TaxTMI 
TaxTMI 
1987 (3) TMI 529
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....ditor-petitioner. The creditor petitioners' case is that the Act is covered under the entries 43, 44 and 95 of the List I Union List in the VII Schedule, whereas the case of the non-petitioner-company is that the Act is covered under entries 23 and 33(a) of list III of the 7th Schedule i.e. Concurrent List. 2. In order to appreciate the controversy, it would be proper to reproduce the relevant entries, reference of which has been made by the learned counsel for the parties. Entries 43, 44 and 95 of List I are as under with comment thereunder in the shorter Constitution of India (VIII) edition by P. D. Basu : -- "43. Incorporation, regulation and winding up of the trading corporations, including banking, insurance and any financial corporations but not including co-operative societies. 1. Incorporation, regulation and winding up of trading corporations-- An Act which regulates the affairs of a company by laying down certain special rules for its management and administration is fully covered by this item. It would also include legislation providing for the amalgamation of companies, but not the regulation of their functions. &nbs....
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....der this Entry--Sections 45A-B of the Banking Companies Act, 1949." 3. Entries 23 and 33 of the List III of the Concurrent List are as under : -- 23. Social Security and social insurance; employment and unemployment. 33. Trade and commerce in, and the production, supply and distribution of : -- (a) The products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the Public interest, and imported goods of the same kind as such products; (b) Foodstuffs, including edible oilseeds and oils; (c) Cattle fodder, including oilcakes arid other concentrates; (d) Raw cotton, whether ginned or unginned, and cotton seed; and (e) Raw Jute. 4. Reference may also be made to the provisions of the Act, its preamble as well as the statement of objects and reasons for enacting the Act. The statement of objects and reasons appended with the Rajasthan Relief Underta....
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....; (2) A notification under Sub-section (1) shall have effect for such period not exceeding two years as may be specified in the notification; but it shall be renewable by like notifications, from time to time, for further periods not exceeding twelve months at a time, so, however, that the total period in the aggregate does not exceed five years. 6. The relevant part of Section 4 is Clause (b) of Sub-section (1) which is also reproduced hereunder : -- (b) no suit, or other legal proceeding shall be instituted or commenced, or if pending, shall be proceeded with, against any industrial undertaking during the period in which it remains a relief undertaking. Explanation :-- "Legal proceeding" means any proceeding under any law before any Court, tribunal, officer, authority, or arbitrator, started on a plaint, petition of appeal, application, reference, or otherwise. 7. It is Clause (b) which is in controversy in these petitions. An explanation has been appended to clause (b) to explain the meaning of the words "Legal Proceeding". The State Government has issued the notification in exercise of the powers conferred Under Sect....
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....e State Legislator has no jurisdiction, in view of the fact that the matter falls in the entries 43 and 95. Even with regard to jurisdiction over the matters stated or mentioned in List I, it is only the Parliament which is competent to snake provisions relating to jurisdiction and powers of all Courts, it has also been faintly urged that the word proceeding should not be considered to cover winding up proceedings and the word Court should also not be considered to include the High Court. If the State legislature had intended to extend the law to winding up proceeding which are being heard and decided by the High Court, it would have made it clear that the provision would include all proceedings relating to companies before the High Court. 9. So far as the second contention is concerned, I may at once state that the expression used by the State legislature in Section 4(b) is of widest amplitude. Legal proceeding has been explained and the explanation makes it abundantly clear that the expression would mean, any proceeding before any Court. It cannot be conceived that the words "any proceeding" excludes the proceedings of winding up and the word court exclude the proceeding befor....
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....kings are allowed to be wound up then in that situation there would be unemployment and the products which may be essential for the society, the society would be deprived of those products. The State Government has come forward to provide relief to such undertakings. It may advance loan or provide other financial assistance or give any guarantees and thereby save those undertakings, for the time being and this can be done by issuance of the notification Under Section 3 and the aggregate period under Sub-section (2) of Section 3 is 5 years. Section 4 further provides for specifying the industrial relations and other facilities temporarily for relief undertakings. The application of certain laws may be stayed and even application of certain agreements, settlements and awards or standing orders may also be stayed or suspended. When laws can be suspended, when awards can be suspended and when standing orders can be stayed, then Under Section 4(1)(b) it was necessary to make a provision for staying pending proceeding or bar the institution or commencement of any suit or other proceeding. Viewed in the light of the preamble and the Statement of Objects and Reasons along with provisions o....
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....ies 23 and 33, in that case, under entry 46 some provisions can be enacted relating to the jurisdiction and powers of all the Courts as well, although in the present case such a situation does not arise. What has only been done is, to prevent institution or commencement of the suits and proceedings and to stay the pending proceedings. Some cases have also been cited at the bar, to which, I may also make reference. 12. Mr. Mehta learned Counsel for the non-petitioner company referred to a direct decision of the Calcutta High Court in Pushraj Puranmull v. N. Roy AIR 1978 Cal 215. The Full Bench of the Calcutta High Court considered the question of constitutional validity of Relief Undertakings (Special Provisions), Act 1972. Their Lordships considered the question as to whether that Act falls within the legislative competence of the legislature of West Bengal or it is beyond its competence. Referring to the decisions relating to the doctrine of pith and substance, their Lordships found that from all the provisions set out in the Act, the pith and substance of the legislation appears to be prevention of unemployment or providing relief against the unemployment and it comes directly....
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....e non-petitioner-Company refuting the case pleaded by the creditor-petitioner. The creditor petitioners' case is that the Act is covered under the entries 43, 44 and 95 of the List I Union List in the VII Schedule, whereas the case of the non-petitioner-company is that the Act is covered under entries 23 and 33(a) of list III of the 7th Schedule i.e. Concurrent List. 2. In order to appreciate the controversy, it would be proper to reproduce the relevant entries, reference of which has been made by the learned counsel for the parties. Entries 43, 44 and 95 of List I are as under with comment thereunder in the shorter Constitution of India (VIII) edition by P. D. Basu : -- "43. Incorporation, regulation and winding up of the trading corporations, including banking, insurance and any financial corporations but not including co-operative societies. 1. Incorporation, regulation and winding up of trading corporations-- An Act which regulates the affairs of a company by laying down certain special rules for its management and administration is fully covered by this item. It would also include legislation providing for the amalgamation of ....
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....under entry 3, List II). Acts coming under this Entry--Sections 45A-B of the Banking Companies Act, 1949." 3. Entries 23 and 33 of the List III of the Concurrent List are as under : -- 23. Social Security and social insurance; employment and unemployment. 33. Trade and commerce in, and the production, supply and distribution of : -- (a) The products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the Public interest, and imported goods of the same kind as such products; (b) Foodstuffs, including edible oilseeds and oils; (c) Cattle fodder, including oilcakes arid other concentrates; (d) Raw cotton, whether ginned or unginned, and cotton seed; and (e) Raw Jute. 4. Reference may also be made to the provisions of the Act, its preamble as well as the statement of objects and reasons for enacting the Act. The statement of o....
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....e a relief undertaking for the purposes of this Act. (2) A notification under Sub-section (1) shall have effect for such period not exceeding two years as may be specified in the notification; but it shall be renewable by like notifications, from time to time, for further periods not exceeding twelve months at a time, so, however, that the total period in the aggregate does not exceed five years. 6. The relevant part of Section 4 is Clause (b) of Sub-section (1) which is also reproduced hereunder : -- (b) no suit, or other legal proceeding shall be instituted or commenced, or if pending, shall be proceeded with, against any industrial undertaking during the period in which it remains a relief undertaking. Explanation :-- "Legal proceeding" means any proceeding under any law before any Court, tribunal, officer, authority, or arbitrator, started on a plaint, petition of appeal, application, reference, or otherwise. 7. It is Clause (b) which is in controversy in these petitions. An explanation has been appended to clause (b) to explain the meaning of the words "Legal Proceeding". The State Government has issued th....
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....rectly impinges upon the winding up proceeding, for which, the State Legislator has no jurisdiction, in view of the fact that the matter falls in the entries 43 and 95. Even with regard to jurisdiction over the matters stated or mentioned in List I, it is only the Parliament which is competent to snake provisions relating to jurisdiction and powers of all Courts, it has also been faintly urged that the word proceeding should not be considered to cover winding up proceedings and the word Court should also not be considered to include the High Court. If the State legislature had intended to extend the law to winding up proceeding which are being heard and decided by the High Court, it would have made it clear that the provision would include all proceedings relating to companies before the High Court. 9. So far as the second contention is concerned, I may at once state that the expression used by the State legislature in Section 4(b) is of widest amplitude. Legal proceeding has been explained and the explanation makes it abundantly clear that the expression would mean, any proceeding before any Court. It cannot be conceived that the words "any proceeding" excludes the proceedings ....
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....ey came into existence. In case, the companies or the undertakings are allowed to be wound up then in that situation there would be unemployment and the products which may be essential for the society, the society would be deprived of those products. The State Government has come forward to provide relief to such undertakings. It may advance loan or provide other financial assistance or give any guarantees and thereby save those undertakings, for the time being and this can be done by issuance of the notification Under Section 3 and the aggregate period under Sub-section (2) of Section 3 is 5 years. Section 4 further provides for specifying the industrial relations and other facilities temporarily for relief undertakings. The application of certain laws may be stayed and even application of certain agreements, settlements and awards or standing orders may also be stayed or suspended. When laws can be suspended, when awards can be suspended and when standing orders can be stayed, then Under Section 4(1)(b) it was necessary to make a provision for staying pending proceeding or bar the institution or commencement of any suit or other proceeding. Viewed in the light of the preamble and....
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....in List III and if the Act, in question, is covered by j entries 23 and 33, in that case, under entry 46 some provisions can be enacted relating to the jurisdiction and powers of all the Courts as well, although in the present case such a situation does not arise. What has only been done is, to prevent institution or commencement of the suits and proceedings and to stay the pending proceedings. Some cases have also been cited at the bar, to which, I may also make reference. 12. Mr. Mehta learned Counsel for the non-petitioner company referred to a direct decision of the Calcutta High Court in Pushraj Puranmull v. N. Roy AIR 1978 Cal 215. The Full Bench of the Calcutta High Court considered the question of constitutional validity of Relief Undertakings (Special Provisions), Act 1972. Their Lordships considered the question as to whether that Act falls within the legislative competence of the legislature of West Bengal or it is beyond its competence. Referring to the decisions relating to the doctrine of pith and substance, their Lordships found that from all the provisions set out in the Act, the pith and substance of the legislation appears to be prevention of unemployment or pr....