Broad construction of "legal proceeding" upheld relief-undertakings protection, including stay of winding up proceedings before court.

The Rajasthan Relief Undertakings (Special Provisions) Act, 1961 was upheld as valid because its true character was the prevention of unemployment and protection of sick industrial undertakings through temporary relief measures. Although Section 4(b) incidentally stayed pending legal proceedings, including winding up actions, the legislation was held to fall within the State's legislative competence on a pith and substance analysis, with reference to Concurrent List fields concerning employment, unemployment, and trade and commerce in controlled industry products. The expression "legal proceeding" was construed broadly to include proceedings before any court, and therefore to cover winding up proceedings before the High Court.

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Issues: Whether the Rajasthan Relief Undertakings (Special Provisions) Act, 1961, and the notification issued under it were beyond the State Legislature's competence because they affected winding up proceedings, and whether the expression "legal proceeding" in Section 4(b) included winding up proceedings before the High Court.

Analysis: The Act was examined as a whole, including its preamble, statement of objects and reasons, and operative provisions. Its dominant purpose was found to be preventing unemployment and providing relief to sick industrial undertakings by enabling temporary protection, financial assistance, and suspension of certain legal processes. Although Section 4(b) incidentally affected pending winding up proceedings by staying legal proceedings against relief undertakings, the true nature of the legislation was held to fall within the Concurrent List entries relating to employment and unemployment and trade and commerce in products of controlled industries. The expression "legal proceeding" was construed in its widest amplitude to include proceedings before any court, including winding up proceedings before the High Court.

Conclusion: The Act was held to be within legislative competence, the challenge to its validity failed, and Section 4(b) was held to apply to winding up proceedings before the High Court.

Final Conclusion: The objections were rejected and the winding up proceedings were directed to remain stayed under the notification.

Ratio Decidendi: Where the true character of a relief-undertakings statute is prevention of unemployment and protection of industrial undertakings, an incidental stay of winding up proceedings does not render the law ultra vires if its pith and substance falls within legislative fields the State is competent to legislate upon.

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