1986 (2) TMI 340

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....d under the said cash credit facility. Respondents Nos. 2 to 5 M/s. Govind Ram and Brothers, Shri K.G. Saksaria, Shri G.L. Vaid and Shri R.K. Saksaria had agreed to be the guarantors for the repayment of any amount due from respondent No.1 under the said cash credit account. Since there was default in repayment of the amount due under the said cash credit account the State Bank of India instituted a suit in Suit No. 18 of 1980 on the file of the Additional District Judge, Gonda for recovery of a sum of Rs. 54,89,822.99 as on March 6, 1980 against respondents Nos. 1 to 5 who were described as defendants Nos.1 to 5 in the plaint praying for a decree in terms of order 34, rule 4 C.P.C. and further consequential directions. In the meanwhile by virtue of an order made by the Central Government under the Sugar Undertakings (Taking over of Management) Act, 1978 (Act No.49 of 1978) (hereinafter referred to as 'the Act') the sugar undertaking belonging to respondent No.1 had been taken over by the Central Government and one Raghubir Singh had been appointed as the Custodian of the said undertaking. The State Bank of India, therefore, impleaded Raghubir Singh and the Union of India a....

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....question whether the trial of the suit should be stayed by reason of the provisions of the Act. There is no dispute about the territorial jurisdiction of the trial court. It is contended by respondents Nos. 1 to 5 that since the management of the sugar undertaking belonging to the respondent No. 1 had been taken over by the Central Government under the Act, the trial of the suit filed against respondent No. 1 for recovery of any amount due from the sugar undertaking was liable to be stayed. It is no doubt true that the Central Government has taken over the management of the sugar undertaking belonging to the respondent No. 1 by issuing a notification under section 3 of the Act and has appointed a Custodian under section 5 thereof. The material part of section 7 of the Act which is relevant for the purposes of this case reads thus: "7. Power of Central Government to make certain declarations.- (1) The Central Government may, if it is satisfied, in relation to a notified sugar undertaking that it is necessary so to do in the interests of the general public with a view to preventing the fall in the volume of production of the sugar industry, it may, by notification, declare t....

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....nd in such manner as may be specified in the notification. Subsection (4) of section 7 of the Act provides that any remedy for the enforcement of any right, privilege, obligation or liability referred to in clause (b) of sub-section (1) of section 7 and suspended or modified by a notification made under that sub-section shall in accordance with the terms of the notification, remain suspended or modified and all proceedings relating thereto pending before any Court, tribunal, officer or other authority shall accordingly remain stayed or be continued subject to such adaptations, so, however, that on the notification ceasing to have effect (a) any right, privilege, obligation or liability so remaining suspended or modified shall become revived and enforceable as if the notification had never been made; and (b) any proceeding so remaining stayed shall be proceeded with subject to the provisions of any law which may then be in force from the stage which had been reached when the proceedings became stayed. A reading of clause (b) of sub-section (1) and subsection (4) of section 7 of the Act makes it clear that it is only on the issuance of a notification by the Central Govt. under sec....

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....gar undertaking or the person owning the said sugar undertaking is a party, or which may be applicable to the said sugar undertaking or that person, shall remain suspended for a further period from 28th March, 1984 to 12.3.1985." The above notification clearly sets out the contracts, assurances of property etc. the operation whereof is suspended or stayed. The Central Government has made a declaration by that notification to the effect that the operation of all obligations and liabilities accruing or arising out of all contracts, assurances of properties, agreements, settlements, awards, standing orders or other instruments in force immediately before the 28th March 1980 (other than those relating to secured liabilities to banks and financial institutions) to which the said sugar undertaking or the person owning the said sugar undertaking is a party shall remain suspended up to March 12, 1985. It is very clearly stated in the said notification that it does not apply to secured liabilities due to banks and financial institutions. The liability involved in the suit was a secured liability and the creditor is the State Bank of India. Yet the High Court surprisingly has proceeded to....