction. [463 C-D]
A.B.C. Laminart Pvt. Ltd. & Anr. v. A.P. Agencies, Salem,
[1989] 2 SCR page 1, relied on.
3. It cannot be disputed that the cause of action had
arisen at Bombay as the amount of Rs. 10,00,000 Itself was
paid through a cheque at Bombay and the same was deposited
in the bank account of the defendent in Bombay. The five
postdated cheques were also issued by the defendent being
payable to the plaintiff at Bombay. The endorsement
’Subject to Anand jurisdiction’ has been made unilaterally
by the defendent while issuing the deposit receipt. This
endorsement does not contain the ouster clause using the
words like ’alone’, ’only’, ’exclusive’ and the like. Thus
the maxim expression units best exclusion alterius cannot be
applied under the facts and circumstances of the case and it
cannot be said that merely because the deposit receipt
contained the endorsement ’Subject to Anand jurisdiction’ it
excluded the jurisdiction of all other courts who were
otherwise competent to entertain the suit [463D-H]
4.The legislature of a State is competent to make laws for
the whole or any part of the State. 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 Legis-
lature can also make a law with respect to any of the
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matters enumerated in Ust-III. The Bombay Relief
Undertakings (Special Provisions) Act, 1958 is relatable to
entry 22 of List 111 and probably to entries 20 and 24.
The Code of Civil Procedure, which provides where a
particular suit has to be Instituted, Is relatable to entry
13 of List-111. It is a central enactment applicable to the
entire country. Both the enactments relate to and deal with
different subjects-matters. There is no question of any
inconsistency between them. [469G-H, 470A-B]
State of Bihar v. Charusila Dasi, [1959] Supp. 2 SCR 601;
State of Bihar v. Bhabapritananda Ojha, [1959] Supp. 2 SCR
624 and Inderjit C. Parekh & Ors. v. B.K Bhatt & Anr., AIR
1974 SC 1183, distinguished.
Jaipur Udyog Ltd. v. Punjab University & Anr., I.L.R. (1981)
1 Punjab & Haryana 624, disapproved.
Binod Mills Ltd. v. Suresh Chandra, [1987] 3 SCC 99,
referred to.
458
5. The State Legislatures do not possess the power to make
a law having extra territorial operation. The Legislature
may well confer an immunity (no doubt, temporary) upon the
relief undertaking effective within the bounds of state, but
it cannot extend that immunity beyond its bounds. A State
cannot prevent the other State from levying and realising
(by proceeding, if necessary, against the properties and
assets of the undertaking situate outside the state) 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. 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. That is the
limitation of power. Probably, for this reason has the
Parliament enacted the Sick Companies (Special Provisions)
Act, 1985. [470D-G]
6. 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 Relief ’Undertaking (Special
Provision) Act, 1953) 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) of
the Bombay Act 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 proper. ties of the relief undertaking
situated within the State of Gujarat, they can be
interdicted by the said notification read with Section 4(1)
(a) (iv) of the Bombay Act. [471B-C]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 380 of 1993.
From the Judgment and Order dated 24.10.91 of the Bombay
High Court in Appeal No. 982/88 in summary suit No. 566/86.
Harish N. Salve, Berarwale, K.J. John, Ms. Deepa Dixit for
M/s Swarup John & Co. for the Appellant.
459
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Raian Karanjawala, Ms. M. Karanjawala and Ms. P. Mullice for
the Respondent.
The Judgment of the Court was delivered by
KASLIWAL, J. Special Leave granted.
This appeal is directed against the Judgment of the Bombay
High Court dated 24th October, 1991. Brief facts of the
case are that the appellant R.S.D.V. Finance Company Private
Limited (hereinafter referred to as ’the plaintiff) filed a
summary suit against the respondent Sh. Vallabh Glass Works
Limited (hereinafter referred to as ’the defendent’) in the
ordinary original civil jurisdiction of the High Court. The
case of the plaintiff was that it had deposited a sum of Rs.
10,00,000 with interest to be charged @ 19% per annum, with
the defendant. The said deposit was to be for a period of
90 days. The aforesaid amount of Rs. 10,00,000 was given to
the defendant company through cheque No. 933251 dated 5th
July, 1983 in the bank account of the defendant at Bombay.
The defendant issued a deposit receipt for the aforesaid
amount dated 11.7.1983. The aforesaid deposit receipt
contained an endorsement to the effect ’Subject to Anand
jurisdiction’. The date of maturity of the aforesaid amount
was to expire on 3.10.1983. According to the plaintiff the
defendant failed to pay the amount of Rs. 10,00,000 and
requested the plaintiff to continue the said deposit till
the end of November, 1983 and for that purpose, handed over
to the plaintiff 5 post dated cheques of Rs. 2,00,000 each
drawn on a Bombay bank. The defendant had also issued a
cheque dated 30th November, 1993 for a sum of Rs. 22,288.32
by way of interest on the said amount of Rs. 10,00,000.
This cheque was also drawn in favour of the plaintiff
payable in Bombay. The plaintiff submitted the aforesaid 5
cheques for payment but the same were dishonored for the
reason "insufficient funds". The plaintiff in these
circumstances filed a summary suit against the defendant for
Rs. 10,00,000 as principal and interest Ca 19% per annum
with 90 days rests.
The defendant in the written statement submitted that the
fixed deposit receipt contained the endorsement ’Subject to
Anand jurisdiction’ are as such the Bombay High Court had no
jurisdiction to entertain the suit. The defendant also
denied that the plaintiff was entitled to claim interest
with 90 days rest. The defendant further averred that the
plaintiff was not entitled to claim any interest as the
deposit receipt provided that
460
interest will cease on maturity. On the basis of the
aforesaid pleadings of the parties Learned Single Judge of
the High Court framed the following issues.
The Learned Single Judge negatived the contention of the
plaintiff that it had never agreed to the condition of Anand
jurisdiction made on the deposit receipt. The Learned
Single Judge, however, accepted the contention of the
plaintiff that the suit was also based on the five post
cheques of Rs. 2,00,000 each and those cheques being payable
in Bombay the Court at Bombay had jurisdiction to decide the
case. The Learned Judge also took note of the fact that the
High Court at Bombay had already granted leave to the
plaintiff under Clause XII of the Letters Patent. It was
also held that if a party had more than one cause of action
and the suit was based on more than one cause of action it
was always open to that party to give up any one cause of
action or rely only on one cause of action. It was also
held that the leave had been granted to the plaintiff on the
basis of the averments made in para 13 of the plaint which
clearly mentioned that the deposit was obtained by the
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defendant from the plaintiff at Bombay. The monies were
deposited by the plaintiff with the defendant at Bombay in
the defendant’s account in the Bank of Baroda, Nariman Point
Branch, Bombay. The cheques for repayment of the deposit
were given by the defendant drawn on Bank of Baroda, Nariman
Point Branch, Bombay. The plaintiff had further stated that
though the entire cause of action had arisen in Bombay the
plaintiff as an abundant caution was applying for approval
under clause XII Letters Patent also since the registered
office of the defendant was situated at Vallabh Vidya Nagar
388121, (within the State of Gujarat). The Learned Single
Judge also noted that in the written statement there was no
reply to paragraph 13 of the plaint and Mr. Parekh, Learned
counsel appearing for the defendant in his usual fairness
stated that the statements made in para 13 of the plaint
were correct. The Learned Single Judge further held that
the plaintiff in the suit had put its claim not only on the
basis of the deposit receipt but had been cautious enough to
also. base its claim on the 5 post dated cheques which were
admittedly payable in Bombay. The Learned Single Judge
under issue No.2 held that the claim for compound interest
cannot be sustained and the said issue was answered in the
negative. The Learned Single Judge under issue No. 3 held
that as the plaintiff has now restricted the cause of action
to the 5 post dated cheques, the claim for interest can only
arise from the dates on which those cheques become due and
payable. The Learned
461
Single Judge as such passed a decree in favour of the
plaintiff and against the defendant in a sum of Rs.
10,00,000 along with interest thereon @ 19% per annum, on a
sum of Rs. 2,00,000 from 23rd November, 1983, on a sum of
Rs. 2,00,000 from 24th November, 1983, on a further sum of
Rs. 2,00,000 from 25th November, 1983 and a sum of Rs.
2,00,000 from 29th November, 1983 and on the last sum of Rs.
2,00,000 from 30th November, 1983.
On an appeal filed by the defendant a Division Bench of the
High Court by its order dated 24th October, 1991 held that
in the circumstances of the ease, the leave granted under
clause XII of the Letters Patent must be revoked and it must
be held that this Court had no jurisdiction to entertain and
try the suit. A prayer made on behalf of the plaintiff
seeking to amend the plaint was also rejected. The Learned
Division Bench allowed the appeal and dismissed the suit.
Aggrieved against the aforesaid Judgment of the Division
Bench of the High Court, the plaintiff has come in appeal
before this Court. It may be mentioned at the outset that
the deposit of Rs. 10,00,000 with the defendant as well as
the issuing of 5 cheques of Rs. 2,00,000 each is admitted by
the defendant. The defendant company had a branch office
and also carried on business in Bombay. It is also an
admitted position that the leave to sue under Clause XII of
the Letters Patent was given by the Bombay High Court. It
is also an admitted position that the plaintiff had made the
total deposit of Rs. 10,00,000 by way of cheque No. 933251
dated 5th July, 1983 drawn on the Canara Bank, Bombay in
favour of the defendant and the said amount was deposited in
the bank account of the defendant in the Bank of Baroda,
Nariman Point, Bombay. It may also be noted that the leave
to defend the suit by the Learned Single Judge was given on
the condition of making a deposit of Rs. 10,00,000 within
four weeks from 11.1.1988. The defendant preferred an appeal
against the aforesaid order of the Learned Single Judge
dated 11.1.1988. The statement of the Learned counsel for
the defendant in the aforesaid appeal proceedings was
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recorded to the effect that the only defence to the suit was
to be on the point that the High Court of Bombay had
nojurisdiction to entertain the suit and the defendant would
not contest the plaintiff’s claim on any other issue except
the issue on the point of jurisdiction. The Division Bench
in its order dated 19.1.1988 observed that the suit was to
be tried as a commercial cause only to the aspect of
jurisdiction.
We have ’heard Learned counsel for the parties and have
perused the
462
record. In our view the Learned Division Bench was wrong in
holding that in the facts and circumstances of this case the
Bombay High Court had no jurisdiction to entertain the suit.
The amount of Rs. 10,00,000 itself was paid by a cheque
dated 5.7.1983 drawn on the Canara Bank and the said amount
was deposited in the bank account of the defendant at the
Bank of Baroda, Nariman Point, Bombay. On 11.7.1983 the
defendant issued a deposit receipt and the said deposit
receipt contained an endorsement of ’Subject to Anand
Jurisdiction’. The date of maturity was mentioned as
3.10.1983. It is also not in dispute that the amount of Rs.
10,00,000 along with interest was not paid on the due date
and the defendant wrote a letter to the plaintiff on
19.10.1983 stating therein that in view of certain problems
they were not in a position to repay the deposit amount on
the due date and thereby requested the plaintiff to allow
the defendant to keep the deposit till the end of November,
1983 with interest at 19% per annum on the delayed payment
as well. The defendant also issued the five post dated
cheques for Rs. 2,00,000 each drawn on Bank of Baroda,
Nariman Point, Bombay dated 23rd, 24th, 25th, 29th and 30th
November, 1983 respectively. It is also an admitted
position that the leave to defend the suit was obtained by
the defendant from the Bombay High Court itself The Learned
Division Bench in our opinion was clearly wrong in holding
that the suit was not based on the five post dated cheques
and that the Bombay High Court had no jurisdiction to try
the suit as the deposit receipt contained endorsement of
’Subject to Anand jurisdiction’. The entire reading of the
plaint clearly shows that the suit was based not only on the
basis of the deposit receipt of Rs. 10,00,000 but also on
the basis of the five post dated cheques. Even if there was
any doubt in the mind of the Division Bench, the Learned
counsel for the plaintiff had made a request for allowing
him to amend the plaint but such request was wrongly refused
by the Learned Division Bench. The Division Bench was
totally wrong in passing an order of dismissal of suit
itself when it had arrived to the conclusion that the Bombay
Court had no jurisdiction to try the suit. The only course
to be adopted in such circumstances was to return the plaint
for presentation to the proper court and not to dismiss the
suit. It may be further noted that the Learned Single Judge
trying the suit had recorded a finding that the Bombay Court
had jurisdiction to entertain and decide the suit. Sub-
sec.(1) of Section 21 of the Code of Civil Procedure
provides that no objection as to the place of suing shall be
allowed by any appellate or revisional Court unless such
objection was taken in the Court of first instance at the
earliest possible opportunity and in all cases where issues
are settled at or before such settlement and unless there
has been consequent failure of justice.
463
The above provision clearly lays down that such objection as
to the place of suing shall be allowed by the appellate or
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revisional court subject to the following conditions :-
(i) That such objection was taken in the
Court of first instance at the earliest
possible opportunity;
(ii) in all cases where issues are settled
then at or before such settlement of
issues;
(iii) there has been a consequent failure of
justice.
In the present case though the first two conditions are
satisfied but the third condition of failure of justice is
not fulfilled. As already mentioned above there was no
dispute regarding the merits of the claim. The defendant
has admitted the deposit of Rs. 10,00,000 by the plaintiff,
as well as the issuing of the five cheques. We are thus
clearly of the view that there is no failure of justice to
the defendant decreeing the suit by the Learned Single Judge
of the Bombay High Court, on the contrary it would be
totally unjust and failure of justice to the plaintiff in
case such objection relating to jurisdiction is to be
maintained as allowed by the Division Bench of the High
Court in its appellate jurisdiction.
We may also consider the effect of the endorsement ’Subject
to Anand jurisdiction’ made on the deposit receipt issued by
the defendant. In the facts and circumstances of this case
it cannot be disputed that the cause of action had arisen at
Bombay as the amount of Rs. 10,00,000 itself was paid
through a cheque of the Bank at Bombay and the same was
deposited in the Bank account of the defendant in the Bank
of Baroda at Nariman Point Bombay. The five post dated
cheques were also issued by the defendants being payable to
the plaintiff at Bombay. The endorsement ’Subject to Anand
jurisdiction’ has been made unilaterally by the defendant
while issuing the deposit receipt. The endorsement ’Subject
to Anand jurisdiction’ does not contain the ouster clause
using the words like ’alone’, ’only’, ’exclusive’ and the
like. Thus the maxim ’expression unius est excusio
alterius’ cannot be applied under the facts and
circumstances of the case and it cannot be held that merely
because the deposit receipt contained the endorsement
’Subject to Anand jurisdiction’ it excluded the jurisdiction
of all other Courts who were otherwise competent to
entertain the suit. The view taken by us finds support from
a decision of this Court in A.B.C
464
Laminart Pvt. Ltd. & Anr. v. A.P. Agencies,
Salem [1989] 2 SCR page 1.
At the hearing of the appeal, it was brought to our notice
that by a notification dated May 5, 1992 (subsequent to the
filing of the S.L.P.) the defendant has been declared a
’Relief Undertaking’ under Section 3 of the Bombay Relief
Undertakings (Special Provisions) Act, 1958 as amended and
applied to the State of Gujarat. By virtue of the said
declaration, it is contended, the suit against the
defendant-undertaking shall have to remain suspended during
the period of operation of the notification as provided in
Section 4(1)(a)(iv) of the said Act.
The Bombay Act was enacted ’to make temporary provisions for
Industrial relations and other matters to enable the State
Government to conduct or to provide loan, guarantee or
financial assistance for the conduct of certain Industrial
undertakings as a measure of preventing unemployment or of
unemployment relief". Initially, it was applicable only to
those industrial undertakings which were started, acquired
or otherwise taken over by the State Government and carried
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on or proposed to be carried on by itself or under its
authority. But by an amendment made in 1960, the Act was
made applicable also to industrial undertakings to which any
loan, guarantee or other financial assistance has been
provided by the State Government. Section 3 expressly
declares that on issuance of notification thereunder the
specified industrial undertaking shall "be conducted to
serve as a measure of preventing unemployment or of
unemployment relief and undertaking shall accordingly be
deemed to be a relief undertaking for the purpose of this
Act". Sub-sec. (2) of Section 3 says that notification
under section 3(1) shall have effect for such period not
exceeding 12 months as may be specified in the notification.
It is, however, renewable for a like period from time to
time so, however, that all the periods in aggregate do not
exceed five years. Section 4(1) is relevant for our purpose
and may be set out in full :
"4(1) Notwithstanding any law, usage custom,
contract, instrument, decree, order, award,
submission, settlement, standing order or
other provision whatsoever, the State
Government may, by notification in the
Official Gazette, direct that :-
(a)in relation to any relief undertaking and
in respect of the period for which the relief
undertaking continues as
465
such under sub-sec. (2) of Section 3-
(i)all or any of the laws in the Schedule to
this Act or any provisions thereof shall not
apply (and such relief undertaking shall be
exempt therefrom), or shall, if so directed,
by the State Government, be applied with such
modifications (which do not however affect the
policy of the said laws) as may be specified
in the notification;
(ii)all or any of the agreements, settlements,
awards or standing orders made under any of
the laws in the Schedule to this Act, which
may be applicable to the undertaking
immediately before it was acquired or taken
over by the State Government or before any
loan, guarantee or other financial assistance
was provided to it by, or with the approval
of, the State Government, for being run as a
relief undertaking, shall be suspended in
operation, or shall, if so directed by the
State Government, be applied with such
modifications as may be specified in the
notification;
(iii)rights, privileges, obligations and
liabilities shall be determined and be
enforceable in accordance with clauses (i) and
(ii) and the notification;
(iv) any right, privilege, obligation or
liability accrued or incurred before the
undertaking was declared a relief undertaking
and any remedy for the enforcement thereof
shall be suspended and all proceedings
relative thereto pending before any court,
tribunal, officer or authority shall be
stayed;
(b) the right, privilege, obligation or
liability referred to in clause (a)(iv) shall,
on the notification ceasing to have force,
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revive and be enforceable and. the proceedings
referred to therein shall be continued:
Provided that in computing the period of
limitation for the enforcement of such right,
privilege, obligation or liability, the period
during which it was suspended under
466
clause (a)(iv) shall be excluded
notwithstanding anything contained in any law
for the time being in force."
The main reliance of the counsel for the defendants is upon
subclause (iv) of Clause (a) of Sub-sec.(1) of Section 4
which says that "any remedy for the enforcement of a
liability accrued or incurred before the undertaking was
declared a relief undertaking shall be suspended and all
proceedings relative thereto pending before any Court shall
be stayed for the duration of the notification under Section
3".
Mr. R.F. Nariman, Learned counsel for the defendant places
strong reliance upon the decisions of this Court in the
State of Bihar v. Charusila Dasi [1959] Suppl. 2 SCR 601 and
State of Bihar v. Bhabapritananda Ojha, [1959] Suppl. 2 SCR
624. According to the Learned counsel the said decisions
conclusively establish that the suit or other proceedings at
Bombay for enforcement of any remedy against the defendant
relating to the said deposit cannot go on so long as the
aforesaid notification is in operation. In view of the said
contention it has become necessary to examine the said
decisions to ascertain their ratio. In both the cases, the
trusts were registered in the State of Bihar. The trust
properties were situated not only in the State of Bihar but
also in the State of West Bengal. The Bihar Legislature
enacted Bihar Hindu Religious Trust Act, 1950 to regulate
the management and functioning of the public trusts in
Bihar. Action was proposed to be taken against both the
trusts under the provisions of the Bihar Act. In the first
case, Charusila Dasi questioned the said action inter alia
on the ground that the Bihar Legislature was not competent
to make a law with respect to a Trust whose properties are
situated not only in Bihar but also in other States in
India. It was argued that the Bihar Legislature has no
extra-territorial jurisdiction and since its attempt to
control and regulate the activities of the trust is bound to
have effect outside the State of Bihar, the Act in question
must be held to be outside the legislative competence of
that Legislature. The Constitution Bench which decided
Charusila Dasi posed the questioned arising before it in the
following words:
"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
situate in Bihar."
467
The question was answered in the following
words:
"In our opinion, the answer to the question
must be in the affirmative. It is to be
remembered that with regard to an interest
under a trust the beneficiaries only right is
to have the trust duly administered according
to the terms and this right can normally be
enforced only at the place where the trust or
religious institution is situate or at th
e
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trustees’ place of residence: see Dicey’s
Conflict of Laws, 7th Edition, p.506. The Act
purports to do nothing more. Its aim, as
recited in the preamble, is to provide for the
better administration of Hindu religious
trusts in the State of Bihar and ’or the
protection of properties appertaining thereto.
This aim is sought to be achieved by
exercising control over the trustees in
personam. The trust being situate in Bihar
the State has legislative power over it and
also over its trustees or their servants and
agents who must be in Bihar to administer the
trust. Therefore, there is really no question
of the Act having extra-territorial operation.
In any case, the circumstances that the
temples where the deities are installed at
situated in Bihar, that the hospital and
charitable dispensary are to be established in
Bihar for the benefit of the Hindu public in
Bihar gives enough territorial connection to
enable the legislature of Bihar to make a law
with respect to such a trust".
It would be evident from the above passage that the ground
upon which the competence of the Bihar Legislature was
upheld was that the administrative apparatus of the trust
was situated within the State of Bihar, wherein it was
registered and was also having some properties. The affairs
of the said trust were sought to be controlled "by
exercising control over the trustees in personam". In other
words, the Bihar Act, in effect and substance, is directed
towards regulating the management and administration of the
trusts registered in the State of Bihar. The fact that such
trusts also possessed properties outside the State of Bihar
did not take away the competence of the Bihar Legislature
which it acquired on account of territorial nexus. To the
same effect is the decision in Bhabapritananda. In this
case there was an additional fact. Long prior to the
enactment of the
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Bihar Act, the Calcutta High Court had framed a scheme under
Section 92 of the Civil Procedure Code relating to the
temple in question. The Bihar Act, however, specifically
excluded the operation of Section 92 C.P.C. Though the
temple was situated in the State of Bihar some of its
properties were situated within the State of West Bengal.
The question again arose with respect to the competence of
the Bihar Legislature to make a law controlling such a
trust. It was held by the Constitution Bench that the Bihar
Legislature was competent to enact the said law and since
the Bihar Act expressly excluded the application of Section
92 C.P.C., the scheme framed by the Calcutta High Court with
respect to the said temple ceased to the operative with the
coming into force of the Bihar Act. The reasoning in this
decision closely follows the reasoning in Charusila Dasi.
In Jaipur Udyog Ltd. v. Punjab University & Anr., I.L.R.
(1981) 1 Punjab & Haryana 624 reliance had been placed on a
decision of this Court in Inderjit C. Parekh & Ors. v. B.K
Bhau & Anr., AIR (1974) SC. 1183 the question for
consideration was whether the prosecution against the appel-
lants under paragraph 76(a) of the Employees’ Provident
Funds Scheme, 1952 is liable to be stayed by virtue of the
notification issued by the Government of Gujarat on May 6,
1972 issued in exercise of the power conferred by Section
4(i)(a)(iv) of the Act. While dealing with the said
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question it was held "the obligations and liabilities of
these persons is not comprehended within the words of Sub-
s.(4) of Clause (a) of Section 4(1) shows that the power of
the State Government is itself restricted to giving
directions referred to in sub-clause (iv). "in relation to
any relief undertaking". Obligations and liabilities of the
directors or other officers of the undertaking are not in a
true sense obligations and liabilities in relation to the
relief undertaking. In plain and simple language they are
the obligations and liabilities of such persons themselves.
Their obligations and liabilities have to be viewed from a
different angle than the obligations and liabilities of the
company itself which only act impersonally’.
It was thus held that the responsibility to pay the
contributions to the provident fund was of the appellants
and if they have defaulted in paying the amount, they are
liable to be prosecuted under Paragraph 76(a) of the Scheme
which says that if any person fails to pay any contribution
which he is liable to pay under the Scheme, he shall be
punishable with six months’ imprisonment or with fine which
may extend to Rs. 1,000 or with both. Such a personal
liability does not fall within the scope of Section
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4(i)(a)(iv) of the Act. Thus the above case did not deal
with the question of the competency of the State to make any
law having extra-territorial operation. We further hold
that the view taken by the Punjab & Haryana High Court in
the case of Jaipur Udyog Ltd. (supra) is not correct.
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
Gujarat. Applying the logic of Charusila Dasi, 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.
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
and submits that the same has been approved by this Court in
Binod Mills Ltd. v. Suresh Chandra, [1987] 3 SCC 99 at 108.
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
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Constitution. Subject to any law made by the Parliament,
the State legislature can also make a law with respect to
any of the matters
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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.
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 and Bhabapritananda 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 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 realision of amounts due from the relief undertaking to
third parties in pursuance of decreesiorders 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. That is 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 respondentcompany, 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
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I.C.I.C.I. Ltd., the operating agency.
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
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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.
In the result we allow this appeal, set aside the Judgment
of the Division Berch of the High Court dated 24.10.1991 and
restore the judgment and decree passed by the Learned Single
Judge dated 24.6.1988. In the facts and circumstances of the
case we make no order as to costs.
G.N.
Appeal allowed.
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